Logistics management is based on a floworiented concept with the objective of integrating resources across the supply chain which

extends from suppliers to final customers, it is desirable to have a means to asses the costs and performance of the supply chain.

 Logistic costs are created by logistics activities such as customer service, transportation, ware housing, order processing and information, lot quantity and inventory carrying.

 It is a techniques that has been widely accepted in retain industry as an application of cost analysis. It is somewhat similar to customer profitability analysis This cost is often termed as the total cost of owernship

 Firstly multiply the unit sales volume by the profit margin of the product. This will give you overall profit for the product. Then divide the profit by the shelf space it uses.

 Rs. 2000/- divided by 100cm, which equals a contribution of rs. 20/-. Then direct product profitability is 20/- per cm.