Wednesday, 20 August 2014

The Logistical Relationship with Finance within the firm

One of the duties of the logistics department is to interact with the finance department because the decisions made in logistics can only be as good as the cost data that they are working with. In return the finance department need to work with logistics in order to help them to forecast the cash flows, requiring information on the status of the finished products that are still between the end of the production line and the purchaser.

The funds of the company need to be allocated by the finance department to the other departments within the company. They will provide the capital budgeting decisions affecting logistics, including purchasing or leasing materials handling equipment, packaging and more.

The relationship between logistics and finance is also focused on the inventory because inventory is a company’s asset that must be paid by either by short or long term financing. It will need to be valued using last in, first out or first in and last out.  The finance department will apply a monetary value to the inventory whereas the logistics department looks at the inventory in terms of units. The inventory float will also be involved, relating to the cash flow in relation to the holding inventory.

No comments:

Post a Comment