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The term logistics is used to describe the operational functions and is an element of the supply chain. It involves all the processes of moving goods and services from one point to the other, including procurement, supply, and stocking or storing materials from the time they are manufactured to when they can be sold in the market. It is usually guided by the 12 principles of logistics costing for efficacy purposes. Because of its complexities, entrepreneurs employ logistics cost management to avoid outrageous logistics costs that mainly arise from transportation charges and storage expenses.
The different types of logistics costing, such as direct, fixed, and variable costs, help a business determine the total cost incurred during all the processes. A sound system should observe the 12 principles of logistics costing examples, including sustaining engineering, supply support and technical data.
The global rise in the e-commerce market has seen rapid growth, with the logistics cost as a percentage of sales in 2019 growing at 16%, but the logistics cost as a percentage of sales for 2020 has seen no rise. The increased online sales and purchases account for the increased logistics cost as a percentage of sales in 2019. However, the logistics cost as a percentage of sales 2020 can rise in the coming years if retailers and supply chain companies agree.
A freight rate or freight charge is what you need to pay to the logistics company after they deliver your products to a specific location. Full truckload rate is a common mode you can use to fill up the entire truck if you have enough shipment or cargo. The charges calculation is easier as you can use a full truckload freight calculator to determine how much you need to pay. While some companies have flat rates, others calculate based on the traveled distance – cost per mile.
Consider using a free freight calculator to get accurate shipping estimates and get the best rates. Different online platforms have a free freight calculator, so finding one should not be an uphill task. Depending on the terms you agreed on, you can pay for shipping goods on delivery or before. Several factors that determine the freight cost include mode of shipment, distance and weight. If you ship your products by air, you will pay much more than using a truck. However, you will benefit from the speed and improved customer satisfaction due to on-time delivery. But if you are working on a budget and would prefer to save some coins, a truck would be a better option.
The hundredweight pricing model dictates how much you will pay depending on the weight of your shipment. Expect to pay more if your load is so heavy and lesser if the weight is not as much. When using a full truckload freight calculator, your shipment should always fall below 45,000 lbs. The last factor that affects freight charges is distance. The further your delivery location, the more you will pay due to fuel, wear and tear of assets and the time used.
Calculating transportation cost in logistics helps you to work away into cost reduction and improved business performance. Logistics is a crucial factor that most companies consider because they can add greater costs to production. While cheaper options are also available, they may be the detriment of your business since they can affect its performance. Here is how you can work out an estimate of transportation cost in logistics.
Evaluate the service level costs. Sometimes companies are unable to meet the consumers' needs because their orders are large. Put into account the amount of time it takes to process and deliver an order. Production errors are also rampant, and sometimes goods can get damaged during the delivery, so malfunction costs should be included. To determine the service level cost, subtract the fulfilled orders from the total amount of products sold. This gives you an estimate of the lost sales.
The following is an example that truck operators may use to determine their cost per kilometer.
Reducing logistics cost does not have to compromise your customer's satisfaction. Here is how to reduce transportation costs in business while maintaining its performance.
Analyzing the cost incurred in logistics is crucial for a company to identify any loopholes or areas that need improvement. Logistic cost components include areas such as transportation or shipping, warehousing and distribution. This is common in large firms which have an internal supply chain and hardly outsource services. Logistics cost analysis ppt reviews all the steps involved to maximize a business' performance. An analysis of logistics cost ppt is complex and usually requires a set of certain business skills. Most large companies have a small section within their organization responsible for the analysis of the logistics. Analyzing each step of the supply chain also helps in logistics cost reduction ppt, a great way to maximize a business' profit. Tools such as logistic cost calculator and logistics cost calculator Xls ease the technicality of the process.
Examples of logistics cost formulas used include:
The formulas can determine the maintenance activity indicators, transport indicators, and loading and offloading activities indicators.
Logistics cost definition describes the expenses incurred during the movement of a product from one point to the other. They differ from one company to the other depending on the tasks a company performs. The different variable logistics cost fall under various categories, including:
Examples include:
Transport falls among the variables in the principles of logistic costing ppt and, as such, is an important factor for any e-commerce business to consider. Thanks to excel sheets, companies can now analyze and plan business concepts simply yet functionally. When creating an excel sheet for transport, various elements such as the vehicles' ownership and operations are included. Since transportation significantly determines a business' profit margins, regular analysis of the area is crucial. It is easier to identify any loopholes during a review or assessment session. For example, you can reduce the traveled distance by looking into other options of warehousing cost in logistics. Outsourcing warehouse services to a closer destination where most of your customers are based may help reduce the transport costs. Tools like road transport rates calculator can help in the calculation of transportation costs.