6. What Does an Appropriate Level of Service Cost?

The provision of availability will naturally incur costs for the supplier. One of the major problems facing logistics management is that of accurately identifying the total costs of the logistics activity. Many of the costs are either hidden or are shared between different activities or cost centres thus making a proper allocation extremely difficult. Nevertheless such problems must be overcome if the company is to develop cost‐effective customer service policies. Often management may not be aware of the true costs of customer service strategy and thus be led to make inappropriate decisions.