Posted in Operations and Supply Chain Terms, Total Reads: 2276
Definition: Logistics Costs
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.
Source: Establish, Inc. / HWD & Grubb & Ellis Global Logistics.
Generally, companies have to do a trade-off between cost and performance while managing logistics costs. This is because the lowest cost transportation may not be the fastest and hence higher costs need to be incurred to provide higher on time delivery and performance. Also, logistics costs is also a function of the type of goods that need to be transported. The mode of transportation for a perishable good will be different from an imperishable good.