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What are logistics costs?
Logistics costs consist of expenses associated with moving product – from sourcing raw materials to delivering customer orders and every step in between. There are critical costs that become part of your supply chain but there are also hidden costs or costs that you just simply are not aware of. What are these costs?
Top 5 Logistics Costs
1. Transportation and shipping
Includes getting inventory from the manufacturer to warehouse and then to customers. Transportation costs include delivering orders to customers at residential addresses via carriers.
Everyone knows this but what are some costs that you may not be aware of?
- Fuel surcharges – these are costs linked to the cost of oil, essentially additional costs charged due to fluctuations in the price of oil
- Unloading and loading costs – when your goods leave or arrive at any destination, someone has to do the loading or unloading. There may be costs associated with this
- Gate charges – warehousing is a business and as such landlords will charge gate charges for parking, for entering the warehouse facilities and this may be passed onto the customer
- Warehousing surcharges – sometimes you leave your cargo in a warehouse while in transit because you are waiting on documentation, this may incur additional warehousing charges and it is usually at much higher rates than normal warehousing costs
2. Warehouse rent
Includes signing a lease and purchasing land, which are often long-term commitments. The costs will vary according to your needs and plans of growth in terms of square footage, loading docks to receive and ship inventory.
Some potential warehouse costs you may not be aware of:
- Insurance – most warehouses do not cover insurance for your goods
- Higher warehousing costs for dead stock – most warehouses do not want your stock to sit there for years and neither do you
- Processing of documentation – any documentation or additional services you may require
3. Inventory storage and allocation
The cost of just storing inventory is high, especially if you are outsourcing storage. The more inventory, the more you will pay.
4. Supplies and equipment in the warehouse
Includes purchasing proper shelving units, pallet racks to hold inventory effectively. You will also need forklifts, conveyors to move goods. For packaging you need shipping supplies, boxes, envelopes, tape, dunnage, labels. Managing warehouses will also require warehouse management system, internet, taxes, utilities and other administrative expenses.
5. Staff labor
You will require personnel to move inventory and pack boxes. You will also need teams like customer service conducting logistics tasks according to your business’s unique requirements.
Now you need more labor BUT what additional charges may come about?
- Overtime – extra hourly pay may be required for labor to work overtime
- Holiday pay – if you need them to work on weekends or holiday, hourly wages are higher
- Insurance – if any injuries happen, is the labor considered your employee or a contract with the warehouse
We have just included a few things to be aware of. In general if you have worked with a warehouse then you would be notified of these costs. But every operator is different so you need to be aware of what potential costs may result in your shipments and supply chain.
Click here to learn about 5 ways to reduce logistics costs.
To learn more about logistics costs drop us a line at – hello(a)zhenhub.com or submit an enquiry here.