A Comprehensive Guide to Logistics Costs

A Comprehensive Guide to Logistics Costs

Read Time: 4 min. 

Keeping operating costs under control is essential for the success of any business. Customers these days expect economy and service, so much of your effort is spent keeping costs in line so you can satisfy their demands.

In logistics, hidden costs, inexperience, and inefficient processes cause delays, adding to the cost of doing business. Ultimately, you need to understand what to expect so you can forecast accordingly.

>>The Importance of Transparency in Freight and How it Helps You Reduce Costs

Typical Logistics Costs

Logistics costs can be categorized into five distinct areas:

  • Incoming Goods is involved with receiving goods at a warehouse, DC, or fulfillment center. You incur costs based on each product’s quantity, the number of SKUs on a pallet and the required level of service. For example, the goods might simply need to be held in the warehouse, or they might need to be counted, inspected, or repacked. Inspection, in particular, requires special skills that could be outside the scope of your contract. It is critical to understand what is and is not included in your agreement.
  • Warehousing and Storage. Costs of warehouse space are generally based on the amount of space you occupy. Goods that require special conditions, such as temperature control or hazardous goods handling, might incur higher costs. Be sure your provider maximizes your storage and shelf space as you don’t want to pay for space you don’t necessarily need. Palletized goods are more reliable from a cost standpoint because it is a standard measure.
  • Fulfillment. Several things contribute to your fulfillment costs:

o Packaging materials required
o Customization
o The number of orders
o Number of SKUs
o Product size
o Units per order

Additionally, costs can vary depending on the level of automation used—the more automated the operation, the more cost-efficient the result.

  • Shipping costs depend on the method (land, rail, air, ocean) and your load’s size and weight. The best third-party logistics partners leverage technology and experience to ensure you get the best possible rates.
  • Returns costs are based on shipping and handling. Often, the returned goods must be inspected before they are returned to stock or sent back to the manufacturer, which can get complicated. Alternatively, you might work with your provider to donate or resell returned goods to avoid or offset additional costs.

15 Important Questions To Ask A Logistics Provider Before Working With Them

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Hidden Costs

Most hidden costs in logistics are attributable to inefficient manual processes and a lack of automation. Manual processes can actually double the costs of warehousing and fulfillment, so it definitely pays to ensure your logistics partner is completely digitized with an integrated warehouse management system (WMS) in place.

Qualities To Look For in a Logistics Partner

When choosing a logistics, warehousing, and fulfillment provider, it pays to do your homework.

  • Are they registered with the local Chamber of Commerce?
  • Do they hold the appropriate export licenses?
  • How long have they been in business?
  • What are their customers saying?

Nothing speaks louder than experience and a reputation for excellence!

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How DTS Supports Your Cost Efficiency

DTS World Cargo works hard to ensure our customers have access to the best tariff rates, customs destinations, and contract rates according to the volume of goods. Our people and our technology are your guarantees of complete transparency through every process.

Reach out today to request a quote. We’d love to hear more about your logistics needs and show you how we can provide value.