Costing logistics oriented

Generally the effects of trade-offs are assessed in two ways from the point of view of their impact on total costs and their impact on sales revenue. For example, it may be possible to trade off costs in such a way that total costs increase, yet because of the better service now being offered, sales revenue also increases. If the difference between revenue and costs is greater than before, the trade-off may be regarded as leading to an improvement in cost effectiveness. However, without an adequate logistics-oriented cost accounting system it is extremely difficult to identify the extent to which a particular trade-off is cost-beneficial. 

It will be apparent from the previous comments that the problem of developing an appropriate logistics-oriented costing system is primarily one of focus. That is, the ability to focus upon the output of the distribution system, in essence the provision of cusfomer service, and to identify the unique costs associated with that output. Traditional accounting methods lack this focus, mainly because they were designed with something else in mind,... 

Logistic cost—location, transportation, collecting Economy-oriented Process... 

Because logistics management is a flow-oriented concept with the objective of integrating resources across a pipeline which extends from suppliers to final customers, it is desirable to have a means whereby costs and performance of that pipeline flow can be assessed. 

To operationalise these principles requires an output orientation to costing. In other words, we must first define the desired outputs of the logistics system and then seek to identify the costs associated with providing those outputs. A useful concept here is the idea of mission . In the context of logistics and supply chain management, a mission is a set of customer service goals to be achieved by the system within a specific product/market context. Missions can be defined in terms of the type of market served, by which products and within what constraints of service and cost. A mission by its very nature cuts across traditional company lines. Figure 3.8 illustrates the concept and demonstrates the difference between an output orientation based upon missions and the input orientation based upon functions. 

The optimization of staffing levels is also included in cost effective strategies. For this purpose, previous identification of the appropriate personnel resources and organizational practices is needed (process oriented organization, flexibility of staff, using individuals with multiple skills, etc.). Effective use of personnel and support with effective logistics are also necessary. 

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