The impact margin and asset turn on ROI Profit Sales (Margin) 20% ROI 15% ROI 10% ROI Sales Cap Emp (Asset turn)

Logistics impact on ROI Customer service Sales revenue Profit Logistics efficiency Costs Return on investment Pipeline management Cash Invoice accuracy Net receivables Capital employed Just-in-time logistics Inventory Fixed assets Asset deployment & utilisation

Logistics management and the balance sheet Logistics variable Assets Order cycle time Cash Order completion rate Receivables Invoice accuracy Inventories Inventory Distribution facilities and equipment Property, plant and equipment Plant and equipment Liabilities Current liabilities Purchase order quantities Debt Financing options for inventory, plant and equipment Equity

The drivers of shareholder value Revenue growth Tax minimisation Shareholder value Working capital efficiency Fixed capital efficiency Operating cost reduction

Changing the cash flow profile Time Source: Srivastava, R. et al., ‘Market-Based Assets and Shareholder Value: A Framework for Analysis’, Journal of Marketing, Vol. 62, No. 1, January 1998, pp.2-18

Stages in the order-to-collection cycle Order placement and communication Order entry Credit check Documentation Order picking Delivery Invoicing and collection

The total costs of a distribution network Total distribution costs Costs Trunking costs Inventory costs Outlet costs Local delivery costs Order processing costs Number of outlets

Horizontal flows that cut across functional boundaries Purchasing Sales Transportation Production Marketing Etc Channel A Channel B Channel C

The programme budget (£’000) Functional area 1 Functional area 2 Functional area 3 Functional area 4 Total channel cost Channel A 100 90 20 80 290 Channel B 50 70 200 340 Channel C 30 220 Functional budgets 190 270 170 850

Customer profitability analysis Cumulative contributions (%) Cumulative customers (%) Source: Hill, G.V., Logistics – The Battleground of the 1990’s, A.T. Kearney., Inc.

Customer profitability analysis: a basic model Direct Gross sales value (GSV) Indirect Trade discount/ Terms of trade Net sales value (NSV) Customer related costs (direct) Production costs Sales calls In-store and co-operative promotions Bonuses Merchandising Production contribution (Sales) Marketing costs Overhead costs (indirect) Sales force management National advertising campaign Marketing contribution Customer-related costs (direct) Distribution Service costs Transportation Packaging/unitisation Stockholding Warehousing Trade credit Order processing Customer contribution to company overhead profit Source: Garttoma, J.L. and Walters, D.W., Managing the Supply Chain: A Strategic Perspective (PalgraveMacmillan, 1996), Reproduced with permission of Palgrave Macmillian

Customer profitability matrix Cost engineer High Protect Net sales value of customer account Danger Zone Low Build Low High Cost-to-serve