There is a critical metric that managers must closely monitor within the supply chain industry- total transportation costs. This is the average cost incurred for moving products from point A to point B along the supply chain. It includes operational costs, packing, shipping, employee pay, fleet maintenance, and all other fees and expenses related to transporting freight. It is a component of many cost-effectiveness measures that management uses to understand all cost expenditures related to transportation management services and shipping. Understanding what commonly constitutes total transportation costs is critical. And using an enterprise TMS solution can help managers more closely monitor trends in these vital areas.
Understanding the Four Cost Elements in Transportation Management
Four essential cost elements are typically seen in total transportation cost monitoring metrics. Understanding these sources and the costs that they encompass gives shippers a more precise picture to work form. It is easier to secure the best price by pairing the best shipping load with the correct shipping method. The four essential cost elements that logisticians can track through an enterprise TMS are as follows:
- Linehaul- the operational costs of transporting loads through any of the various shipping modes.
- Pickup and delivery- the expenses wrapped up in the handling and sorting, and delivery of loads.
- Terminal handling- the fees and costs that come with terminal stops for loading and unloading.
- Billing and collecting- the costs involved with issuing invoices and tracking down payments.
What Impacts and Influences the Total Cost of Load Transportation
Freight managers must stay on top of expenses, or they can quickly get out of hand. Focusing on total transportation costs trends such as these is essential for growth and success.