Principles of logistics costing

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, 

The successful achievement of defined mission goais invoives inputs from a large number of functional areas and activity centres within the firm. Thus an effective costing system must seek to determine the totai systems cost of meeting desired mission objectives (the output of the system) and the costs of the various inputs involved in meeting these outputs. 

Attributable cost is a cost per unit that could be avoided if a product or function were discontinued entirely without changing the supporting organisation structure. 

In determining the costs of an acfivify cenfre, e.g. fransporf, attributable to a specific mission, the question should be asked What costs would we avoid if this customer/ segment/channel were no longer serviced These avoidable costs are the true incremental costs of servicing the customer/segment/channel. Often they will be substantially lower than the average cost because so many distribution costs are fixed and/or shared. 

This approach becomes particularly powerful when combined with a customer revenue analysis, because even customers with low sales offtake may still be profitable in incremental costs terms if not on an average cost basis. In other words the company would be worse off if those customers were abandoned. 

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