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Keywords Activity-based costing, Supply chain, Supply-chain management, Implementation
Abstract The purpose of this research paper is to help managers improve their understanding of logistics costs and the accounting for those costs in order to optimize use of the total cost approach to managing logistics processes. This paper will discuss the history and evolution of logistics management and activity-based costing (ABC), the driving cost factors affecting the key logistics activities, and the use of ABC systems to help improve the allocation of logistics costs to specific cost objects. This paper also includes several important managerial implications and implementation techniques for an ABC system.
Introduction
As the business world changes, business functions must do the same. To stay competitive in the emerging global market, businesses must change the way they view their traditional business functions. Businesses must look beyond what the function currently accomplishes and envision what the function can accomplish. Logistics has recently become a focus of such attention. Traditionally, logistics was viewed as an expensive, necessary cost of business rather than as a possible source of competitive advantage. Only recently have experts begun to see the awesome potential in logistics management, more commonly known as part of a broader supply chain management.
Supply chain management as its own discipline did not exist a few decades ago. In the late 1970s, deregulation of the public transportation industry brought about a closer analysis of traffic management in many corporations and allowed more decision-making capabilities in selecting modes of transportation. Then in the 1980s, the functions of warehousing and inventory management became of more concern among corporate officers due to increasingly high interest rates and a flux of corporate buyouts. Another factor affecting the recent evolution of supply chain management was the highly successful use of just-in-time manufacturing in many Japanese firms. The rapid succession of these events prompted companies to focus increasingly on coordinating the inbound and outbound flow of goods and services in a more cost-effective manner, which, in essence, embodies the general idea of logistics management (Prince, 1999).
Logistics management can be formally defined as that part of the supply chain process that plans, implements, and controls the effective, efficient flow and storage of goods, services, and related information from the point of...