Trade & Industry Advisory

29 June 2021 • 5 min read

Transportation Costs | A Key Factor in Logistics

Editorial Team

Transportation costs have always been a key element in logistics that joints the separated activities.

Transportation costs have always been a key element in logistics that joints the separated activities.

1. Transportation management is the backbone of the Supply Chain

According to the statistics, transportation costs occupy one-third of the amount in the logistics costs and largely influences the performance of the logistics system. Transporting is inevitable to logistics as it required in the whole production procedures, from manufacturing to delivery to the final consumers and even returns. In today's economy, it is virtually impossible for a logistics firm to function without the help of transportation. In fact, the backbone of the entire supply chain in logistics is the transportation management that makes it possible to achieve the right product in the right quantity and the right condition, at the right place, at the right time, for the right customer at the right cost.

2. Components dependant on effective transportation

When all the components of the logistics sector like production, storage, transportation, wholesaling, and retail sale are dependent on effective transportation, you might now fairly access what major influence does the transportation costs have on the logistics sector. It requires efficient planning of all these functions and sub-functions into a system of goods movement in order to minimize the costs and to maximize services to the customers. Production or manufacturing plants required the assembly of various materials, components which cannot be done without transportation. Warehousing or storage services between production plants and marketing outlets involve separate transport. Finally, the chain completes with merchandising the finished product or say the final delivery to the consumers which again cannot be brought into action without the help of transportation. So, all these developments majorly depend on better, effective and affordable transport services which ultimately reflects on the logistics costs and performance.

3. Transportation costs

Talking about transportation costs, today it is the major concern of the logistics sector as well as the other companies as it constitutes to about 40-50 percent of the total logistics costs and 4 to 10 percent of the selling price of the final products. With this, it is pretty much clear that the transportation decisions directly affect the total logistics costs, and cost in other functional areas of the firm. Now, that we know about the major impact of transportation on logistics we should now think about effective ways to resolve the ever-increasing prices.

4. Things to finally pay attention to
The logistics company should pay major attention to the transportation management which encompasses the day-to-day functions of the transportation process. Separate company personnel should be hired who have considerable knowledge about transportation pricing, services, and regulation, both domestic and international, to manage the transportation process and to operate the logistics system efficiently. With the growing digital market, integration of logistics and e-business is the future trend. The integration could help the companies reduce the middle-level procedures as the producers could immediately give the products over to the terminal customers. Companies then will not have to take the costs of inventory and warehouse, and therefore they could reduce expenses and also administer sources more efficiently. However the physical delivery still relies on the transportation system to finish the operations, but it still manages to cut down the costs from production to warehouse and warehouse to the final consumer.

Blog comments

26 July 2023
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