Total Transportation Costs: How to Know and What to Consider

Managing your total transportation costs can be challenging without the right tools.

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.
With a focus on total transportation cost elements, shipping and logistics managers can better track expenses and spending throughout the supply chain.

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 and how that impacts 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.

Calculate your potential Saving Using an enterprise TMS

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.

Get Expert Assistance for Total Transportation Cost Monitoring from MercuryGate

Today, many shipping and logistics managers rely on cost-effectiveness measures to understand all cost expenditures that come with day-to-day operations. Many of the 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.

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