Key Takeaways from the TalkLogistics does not only raise ROIC (return on invested capital); it can also lower WACC (weighted average cost of capital).
Misapplied, ROIC management backfires. Targeting the logistics cost ratio alone, judging investment on a single year's ROIC, cutting inventory too far and pushing burdens onto suppliers all halt necessary investment and shrink operations.
In Nexgen View, we argue that the amended Logistics Efficiency Act has put logistics on the management agenda, and that, now it is tied to the Tokyo Stock Exchange's 2023 request, companies that only cut costs risk falling behind. Logistics must shift towards creating enterprise value.
Contents
- Event overview
- The talk: logistics raises ROIC and lowers WACC
- Nexgen View: logistics has reached the boardroom
- Closing
1. Event overview
Ariki Ono, chief executive and Logistics AI Architect at Nexgen Japan, spoke at the National Logistics Convention 2026, hosted by the Japan Institute of Logistics Systems (JILS), on 6 October. The convention was held at KFC Hall & Rooms in Ryogoku, Tokyo, and streamed online. It was aimed at chief executives and senior management, and at managers in logistics, procurement, production and sales.
Ono spoke in the second session, a series of themed talks titled "Logistics Innovation for Higher Enterprise Value". The session drew on Management × Transformation (in Japanese), a booklet produced by JILS's special committee on logistics innovation. After an opening message from Professor Katsuhiro Nishinari of the University of Tokyo, who chairs the committee, Ono was followed by Koichi Tasaka, General Manager of Strategic Planning in the Logistics Division at Kao Corporation, and Yuichiro Ikeda, Managing Director at Sigmaxyz Inc.
Ono's talk, "The Changing Business Environment and the New Role of Logistics", corresponds to the booklet's first chapter, "Logistics as a Pillar of Management Strategy", which he wrote. In 20 minutes he set out to leave the audience with two points:
- Supply chains and logistics are highly effective at raising both financial and non-financial value.
- What ROIC and WACC are, and why they matter to chief executives.
This report summarises the talk and sets out our view.
2. The talk: logistics raises ROIC and lowers WACC
2-1. Pushing up enterprise value from both sides
Enterprise value rests on the gap between ROIC and WACC. A company creates value only when the return it earns on the capital invested in its business (ROIC) exceeds the cost of raising that capital (WACC).
Ono argued that logistics is one of the few functions that can widen that gap from both sides.
How logistics feeds into enterprise value
Raising ROIC (capital efficiency)
Lower logistics costs and fewer stockouts lift margins; fewer inventory days and consolidated sites lift asset turnover. Better demand forecasting cuts inventory and stockouts at the same time.
Lowering WACC (turning non-financial value into financial value)
Business continuity planning and preparation for geopolitical risk lower the risk premium on equity. Fuller disclosure on Scope 3 emissions and human-rights due diligence raises ESG ratings and cuts the cost of funding. A diversified supply network makes earnings less volatile.
2-2. Four traps in ROIC management
Used carelessly, ROIC does harm: necessary investment stalls and operations shrink. Ono set out four traps that logistics departments fall into, and how to avoid them.
The traps, and the right approach
Targeting the logistics cost ratio alone
Do not stop at a single-year P&L target such as "logistics costs below x% of sales". Link inventory days, the number of sites and equipment utilisation to the ROIC tree.
Judging investment on a single year's company-wide ROIC
Do not reject automation because ROIC dips just after the investment. Assess it over several years, on the spread between the project's ROIC and WACC and the shrinking capital base after depreciation.
Cutting inventory so far that stockouts follow
Do not trim safety stock across the board and lose sales. Treat service levels as a variable and balance inventory against stockouts category by category.
Looking only at your own invested capital
Do not push inventory or payment terms onto suppliers to flatter your own ROIC. Look at the cash tied up from supplier to shop shelf as a whole, through the cash conversion cycle (CCC).
He also traced how operational constraints drag ROIC down. Short lead times demanded by customers and extra work at delivery scatter distribution sites and swell safety stock. Inventory turns slower, fixed site costs and the variable costs of frequent small deliveries rise, and ROIC falls. Service levels, in other words, are too important to be left to the warehouse floor.
2-3. Which measures matter more in an age of triple pressure
In the second half of the talk, Ono mapped the structural shifts under each heading of a PESTLE analysis for 2026–2030 onto the management measures that will matter more as a result.
Persistently high interest rates, geopolitical fragmentation and a structural shortage of labour form a triple pressure. Under it, working capital (CCC) and the risk premium (WACC) become far more important, and cash-focused management and strategies that support risk management come to the fore. AI and automation are the only shift that offers a way to go on the offensive, and companies should consider how to use them to relieve all three pressures.
3. Nexgen View: logistics has reached the boardroom
This year's convention ran under the banner "Logistics Evolving with Management". The slogan captures a real change: logistics is finally becoming a matter for the board. Here is how we read it.
3-1. The trigger: the amended Logistics Efficiency Act
The trigger, without doubt, was the amended Logistics Efficiency Act. The law, in effect, put the head of logistics in the management team.
