Measuring Logistics Performance Using the Strategic Profit Model

Abstract

One useful way to determine how a proposed system change will influence profit performance and return on assets is by using the Strategic Profit Model (SPM). The SPM demonstrates that Return on Net Worth (RONW) is a function of three factors management can control: net profit, asset turnover and financial leverage. We derive and explain the SPM and then apply the model to six different firms in the footwear industry. We, offer the SPM as a normative tool and use its predictive ability to offer insights to the logistics managers for each firm. We illustrate how the SPM can help maintain operational superiority or initiate a turnaround depending on whether the company is a financially strong or a struggling firm. Results expose certain common elements differentiating firms outperforming the marketplace from those less fortunate.

Citation

Stapleton, D., Hanna, J.B., Yagla, S., Johnson, J. and Markussen, D. (2002), "Measuring Logistics Performance Using the Strategic Profit Model", The International Journal of Logistics Management, Vol. 13 No. 1, pp. 89-107. https://doi.org/10.1108/09574090210806388