Financial Controls of Logistics Performance - Assignment Example

8. Why is it difficult to obtain logistics cost data in many firms? Logistics costs are essential factors that influence the market competitiveness of firms and countries. Reducing logistic costs is bound to reduce the total costs of both goods and services. However, the attainment of logistics cost data is relatively difficult for most companies. This is primarily as a consequence of the lack of sufficient logistics cost information as a result of poor logistics management activities. Firstly, there is no unified definition of logistics cost (Bokor, 2012).

The lack of uniformity with regards to defining logistics costs, as well as methods used in the calculation of logistics cost affects the acquisition of logistics data. Since the definition of logistics cost is incoherent, it is, therefore, tricky to compare the findings of logistics costs. In addition, it is difficult to acquire logistics data because the cost component is mostly not standardized. The limited standardization of cost measurement deters the standardized acceptability of logistics data.

In addition, difficulties emerge due to the hardships encountered in the collection of transparent information. On a micro level, a vast majority of firms publish cost data to serve their accounting needs, as well as external requirements such as government taxation (Pohlen, Klammer & Cokins, 2009). These produce an inhibitor to cost transparency throughout the data collection process. The accounting needs of firms often inhibit cost transparency, resulting in deficient information, disparities in the allocation of costs such as overhead costs and a narrow outlook of the concept of cost management. 9. Explain the four methods that can be used for controlling logistics activities.

What are the advantages and disadvantages of each? 1. Standard Cost Standards are utilized as an integral part of flexible budgeting processes. One of the greatest advantages of standard cost is the provision of the most effective management controls. Standard costs are typically ascertained from industrial engineering studies in which logisticians assess work activities and operations in order to realize effective and practical operating rates for different tasks. Another major advantage of standard costs is that they can be created for diverse logistics functions, including warehousing and transportation, as well as other logistical components and levels such as individual work activities and logistics sub-functions (Voortman, 2004).

However, standard costs have the disadvantage of inapplicability in case of increased costs of doing business, for instance, increased transportation. 2. Budgets Budgets are quite effective in terms of monitoring, as well as controlling costs. In some instances, the utilization of standards is not needed. This is particularly the case for tasks, which are repeated infrequently. Another advantage is that budgets control business processes and costs in a highly effective manner. Notably, the effectiveness of a budget is based on the anticipation of cost patterns.

Budgets are also advantageous since they are adjustable to reflect shifts in operating conditions, consequently, companies utilize budgets to control costs in most areas (Bokor, 2012). However, budgets can also deter effective implementation of innovative business ideas that entail more costs than those placed in the budget. 3. Productivity Standards Productivity standards are highly applicable when standard costs are unavailable