Logistics Costing
Let’s learn more about Logistics Costing. Logistics costs are defined differently by different companies. Some companies do not account interest and depreciation on inventories as logistic costs. Others include the distribution costs of their suppliers or the purchasing costs. In some cases, even the purchase value of the procured goods is included in the logistic costs. So, there is no generic definition of this term but every company needs to define the logistics costs for itself and the KPI’s it will be tracking to lower the costs.
Total logistics costs consider the whole range of costs associated with logistics, which includes transport and warehousing costs, but also inventory carrying, administration and order processing costs.
Logistics costs arise in the following stages of production:
- acquisition of materials, intermediates and other products from suppliers,
- storage of materials and waste,
- external and internal transport,
- production planning,
- storage of semi-finished products,
- storage of finished products,
- transfer of finished products to customers.
Logistics Costing Types
Types of logistics costs depends on various supply logistics tasks performed within the company. Each task performed in the logistic system incur cost. Strict cost calculation in the logistics systems allows to distinguish them from the overall costs of the company.
Main types of logistics cost
- direct costs (transport, storage, inventory, handling, communications) and indirect costs,
- fixed and variable costs,
- the cost of supply, production and distribution,
- tangible and intangible costs,
- the cost of the development of logistics and projects recommended by the logistics,
- strictly logistics costs.
Logistics costs are expressed in money the consumption of human labour, resources and objects of labour, financial expenses and other negative effects of events. They are caused by the flow of material goods in the enterprise and between enterprises, as well as during maintaining inventories.
According to the criterion of variability we can be on fixed and variable. To fixed costs include, among others, depreciation costs of storage, transportation, cash outflows from taxes and fees. Variable costs are labour costs, costs of involved capital, consumption of materials and fuels. Cost calculation allows to identify the threshold of profitability. Thus it is possible to determine the type and nature of the relationship between these logistics costs and overall company’s performance.
Strategic segmentation and logistics costs
For the purposes of strategic management we distinguish between the analysis of separate market segments:
- operating costs of transport – freight forwarding and movement,
- the cost of maintenance and operation of the warehouse,
- cost of maintaining the inventory,
- costs of unavailability – depletion of stocks and costs of inefficient operation,
- administrative costs.
Logistics costs reflect the consumption of enterprise assets, caused by the planned and unplanned events, implementation and control of technological processes involving moving various materials in time and space. Various formulas for logistics costing analysis are illustrated, next.
Distribution center logistics costs
Distribution center logistics costs, involves calculating the cost of logistics distribution center, you can calculate the following ratios, and then these ratios with the year before, three years ago to examine the comparative cost of logistics distribution center of the actual situation, you can also compare with the same industry, other enterprises, or with other industry comparison.
unit sales of logistics cost ratio = logistics costs / sales × 100%
The higher this ratio the lower the price elasticity, from the chain over the years of data, to be generally aware of their movements, while, through the industry and trades with the same comparison, you can learn more about the logistics distribution center cost levels.
The ratio of price changes and trading conditions, by the impact of changes in a larger, and as assessment indicators also there is a certain deficiencies.
unit operating expenses logistics logistics cost rate = cost / (sales, general and administrative expenses +) × 100%
Logistics costs accounted for by operating expenses (sales, general and administrative expenses +) ratio can determine the proportion of the cost of the logistics chain, and this ratio is not the impact of changes in purchase costs, the value obtained relatively stable, thus suitable to do distribution center logistics chain rationalization of indicators.
the cost of the logistics functions of the logistics functions of the rate = cost / logistics total cost × 100%
This indicator can be clearly packaging costs, transportation costs, storage costs, handling, distribution processing fees, and information flow costs, logistics management fees on the cost of the logistics functions of the ratio of the total cost of logistics accounts.
Transport, distribution-related indicators
- loading rate = actual load / standard load × 100%
- vehicle starting rate = monthly total starting number / owner Number of units × 100%
- run the turnover rate = monthly total number of running / owner Number of units × 100%
- units of vehicles on monthly total mileage = mileage / owner Number of units
- unit of mileage on the actual road driving charge = 3 fee / monthly total mileage charges = repair + travel inside and outside the tire fee + fuel charges)
- unit shipments freight = freight charges / freight volume
The maintenance activity indicators
- warehouse utilization = inventory area / total area × 100%
- Inventory turnover = annual amount of a database (number) / average inventory value (number) = the amount of years out of library (quantity) × 2 / (the end of the beginning inventory amount + the amount of stock)
The loading and unloading activities of indicators
- unit workload = total man-hours workload / number of man-hours loading and unloading operations
- (loading and unloading operations the number of man-hours = working number × operating time)
- handling efficiency = standard number of man-hours loading and unloading / loading and unloading the actual number of man-hours
- loading and unloading equipment, loading and unloading equipment, the operating rate = actual starting time / loading and unloading equipment standard starting time of
- unit workload of handling equipment repair = repair / total workload of unit workload uninstall fee = handling fees / total workload of
