BLOG

Why Your Logistics Costs Are What They Are
Author: James Han



Introduction

It's hard to wrap the fact around that you'll be spending thousands of dollars on an international shipment.  That's the price we have to pay to scale our businesses. Yes and No.  It shouldn't come as a surprise that it is an expensive and time-consuming task to operate a 3PL (Third-Party Logistics), 4PL or the entire supply chain.  But, do we really have to pay the pied piper?  There's no doubt that there are so many moving components that goes into a 3PL.  None of which can be ignored.


What are logistics costs?

At a high level, it is the culmination of all expenses, fees, and duties that are associated with transportation costs.  Delivering merchandise from point a to point b.  In which a good chunk goes into logistics costs that are variable costs, but also some that are fixed costs.  


What makes up logistics costs?

There are so many variables involved in calculating logistics costs.  Even deciding between the average time of delivery, which can be ground, air or ocean, shipping, can make a huge difference in costs.  Many logistics service providers have their own way of determining the costs involved in domestic and international transportation.  Some of which can cut down on your profit, if done by yourself.  For instance, warehousing costs, warehouse equipment, that can be physical such as forklifts and shelving, while others can be virtual such as, warehouse management software, and API technology that connects your orders to automate the order management system process.  Without these technologies, you would probably have to manually send the logistics company the orders.  Which may lead to possible inaccurate inventory, or poor inventory forecasting.  Not to mention the labor costs to pick, pack, and label the orders. 

Storage costs can be quite expensive since logistics companies, run on the amount of warehouse space that is currently available.  To control costs, especially if consumer demand does not reflect the supply, they ask their clients' to move partial or their entire inventory to another warehousing facility. 

Some of these changes in real time, such as the shipping costs, excluding the transportation costs to the port.  However, well established logistic companies such as PNPLINE, have partnerships with various major shipping companies such as FedEx, UPS, DHL, and USPS can drastically lower costs compared to doing it yourself.  At PNPLINE we ship 50k worth of products per month and have a strong relationship with these shipping companies for many years now that builds trust.  


Conclusion

The best logistics companies don't just consider the lowest costs, but also a cost-effective way to minimize potential issues such as, damages to their clients' products while in transport.  At the end of the day, customer support, as well as, speedy deliveries, can make or break a company.  This can mean, paying a little more for the right packaging material for your customer.

Request Your Quote

We’ll provide you a customized
quote today

Close