Logistic costs include all costs beyond the basic production costs for a unit. This includes service costs, transportation costs, inventory costs and warehouse costs. Companies focus on these costs because they devalue a product after production, essentially adding costs to the production of materials and decreasing the production performance of a company.
Reducing logistic costs is an important business focus for improving the overall performance of a product. Assess your sales in terms of total sales revenue subtracted by the total cost for production, including cost of materials, labor, utilities and space.
Refer to this value as profit, as this represents the gross profit during a specific time period, before you calculate the logistical costs. Note that the logistical cost and profit reports start with the profit value and then represent the loss of profits based on logistic complications like service, transportation, warehouse and inventory costs.
Calculate the service-level costs by determining the unmet consumer demand based on industry restraints. Include production restraints, such as the inability to meet large orders due to time constraints or lost production days.
Include ordering delays, such as the time it takes to process an order, delivery time and managing backorders. Include malfunction costs, such as products damaged during deliver, production errors and returned products. Determine the service level costs by subtracting the actual number of products sold without return from the total units ordered.
Determine the transportation level costs. Divide the total transportation costs by the total sales on the transported products to determine the percentage costs for transportation.
Include all transportations costs in this equation, such as payroll for transportation staff, fuel use, insurance costs and maintenance costs. Calculate the warehouse costs as the cost of long term storage for produced merchandise.
Include the land costs, building costs, utilities, payroll and special costs if your products require special storage conditions, such as cooling.
Also, include any additional warehouse space used for out of stock items, which are often stored so your company can reuse them later for parts. Present warehouse costs in terms of a pure cash value, or represent them as a percentage of your total sales by dividing your warehouse costs by your total revenue from sales.
Determine your inventory costs, as the cost of short term storage for produced merchandise waiting to be shipped and merchandise at your store waiting to be sold. Include the space costs, utilities, labor costs and special arrangements for your products, such as cooling necessities.
Present inventory costs in terms of pure cash value or as a percentage of your profits.
|Managing Logistics Costs||Keeping production costs low by producing or sourcing raw goods in other countries or states allows companies to make more profit, but the logistical costs of transporting and storing products can eat into those profits.|
|What is total logistics cost? - regardbouddhiste.com Specialties||Inlogistics costs rose to a recent record of 9. Bylogistics costs had fallen to just 7.|
|Recent Feedback||Inventory and Total Logistics Cost Essay introduction. Supply chain includes different companies.|
Tips Logistic costs and production costs are two very different values. Logistic costs are additional costs resulting from product handling after production.
References Logistics and Supply Chain Management: Measuring logistics costs and performance About the Author Kristyn Hammond has been teaching freshman college composition at the university level since She has experience teaching developmental writing, freshman composition, and freshman composition and research.Logistics.
Logistics is defined as the management process for the movement of goods across country or across the globe. Companies map out the transportation path of their goods into a supply chain. LOGISTICS ACTIVITIES THAT DRIVE TOTAL LOGISTICS COST Logistics costs are important factors which affect the competitiveness of every organization today.
Companies can enhance their market competitiveness by reducing their logistics costs, thus lowering the total costs of goods and services.
State of the Logistic Union the total cost of US logistics was estimated at $ trillion for , up $ billion from but in the Wilson noted that if the interest rate of % was in play, interest on carrying the inventory and thus total logistics costs in would have increase by $ billion.
That, in. Logistic: Inventory and Total Logistics Cost Essay Supply chain is a network of logistic systems - Logistic: Inventory and Total Logistics Cost Essay introduction. . Both logistics costs and its largest component, transportation cost, have experienced a steady decline as compared to GDP, while the inventory cost shows some cyclical fluctuations over time.
Along its decline compared to GDP, transportation as a share of the total logistics costs has trended upward, ending more than 18 percentage points higher. Maintaining a low logistic cost, while ensuring a high product performance is key to making your production business profitable.
Logistic costs include all costs beyond the basic production costs for a unit. This includes service costs, transportation costs, .