Ever since, the refrain has been that logistics needs a management perspective. Yet a refrain is not enough to make chief executives treat logistics as their own business. What logistics delivers has to be connected to the yardsticks they already use.
3-2. The link: the Tokyo Stock Exchange's request
What tied management and logistics together was the Tokyo Stock Exchange's request of 2023 that listed companies manage with an awareness of their cost of capital and share price. With around half of the companies in its Prime Market trading below book value, it asked them to analyse and disclose whether they were earning more than their cost of capital, and to act if not.
The law put the head of logistics on the management team; the exchange made chief executives answerable for ROIC and WACC. A CLO is in a position to move the very numbers a chief executive explains to investors.
3-3. Cost-cutting alone opens a gap
That is why companies that treat logistics purely as a cost to be cut now risk falling behind their rivals.
Cost-cutting touches only one side of ROIC, the margin. And with freight rates and wages climbing amid labour shortages, there is less and less left to cut. Companies that have begun to talk about logistics in terms of enterprise value, by contrast, can raise capital efficiency by redesigning inventory and networks, lower their cost of capital by building resilience and improving disclosure, and present the results as management numbers. Two companies spending the same on logistics may be valued quite differently by the capital markets.
The gap also shows in the traps described above. A department that targets the logistics cost ratio alone tends to reject automation on one year's ROIC, cut inventory across the board until stockouts follow, and shift the burden onto suppliers. Logistics confined to cost-cutting drifts towards a downward spiral.
Ariki Ono, chief executive, Nexgen Japan
Logistics is not a cost-cutting device. It is a device that widens the ROIC–WACC spread from both sides.
The amended act should be the moment for logistics to change course, towards contributing to the creation of enterprise value. In our view, a CLO's first job is to present logistics measures to the board in the language of the ROIC tree and the cost of capital, not the logistics cost ratio.
4. Closing
The mandatory appointment of CLOs is a starting line, not a finishing one. The law has brought logistics into the boardroom, and the exchange has handed chief executives the yardstick. What remains is for logistics to speak in those terms. Nexgen Japan will keep helping companies build organisations that can describe logistics in the language of enterprise value, through research, publishing and implementation.
We thank the Logistics Month 2026 promotion committee and JILS for planning and running the convention, Professor Katsuhiro Nishinari for his opening message, Mr Tasaka and Mr Ikeda for sharing the session, and everyone who attended in person or online.
Booklet | Japan Institute of Logistics Systems
Management × Transformation
Questions we often receive from practitioners
What put logistics on the management agenda in Japan?
The amended Logistics Efficiency Act. Since April 2026, shippers above a certain size must appoint a board-level CLO (Chief Logistics Officer), draw up a medium- to long-term plan and report regularly. The person responsible for logistics now sits in the management team, and logistics is expected to be run with a management perspective. That has since been linked to the Tokyo Stock Exchange's request of March 2023 for listed companies to manage with an awareness of their cost of capital and share price, so logistics is now discussed in terms of capital efficiency and enterprise value.
How does logistics affect enterprise value?
It raises ROIC (return on invested capital) and lowers WACC (weighted average cost of capital). Cutting logistics costs lifts margins, and reducing inventory and consolidating sites lifts asset turnover, both of which raise ROIC. Preparing for disruption and geopolitical risk, and improving disclosure on Scope 3 emissions and human-rights due diligence, lower the risk premium and raise ESG ratings, which lowers WACC. Logistics can therefore widen the spread between ROIC and WACC, the source of enterprise value, from both sides.
What is wrong with a logistics department that targets cost reduction alone?
It risks halting necessary investment and pushing operations into a downward spiral. A target based only on logistics costs as a share of sales hides how inventory days and the number of sites affect enterprise value. Judging investment by a single year's company-wide ROIC gets automation projects rejected on their first-year numbers. Cutting safety stock across the board loses sales to stockouts, and pushing inventory onto suppliers increases cash tied up across the supply chain. Such companies fall behind those that measure logistics by its contribution to enterprise value.
How should a CLO explain logistics to the board?
In the language of the ROIC tree and the cost of capital, not the logistics cost ratio. Consolidating sites should be presented as a reduction in invested capital, better demand forecasting as fewer stockouts and less inventory at the same time, and stronger business continuity and disclosure as a lower risk premium. Investments should be judged over several years on the spread between the project's ROIC and WACC, not on a single year.
Related seminar
ROIC Management Led by the CLO: measure logistics by enterprise value, not by the P&L
Learn the concepts and yardsticks for describing logistics in terms of the ROIC tree and the cost of capital, through worked examples from hypothetical companies and an exercise applied to your own business. A corporate seminar for CLOs, heads of logistics, corporate planning and finance.
View seminar details →References and Key Sources
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- Japan Institute of Logistics Systems (JILS), "経営×変革" (Management × Transformation, March 2026, in Japanese; chapter 1 written by Nexgen Japan's chief executive)
- Tokyo Stock Exchange, "資本コストや株価を意識した経営の実現に向けた対応について" (Action to Implement Management that is Conscious of Cost of Capital and Stock Price, 31 March 2023, in Japanese)