Chapter 15Management of Business Logistics, 7 th Ed.1 Ch. 15: Supply Chain Finance >>>The Connection Landed costs (Production +Transportation costs) of products impacts a buyer’s decision to purchase a seller’s product thus affecting both sales and profitability. Supply chain alternatives enable optimization of the corporate goal of profit maximization. Inventory minimization is a direct result of the competing needs for capital and the difficulty many firms have in raising capital. Various cost levels of customer service must be analyzed to find the most profitable level. Sales, cost, and profit drive the goals of top management and supply chain managers should convert cost savings into sales and profit increases.

Chapter 15Management of Business Logistics, 7 th Ed.2 The Supply Chain Financial Impact Stockholder return – major financial objective Net worth (Assets – Liabilities), – must consider absolute and relative size of the profit in relation to stockholders’ net worth or net investment Return on assets (ROA) – used as a benchmark of asset utilization Channel structure – may consider outsourcing as a way to improve ROA. Channel inventories – may consider minimizing inventory as a way to improve ROA. Order management – reduces costs and improves sales, both of which improve the ROA. Transit time – reductions here improve sales and reduce inventories, thereby improving ROA.

Chapter 15Management of Business Logistics, 7 th Ed.3 Figure 15-1 Supply Chain Impact on Return on Assets

Chapter 15Management of Business Logistics, 7 th Ed.4 Figure 15-2 Supply Chain Decisions and ROA

Chapter 15Management of Business Logistics, 7 th Ed.5 Figure Supply Chain Service Failure

Chapter 15Management of Business Logistics, 7 th Ed.6 On the Line: Hard Sell The benefits of logistics management are evident, but it remains a hard sell to convince senior management that logistics is vital to a company’s financial performance and therefore deserves continued investment. Creating value, reducing costs, increasing both asset utilization and economic profit, and enabling growth are ways to sell logistics.