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Questions and Answers
What proportion of gross domestic product is the total cost of logistics estimated to be close to in the USA?
Why are traditional accounting systems not always fully understood by organizations in terms of logistics costs?
What does logistics activity not just generate, but also revenue through?
What form of resources does logistics activity require?
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How can logistics management impact Return on Investment (ROI)?
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What is the significance of cash and receivables in business liquidity?
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How does logistics influence the balance between debt and equity in financial management?
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How does logistics management impact the shape of the balance sheet?
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What is the main factor that determines the value of a business?
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What is crucial for effective logistics and supply chain management?
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What does the concept of 'mission' in logistics and supply chain management refer to?
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What does logistics management aim to integrate across the pipeline from suppliers to final customers?
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What is economic value added (EVA)?
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How can logistics impact shareholder value?
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What are the basic drivers of enhanced shareholder value?
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How can time compression in the pipeline impact working capital requirements?
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What is the purpose of direct product profitability (DPP) in logistics and supply chain management?
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What does customer profitability analysis involve in logistics and supply chain management?
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What is the purpose of logistics cost analysis in logistics and supply chain management?
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What is the reverse of traditional techniques in mission costing in logistics and supply chain management?
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Study Notes
Costing and Profitability Analysis in Logistics and Supply Chain Management
- Effective costing system aims to determine total systems cost of meeting mission objectives and the costs of various inputs involved
- Mission costing is the reverse of traditional techniques, where functional budget is determined by the demands of the missions it serves
- Customer profitability analysis involves identifying avoidable costs and incremental revenue to accurately measure customer profitability
- Customer profitability matrix categorizes customers based on their net sales value and cost-to-serve
- Different strategies are proposed for customer categories including Build, Danger zone, Cost engineer, and Protect
- Direct product profitability (DPP) attempts to identify all costs attached to a product or order as it moves through the distribution channel
- Understanding DPP is important for suppliers as their ability to be a low-cost supplier is influenced by the costs incurred in the logistics system
- Table 3.3 describes the steps to be followed in moving from a crude gross margin measure to a more precise DPP
- Four stages in the implementation of an effective mission costing process are defined: defining customer service elements, identifying factors leading to variations in service, identifying specific resources used to support customer segments, and attributing activity costs by customer type or segment
- The basic purpose of logistics cost analysis is to provide managers with reliable information for better resource allocation to meet customer service requirements in the most cost-effective manner
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Description
Test your knowledge of costing and profitability analysis in logistics and supply chain management with this quiz. Explore topics such as mission costing, customer profitability analysis, direct product profitability, and strategies for customer categories. Evaluate your understanding of effective costing systems and their impact on resource allocation for customer service requirements.
