A cost perspective on the location of value-added logistics services in supply chains

Academic literature underlines the importance of developing value added logistics services (VALS) to meet customers' satisfaction. However, there is hardly any attention given to the discussion on where to perform these VALS and how such decision affects the supply chain. This paper discusses the location of VALS and its impact on supply chain configurations and logistics costs. In particular, the paper focuses on: 1) the importance of VALS in cost terms to the supply chain; 2) the impact of location decisions regarding VALS on the supply chain, taking into account logistics time costs and out‐of‐pocket costs; 3) the role of the logistics characteristics of products and the nature of VALS in the location decisions regarding VALS. We present an evaluation model for optimising the location of VALS. We apply the model empirically by following the cost flow associated with a container filled with sportswear shoes and by comparing the differences in time costs and out‐of‐pocket costs associated with a range of VALS location alternatives. As such, we propose a VALS location decision making framework to facilitate the location selection procedure.