Advantages of ABC to Logistics

ABC appears well suited for costing and measuring the performance of logistics processes. Many logistics costs remain buried in overheads; and logistics managers do not have adequate visibility or control over their costs. ABC would more clearly depict the critical linkage existing between corporate profitability and logistics costs and performance. Logistics confronts many of the same conditions that make manufacturing enterprises good. Logistics can benefit from the costing and measuring of performance at the activity level. Activity analyses may identify opportunities where process re-engineering could reduce operating costs and improve service performance.

Logistics also provides an opportunity to extend ABC across the supply chain. ABC, in a supply chain setting, could identify opportunities for eliminating redundant activities existing within the supply chain, channel members with excessive resource consumption patterns, or analyze alter­native channel structures. The supply chain could use ABC to re-engineer inter-organizational processes to obtain a competitive advantage through cost reduction or service differentiation. How­ever, logistics does pose several distinct challenges that may make ABC implementation more dif­ficult than in the manufacturing environment.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.

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