Logistics performance usually involves the typical trade-off relation between cost and
quality. This opinion is parallel to the assumption that service quality must be maximized
at the lowest logistics costs. For many companies cost of transport is the highest
logistical cost. Transport cost is usually defined only as freight charges. Apart from
freight charges, costs arise from carrying inventory in-transit, from numerous operations
connected with frequent and small deliveries resulted from just in time deliveries.
During a production plan preparation, it is vital to know exactly when material
will be delivered. Focus on customer needs’ satisfaction, order fulfillment, short transit
time, on-time delivery, gives transport costs a newdimension. Unless considerable
buffer stocks are kept, the production plan relies on accurate estimated delivery dates.
Delays, lacking or inaccurate delivery information can be extremely costly as the consequence
could be production down-time (Holter et al. 1993). Risk is connected with
a basic assumption in the resource-based perspective that a company is highly dependent
on resources controlled by others (Halldórsson, Skjøtt-Larsen 2004). Transit
times affect the cash-to-cash cycle for most companies. Long transit times means later
payment and negatively affects the cash flow. Cash is tied up in inventory in-transit
that could otherwise have been employed elsewhere, contributing to further revenue
generation