1、Contemporary Logistics Twelfth Edition Chapter 3 Strategic and Financial LogisticsLearning Objectives(1 of 2)3.1 To understand how logistics decision can influence an organizations strategic financial outcomes3.2 To review basic financial terminology used by logistics managers3.3 To explain organiza
2、tional financial reporting requirements affected by logistics activities3.4 To employ the strategic profit model to highlight the financial impact of logistics activities Learning Objectives(2 of 2)3.5 To consider the value of utilizing the Balanced Scorecard approach for examining the performance o
3、f a logistics systems3.6 To compare some of the common performance measures for logistics activitiesConnecting Strategy to Financial Performance(1 of 9)Logistics managers must find ways to:Communicate how logistics capabilities provide value Support corporate strategy and success in financial terms
4、Connecting Strategy to Financial Performance(2 of 9)Three generic strategies that can be pursued by an organization1.Cost leadership strategy Requires an organization to pursue activities that will enable it to become the low-cost producer in an industry for a given level of qualityConnecting Strate
5、gy to Financial Performance(3 of 9)Three generic strategies that can be pursued by an organization2.Differentiation strategy Entails an organization developing a product and/or service that offers unique attributes that are valued by customers and that the customers perceive to be distinct from comp
6、etitor offeringsConnecting Strategy to Financial Performance(4 of 9)Three generic strategies that can be pursued by an organization3.Focus strategy Concentrates an organizations effort on a narrowly defined market to achieve either a cost leadership or differentiation advantageConnecting Strategy to
7、 Financial Performance(5 of 9)Functional level strategies exist in:Marketing Finance Manufacturing Procurement LogisticsConnecting Strategy to Financial Performance(6 of 9)Logistic strategy decisions involve:Determining the number and location of warehouses Selecting appropriate transportation modes
8、 Deploying inventory Investments in technology that support logistics activitiesConnecting Strategy to Financial Performance(7 of 9)Logistics strategy is directly influenced by strategic decisions in functional areas of:MarketingoProduct availability,desired customer service levels,and packaging des
9、ign directly influence logistics decisions FinanceoRates of return may affect the decision to manage ones own warehouse or use a third-party providerConnecting Strategy to Financial Performance(8 of 9)Logistics strategy is directly influenced by strategic decisions in functional areas of:Manufacturi
10、ngoStrategic decisions by manufacturing to implement just-in-time system would influence logistics decisions in warehousing,transportation,and inventory management ProcurementoThe decision to move from domestic to global sourcing would naturally affect logistics activities such as the potential use
11、of new modes of transportationConnecting Strategy to Financial Performance(9 of 9)Logistics function can positively affect the financial outcome of an organization by designing a strategy to optimally support the requirement of the businessBasic Financial Terminology(1 of 3)Income statement shows fo
12、r a period of time:RevenuesoAlso referred to as sales,provide a dollar value of all the products and/or services provided by a company Expenses oAlso referred to as costs,provide a dollar value for the costs incurred in generating revenues during a given period of time Profit Also referred to as a p
13、rofit and loss(P&L)statementFigure 3.1:Example Income StatementBasic Financial Terminology(2 of 3)Balance sheet reflects at any given point in time:AssetsoWhat a company owns and come in two forms:current assets that can be easily converted to cash and long-term assets that have a useful life of mor
14、e than one year LiabilitiesoThe financial obligations a company owes to another party Owners equityoDifference between what a company owns and what it owes at any particular point in timeFigure 3.2:Example Balance SheetBasic Financial Terminology(3 of 3)Statement of cash flows Details how an organiz
15、ation generates cash and where cash is used Positive cash flow enables an organization to:oContinue daily operationsoMake investments for growthoMeet financial obligationsoUltimately remain in businessFigure 3.3:Example Statement of Cash FlowsStrategic Profit Model(SPM)(1 of 8)Issues with reporting
16、financial figures without appropriate context Many financial measures reported as ratios Profitability analysis is useful in assessing logistics activities and proposed changes to a firms logistical systemsStrategic Profit Model(SPM)(2 of 8)Return on Investment(ROI)Common measure of organizational f
17、inancial success Return on Net Worth(RONW)Measures profitability of funds invested in the business Return on Assets(ROA)Indicates what percentage of every dollar invested in the business is ultimately returned to the organization as profitStrategic Profit Model(SPM)(3 of 8)Provides the framework for
18、 conducting ROA analysis Incorporates revenues and expenses to generate net profit margin Includes assets to measure asset turnoverFigure 3.4:Strategic Profit ModelStrategic Profit Model(SPM)(4 of 8)Provides a way for managers to examine how a proposed change to their logistics system influences pro
19、fit performance and ROA SPM drawbacks include:Fails to consider the timing of cash flows Is subject to manipulation in the short run Fails to recognize assets dedicated to specific relationshipsStrategic Profit Model(SPM)(5 of 8)Logistics connections to net profit margin Net profit margin=net profit
20、/sales Multiple ways in which net profit margin can be influenced by managerial decisions Relevant categories include:oSalesoCost of goods soldoTotal expensesStrategic Profit Model(SPM)(6 of 8)Logistics connections to net profit margin SalesoThe dollar value of all the products or services an organi
21、zation provides to its customers during a given period of time Costs of goods soldoIncludes all the costs or materials and labor directly involved in producing a product or delivering a service Total expensesoMade up of the variable and fixed costs that are not directly related to making the product
22、 or delivering a serviceStrategic Profit Model(SPM)(7 of 8)Logistics connections to asset turnover Asset turnover=total sales/total assets Asset turnover provides information on how efficiently capital is employed to support the business Inventory is typically the most relevant logistics asset Logis
23、tics decisions can influence the speed at which invoices are paidaccounts receivableStrategic Profit Model(SPM)(8 of 8)Logistics connections to asset turnover Inventory can represent a significant part of a firms current assets Accounts receivable is the amount of money customers owe to an organizat
24、ionBalanced Scorecard(BSC)(1 of 2)Balanced Scorecard(BSC)is a strategic planning and performance management system used in industry,government,and nonprofit organizationsBalanced Scorecard(BSC)(2 of 2)Management should evaluate their businesses from four perspectives Customers Internal business proc
25、esses Learning and growth Financial results Forces managers to look beyond traditional financial measures(more holistic approach)Logistics Activity Measures(1 of 2)Transportation measures Focus on labor,cost,equipment,energy,and transit time Warehousing measures Include labor,cost,time,utilization,a
26、nd administration Inventory measures Include obsolete inventory,inventory carrying cost,inventory turnover,and information availabilityLogistics Activity Measures(2 of 2)Design and implementation of measures Determination of key measures should be tailored to the organization and level of decision m
27、aking Data collection and analysis are a major part of a performance measurement system in logistics Behavioral issues should be considered when establishing and implementing a system of logistics measures Frequent communication and constant updating of the measures is a necessary condition for ensu
28、ring they are supporting organizational goalsKey Terms(1 of 2)Assets Asset turnover Balanced Scorecard(BSC)Balance sheet Cost leadership strategy Current ratio Differentiation strategy Expenses(costs)Focus strategy Income statement LiabilitiesKey Terms(2 of 2)Net profit margin Omnichannel strategy Owners equity Return on assets (ROA)Revenues(sales)Sarbanes-Oxley Act(SOX)Statement of cash flows Strategic Profit Model(SPM)
