Logistics costs: what are the 7 main types and how to manage them?

Logistics costs are all the expenses that the company has to manage the logistics of the business. Knowing how to reduce them is essential to be more competitive.

Logistics costs include expenses related to the acquisition of resources, product distribution and other expenses that make up a company's production, sales and delivery chain.

Good logistics cost management goes beyond getting the product to the consumer. It includes making decisions on the best use of financial resources and, of course, ensuring savings in all these processes.

In this article you will learn about the main logistics costs of a company and how to improve their management.

What are logistics costs?

Logistics costs are considered to be those related to the demands for the movement of products and services goods in a company's supply chain. In other words, all the company's logistics expenses.

We are talking about product inventory, distribution, the acquisition of resources and raw materials and even the taxes levied on these items.

Good business logistics is essential to improve the quality of processes.

Therefore, being able to reduce these costs has a positive impact on the overall performance of the organization.

Why is it important to manage logistics costs?

In a market that undergoes constant disruption, change and is increasingly competitive, every detail makes a difference.

Even when the product delivered to the consumer is good, a bad management can lead to the closure of the company and a good cost management is one of the solutions to face the market transformations.

Increasingly demanding consumers and the growth of e-commerce sales demand more efficient logistics processes from companies. Of course, the final costs also have an impact on the customer's choice of brand A or B.

In this sense, reducing logistics costs through good management is fundamental. The adoption of good practices guarantees more economy and efficiency, being a strategy that will influence all areas of the company.

What are the types of logistics costs?

The main logistics costs of a company involve a number of factors. After all, managing a company's logistics is much more than just ensuring the delivery of a product: it involves the entire supply chain management of an organization.

1. Procurement costs

Procurement costs include the purchase of raw materials and other inputs necessary for the production of the good that will reach the consumer.

These costs must be taken into account in logistics management, since a lack of resources or poor management of purchasing processes can have repercussions throughout production and distribution.

2. Inventory or stock

Inventory is also among the main logistics costs of an organization. Product storage costs can represent a high cost and without good inventory management, the brand can run into problems.

The cost of the inventory space itself, whether it is a room or a large shed, storage insurance and even maintenance to prevent product loss, must be taken into account.

3. Packaging

Packaging represents an important cost to consider, especially when products are shipped to more distant regions or if the merchandise is delicate and requires reinforcement to reach its destination in one piece.

In addition to ensuring product integrity, other factors must be taken into account, such as excess plastic, which can damage brand image.

A balance must be struck between packaging costs, retail value to the end consumer and environmental impact.

4. Transportation logistics costs

Transportation logistics costs are related to the distribution of products. Expenses include fuel, tolls, hiring a driver or an external company, vehicle maintenance, among others.

Remember that the value may vary depending on the distance, the quantity and type of cargo, the vehicle used and even the route chosen.

5. Taxation

Another point that increases the total logistics cost is the taxation of logistics processes. Interstate and intercity transport services represent an important cost.

6. Investments in new technologies

Technologies used in the management of logistics processes should also be included in this account.

These investments are important for improving the workflow and lead to greater savings in the medium and long term. In any case, they should be considered as part of the company's logistics costs.

After all, adopting new technologies is essential to make the brand more competitive, recognized and innovative.

7. People

Finally, labor is an important part of logistics costs. Consider salaries, fees, vacations, leave and benefits. At the end of the day, all these values have an impact on the final costs of the products that the brand delivers to consumers.

With the sum of all these factors, the company reaches the total logistics cost, which, depending on the area, may also contain other elements.

Read also: what are the main technological trends for the supply chain?

How to make a good logistics cost management?

Good logistics cost management consists of adopting good practices to reduce these values and ensure a smoother financial flow for the organization.

Here are some tips to improve management and reduce the costs of logistics processes:
  • Have a good planning: know what are the fixed and variable costs. Analyze the total logistics costs, as well as the amount invested in each area. In this way, it is possible to identify areas to reduce expenses.
  • Invest in good tax planning: in parallel to other expenses, tax payments should be planned in a more organized way. A thorough knowledge of the legislation in the area can even help to obtain exemptions and incentives, reducing tax costs.
  • Process mapping: evaluate how all processes are carried out in order to standardize them and achieve a high level of excellence. More efficient processes are also lower cost processes.
  • Automate processes: automating repetitive tasks streamlines the business routine, avoids errors and reduces tax costs, making the company more efficient from start to finish.
How can an integrated management system help?

To improve logistics cost management, technology is an important ally. In addition to process automation, it is worth investing in integrated management platforms.

From an integrated vision, it is possible to work with aligned teams and processes, focused on common objectives.

Thus, areas share data automatically, eliminate repetitive tasks, optimize organizational performance and improve logistics processes, as well as customer satisfaction.