What Are Logistics Costs And How Do You Calculate Them?

Maintaining an e-commerce business is profitable but can be challenging. The business owner needs to manage the rising number of orders and staff on site. At the same time, they face challenges such as changes in shipping prices, new software systems, and picky customers that require speedy delivery. However, you must also calculate the logistics costs to implement them in the final product price. What are logistics costs, and how do you calculate them? This article shares the everyday logistics cost categories to give you a better understanding.

Inbound Goods and Receiving

The first cost your business will face is receiving the supplier’s inventory. Whether you buy your goods from a wholesaler or get them directly from the manufacturer, you must receive them and store them in your inventory. Businesses that have production facilities and make their products will receive raw materials.

First, you face shipping for the materials. Inbound labor, which refers to employee salaries, is another essential part of the cost. If outsourcing, you must pay some extras, such as standard fees, based on the number of products you receive.

Software and support

Modern warehouses rely on technology to streamline operations, so don’t forget to include the software and maintenance costs. Businesses have two options: establishing their systems or working with outsourcing partners for warehouses charlotte nc. If you outsource this service, your provider will take care of everything.

Don’t forget that establishing your management system includes development, implementation, equipment, and expert team costs.

Inventory Storage

The warehouse is the central hub of all operations. This is where the goods get stored upon arrival, so operating a warehouse brings different expenses related to the storage. First, you need a warehouse, so you will likely need to pay rent or a mortgage. Next, we have the utilities. Warehouses have electricity systems, HVAC, and water supply. Also, they are large spaces, so you must dedicate some funds to them. Also, some storage facilities include advanced security systems to secure the products and people.

Depending on the laws, warehouses need safety equipment, which brings additional costs for installation, maintenance, and regular testing. Next on the list are backup systems, such as local data storage and on-site generators. Finally, we have the shelving installation and maintenance required. The final cost for the warehouse will depend on the size of the space, so companies need to consider this for their future growth.

Pick and Pack Actions

This cost category refers to the order fillings that your warehouse receives. The warehouse management tools share an order list, and the employees must go through the warehouse and assemble the order. When the products are picked from the storage facility, they go to the packing station to be prepared for shipping. The staff will place the products in boxes, add filler or other materials, tape the box, and add the shipping information on the package.

Returns and replacements

Delivering the gods to the final customer is not where your obligations end. Sometimes, customers won’t be satisfied and request returns or replacements, which brings additional costs for your company. The customers will expect you to cover the return shipping costs, so you need to count this in the total costs.

Final take

The logistic cost consists of all the expenses related to receiving, processing, and shipping the goods but also extends to the post-purchase process. With warehouse outsourcing services available, companies can scale their operations and avoid the high maintenance costs related to warehousing.


  • Resources

  • About the Curator

    Abelino Silva. Seeker of the truth. Purveyor of facts. Mongrel to the deceitful. All that, and mostly a blogger who enjoys acknowledging others that publish great content. Say hello 🙂

    • Sidebar Mail