Logistics and Supply Chain Management Quiz
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Questions and Answers

What proportion of the gross domestic product is the total cost of logistics estimated to be close to in the USA?

  • 20%
  • 10% (correct)
  • 15%
  • 5%

    • What is one reason traditional accounting systems may not fully understand logistics costs?

  • They prioritize understanding customer costs over product costs
  • They tend to be focused around understanding product costs rather than customer costs (correct)
  • They focus on understanding customer demand
  • They are not designed to handle financial issues in supply chain strategies

    • What does logistics activity generate in addition to cost?

  • Operating expenses
  • Revenue through the provision of availability (correct)
  • Liabilities
  • Debt

    • What resources does logistics activity require?

    <p>Fixed capital and working capital</p> Signup and view all the answers

    Which financial metric is influenced by the ratios of profit/sales and sales/capital employed?

    <p>Return on Investment (ROI)</p> Signup and view all the answers

    How does logistics management impact the balance sheet?

    <p>By influencing the shape of the balance sheet</p> Signup and view all the answers

    What part of the balance sheet is directly impacted by logistics variables?

    <p>Cash and receivables</p> Signup and view all the answers

    How does logistics influence inventory levels and management strategies?

    <p>By tying up a significant portion of current assets in inventory</p> Signup and view all the answers

    How does logistics impact current liabilities?

    <p>By influencing accounts payable for bought-in materials</p> Signup and view all the answers

    What does logistics heavily use in terms of fixed assets?

    <p>Property, plant, and equipment</p> Signup and view all the answers

    How can logistics impact the balance between debt and equity?

    <p>By impacting alternative logistics strategies such as leasing and third-party suppliers</p> Signup and view all the answers

    Which area of financial performance can logistics significantly influence?

    <p>Return on Investment (ROI)</p> Signup and view all the answers

    What can impact after-tax free cash flow in location decisions for global organizations?

    <p>Different tax regimes, property tax, excise duty, and customs regulations</p> Signup and view all the answers

    How is the value of a business determined?

    <p>By the net present value of free cash flow</p> Signup and view all the answers

    What do inventory holding costs include?

    <p>The cost of capital, comprising the cost of debt and equity</p> Signup and view all the answers

    What does logistics costing mirror?

    <p>The materials flow</p> Signup and view all the answers

    What is crucial for effective logistics and supply chain management?

    <p>Defining the desired outputs of the logistics system and identifying the costs associated with providing those outputs</p> Signup and view all the answers

    What does the concept of 'mission' in logistics and supply chain management refer to?

    <p>A set of customer service goals achieved within a specific product/market context</p> Signup and view all the answers

    What does logistics management aim to integrate across the pipeline?

    <p>Resources from suppliers to final customers</p> Signup and view all the answers

    What is crucial for identifying the change in costs brought about by logistics decisions?

    <p>Total cost analysis</p> Signup and view all the answers

    What does the adoption of an integrated approach to logistics and distribution management face challenges due to?

    <p>The lack of appropriate cost information and the need to manage the total distribution activity as a complete system</p> Signup and view all the answers

    What can influence total logistics costs?

    <p>The addition or removal of a depot from the system</p> Signup and view all the answers

    What is the primary goal of an effective costing system in logistics and supply chain management?

    <p>To determine total systems cost of meeting mission objectives and the costs of various inputs involved</p> Signup and view all the answers

    What does customer profitability analysis involve?

    <p>Identifying avoidable costs and incremental revenue to accurately measure customer profitability</p> Signup and view all the answers

    What does the customer profitability matrix categorize customers based on?

    <p>Net sales value and cost-to-serve</p> Signup and view all the answers

    What is the purpose of understanding Direct Product Profitability (DPP) for suppliers?

    <p>To identify all costs attached to a product or order as it moves through the distribution channel</p> Signup and view all the answers

    What are the defined stages in the implementation of an effective mission costing process?

    <p>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</p> Signup and view all the answers

    What is the basic purpose of logistics cost analysis?

    <p>To provide managers with reliable information for better resource allocation to meet customer service requirements in the most cost-effective manner</p> Signup and view all the answers

    What does mission costing aim to determine?

    <p>Functional budget determined by the demands of the missions it serves</p> Signup and view all the answers

    What is the primary focus of different strategies proposed for customer categories?

    <p>Build, Danger zone, Cost engineer, and Protect</p> Signup and view all the answers

    What does Table 3.3 describe?

    <p>The steps to be followed in moving from a crude gross margin measure to a more precise DPP</p> Signup and view all the answers

    What does the direct product profitability (DPP) attempt to identify?

    <p>All costs attached to a product or order as it moves through the distribution channel</p> Signup and view all the answers

    What does the effective costing system aim to determine?

    <p>Total systems cost of meeting mission objectives and the costs of various inputs involved</p> Signup and view all the answers

    Study Notes

    Logistics and Supply Chain Management: Key Considerations for Global Organizations

    • Location decisions can impact after-tax free cash flow due to different tax regimes, property tax, excise duty, and customs regulations.
    • The value of a business is determined by the net present value of free cash flow, which can be affected by strategies such as increasing revenues or reducing risk.
    • Integrated logistics and distribution management face challenges due to the lack of appropriate cost information and the need to manage the total distribution activity as a complete system.
    • Total cost analysis involves understanding the various cost elements involved in the order processing cycle and identifying the change in costs brought about by logistics decisions.
    • Inventory holding costs include the cost of capital, comprising the cost of debt and equity, and the weighted cost of capital is usually used to reflect this.
    • Logistics costing should mirror the materials flow and enable separate cost and revenue analyses by customer type, market segment, or distribution channel.
    • Defining the desired outputs of the logistics system and identifying the costs associated with providing those outputs is crucial for effective logistics and supply chain management.
    • The concept of 'mission' in logistics and supply chain management refers to a set of customer service goals achieved within a specific product/market context, cutting across traditional company lines.
    • Successful achievement of defined mission goals involves inputs from various functional areas and activity centers within the firm.
    • Logistics management aims to integrate resources across a pipeline extending from suppliers to final customers, with the objective of assessing costs and performance of that pipeline flow.
    • The adoption of an integrated approach to logistics and distribution management has proved difficult for many companies due to the lack of appropriate cost information and the need to manage the total distribution activity as a complete system.
    • Total logistics costs can be influenced by the addition or removal of a depot from the system, and total cost analysis is crucial for identifying the change in costs brought about by logistics decisions.

    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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    Chapter 3: Measuring Logistics Costs & Performance PDF

    Description

    Test your knowledge of logistics and supply chain management with this quiz covering key considerations for global organizations. Topics include location decisions, integrated logistics and distribution management, total cost analysis, inventory holding costs, mission in logistics management, costing and profitability analysis, and customer profitability analysis.

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