The Cellular Flow Logistics Costing System

Abstract

There is need for a new, more precise, more integrated system for logistics costing. The integration of purchasing, transportation (traffic) and storage operations throughout the vertical stream, from source of materials to the consumer is discouragingly complex. It cannot be accomplished by departmentalising logistics functions, performing average and joint commodity costing, and dealing primarily with direct costs. The volume of records may be representative, but there is a very apparent lack of costing systems to facilitate logistics planning. The volume of shipment is the key to logistics cost analysis, just as volume of production is the independent variable in conventional economic analysis. Logistics costs vary with changes in the volume of shipment. Cost per hundredweight is the unit for cost analysis under the Cellular Flow Planning System. It is measured on a specific commodity, between specific points. Purchase price, transport rate, linear increasing costs, constant and single payment decreasing costs are the five classes of costs used to compare competitive volumes of shipment. All significant logistics costs can be so classified. This article presents only the rationale behind the unit for cost measurement, the classification of costs, and the means of comparison.