Financial Measures

There are several fixed and operational costs associated with a supply chain. Ultimately, the aim is to maximize the revenue by keeping the supply chain costs low. Costs arise due to inventories, transportation, facilities, operations, technology, materials, and labor. The financial performance of a supply chain can be evaluated by looking into the following items [#!bagchi98!#]:

• cost of raw material
• revenue from goods sold
• activity-based costs such as material handling, manufacturing, assembling, etc.
• inventory holding costs
• transportation costs
• cost of expired perishable goods
• penalties for incorrectly filled or late orders delivered to customers
• credits for incorrectly filled or late deliveries from suppliers
• cost of goods returned by customers
• credits for goods returned to suppliers

Typically, the financial performance indices can be put together using the following major modules: activity based costing, inventory costing, transportation costing, and inter-company financial transactions.