Logistics Cost Management & Financial Analysis Flashcards

What does 'Total Cost of Ownership' (TCO) in logistics include beyond the purchase price?

Answer: All costs associated with acquiring, using, and disposing of a product

TCO encompasses all lifecycle costs including acquisition, operation, maintenance, and disposal costs.

Transportation costs typically represent what percentage of total logistics costs for most companies?

Answer: 40–60%

Transportation costs represent 40–60% of total logistics costs on average, making it the single largest cost category.

What is the primary purpose of a freight audit process?

Answer: Reviewing and verifying carrier invoices for billing accuracy

Freight audit systematically reviews carrier invoices to verify charges are accurate and match contracted rates.

Demurrage fees are charged when:

Answer: A carrier's equipment is held beyond the agreed free-time period

Demurrage is a fee imposed when containers, railcars, or vessels are detained beyond the allotted free time.

Which of the following is considered a variable logistics cost?

Answer: Transportation fuel expenses

Fuel costs fluctuate with shipment volume and distance, making them variable costs that change with logistics activity levels.

The Economic Order Quantity (EOQ) model is designed to minimize:

Answer: Total inventory ordering and holding costs combined

EOQ finds the optimal order size that minimizes the combined total of ordering costs and inventory holding costs.

A company's logistics cost ratio is best defined as:

Answer: Total logistics costs expressed as a percentage of net sales revenue

The logistics cost ratio measures total logistics spending relative to revenue, enabling performance benchmarking.