How can logistics costs be represented

Reductions in working capital will have a beneficial effect on an organisation s ROI. For example, inventory reductions increase both prohtability (reduced costs) and capital (increased asset utihsation). Supply chain decisions have an impact on costs and assets, so they affect both the drivers of ROI. Understanding the trade-offs involved is key to increasing value. 

Key issues What are the various ways of cutting up the total cost cake, and what are the relative merits of each  

We all have a pretty good idea of what the total costs of a business are in practice. The costs of such items as materials used, power and wages all lead to bills that have to be paid. What is not so clear is how these costs should be allocated to supply chain processes - or even to products for that matter. Christopher (2005) states that problems with traditional cost accounting as related to logistics include  

The important point here is that the total cost is constant it is the ways we analyse that cost that are different. Why analyse it in different ways To gain better information about our cost basis so that we can manage the business better. Let us look in turn at each of these ways to cut the total cost cube. 

One popular way of analysing costs is to consider the effect of volume of activity on them. Costs tend to respond differently as the volume changes  

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