A critical metric that managers must closely monitor within the supply chain industry is total transportation cost.
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.
Total transportation cost 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 monitor trends in these vital areas more closely.
Understanding the Four Cost Elements in Transportation Management
Four essential cost elements are typically measured in total transportation cost monitoring metrics.
Understanding these sources and their costs gives shippers a more precise picture to work from. 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 various shipping modes.
- Pickup and delivery: the expenses incurred in handling, sorting, and delivering loads.
- Terminal handling: the fees and costs of terminal stops for loading and unloading.
- Billing and collecting: the costs involved in issuing invoices and tracking down payments.
What Impacts and Influences the Total Cost of Load Transportation
Monitoring expenses and total transportation cost metrics is critical for ongoing growth and logistics success. However, it is essential to understand what impacts and influences these costs. It is important to know how these costs affect every other link in the supply chain, especially in the final mile.
As reported by Logistics Management, “the last mile makes up 50% of total logistics costs on any shipment, says this segment of the supply chain is fraught with challenges, including congestion in urban areas, distance in remote areas, invalid or incorrect address details, hard-to-locate destinations, a lack of human presence to sign for deliveries, and even out-of-service elevators.”
So it’s imperative to know a few key factors affecting total transportation costs and how managers can help reduce these freight expenditures.
Freight managers must stay on top of expenses, or they can quickly get out of hand. Focusing on total transportation cost trends such as these is essential for growth and success.
Get Expert Assistance for Cost Monitoring and Management
Today, many shipping and logistics managers rely on cost-effectiveness measures to understand all cost expenditures with day-to-day operations.
Many transportation management services and shipping processes utilized today come with inherent costs. However, many of these expenses can be significantly reduced or even avoided.
Understanding total transportation costs are essential for growth in the years ahead.