Logistics and SCM Cost and Agility Assessment Tool and Case Study

What is Included in Logistics and Supply Chain Management Cost Measures?

Logistics and SCM cost can be broken down in three separate, but complementary pieces: internal logistics and SCM costs, outsourcing logistics and SCM costs and inventory carrying costs.  The proportions of these costs vary widely by sector.  For example, in a JIT mode, internal logistics and SCM costs tend to increase, but this is balanced by a reduction in the inventory carrying costs; this happens in volatile sectors, such as upscale clothing, automotive, computers and perishable goods.

Internal Logistics and SCM Costs

Internal logistics and SCM costs encompass all logistics and SCM activities that occur within users firms (manufacturer, wholesaler or retailer). It excludes all outsourced logistics and SCM activities and all production processes.

Outsourcing Logistics and SCM Cost

Outsourcing logistics and SCM costs encompass activities assigned to a logistics and SCM service provider.

Inventory Carrying Cost

Include opportunity costs, shrinkage, insurance and taxes, total obsolescence (for raw materials, work in process (WIP), and finished good inventory), channel obsolescence and field service parts obsolescence. It excludes all distribution cost related to warehousing, which are captured in the internal and outsourced logistics and SCM costs.

What inventory carrying costs do not consist of:

• all the necessary handling of the goods and/or materials
• the depreciation of warehousing assets

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