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2023 by The McGrawHill Companies, Inc. All rights reserved. McGrawHill/Irwin 1712 IMPACT OF LOGISTICS ON RETURN ON NET WORTH sales total assets STRATEGIC PROFIT MODEL X $ $ $ $ $ $ % Net Profit Margin profit sales ? Net Profit Sales _ Gross Margin Total Expenses Sales _ Cost of Goods Sold Variable Expenses Sales increase due to better customer service Fewer LTL shipments Fewer freight claims Lower freight costs Insurance Taxes Variable Storage costs Inventory risk costs $ $ $ $ $ $ $ ? Sales Total Assets + Fixed Assets Current Assets Inventory + Accounts Receivable + Other Current Assets % Return on Net Worth Net profit worth Total assets worth Net profit total assets = = Financial Leverage Return on Assets X X Fewer employees required Lower thirdparty warehousing costs Reduced IS costs Reduced cost of supervision Reduced inventory investment Reduced due to more prompt paying customers (reduced errors) General and Administrative Information Systems Warehousing Costs Inventory Carrying Costs Transportation Costs Lower cost due to new or more efficient manufacturing facilities Logistics’ Impact Lot Quantity Costs Reduced order management costs Fewer last minute production changes Less warehouse space required Increase investment in modernized production facilities Lower cost of purchased materials