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UNIT 11 Value of Logistics,Logistics is to create value - value for customers and suppliers of the firm, and value for the firms stakeholders.,Trade-off Impact on Costs and Revenue,The effects of trade-offs are assessed in two ways: their impact on total costs their impact on sales revenue,Key Performance Indicators of Logistics Costs,Logistics cost can be broken down in three separate, but complementary pieces: internal logistics costs outsourcing logistics costs inventory carrying costs.,Key Performance Indicators of Logistics Costs,2. According to logistics functions, logistics cost can be generally broken down into three pieces: physical distribution costs information flow costs logistics management costs,Physical Distribution Costs,Special attention should be paid: Packaging costs refers to primary and secondary packaging costs, not including tertiary package cost which is for sales; Transportation costs also includes the cost of transportation carried out by the companys own means of transport; In addition to storage fee in rented warehouses, it also includes storage fee when stored in the companys own warehouse; Distribution costs also include packaging, sorting, picking, handling, short-distance transportation costs and so on.,Key Performance Indicators of Logistics Costs,3. Three Steps of Logistics Cost and Agility KPI,Total Cost Analysis,Total logistics costs consider the totality of costs associated with logistics, which includes transport and warehousing costs, but also inventory carrying, administration and order processing costs.,Total Cost Analysis,Total Logistics Costs Tradeoff Source: adapted from McKinnon, A. “The Effects of Transport Investment on Logistical Efficiency”, Logistics Research Centre, Heriot-Watt University, Edinburgh, UK.,Activity-Based Costing,Concept of Activity Based Costing - Activity based costing (ABC) identifies and measures, with reference to the single company, the costs sustained to realize logistics activities influenced by the companies that cooperate along the supply chain.,Activity-Based Costing,2. Advantages of ABC Providing managers with useful information about labor and other resources, leading to the management and control of the overheads present in the company. Making the logistics activities more efficient by eliminating redundant or unnecessary tasks, and optimizing resource allocations to activities adding more value to the product or customer. ABC permits the planning of more efficient collaborative relationships among the companies in the supply chain.,Activity-Based Costing,3. Drawbacks of ABC lack of perfect cost data the reluctance of companies to communicate their data the loss of attention on the customers,Thank You!,
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