What are Logistics Costs

Logistics costs are defined differently by different companies. Some companies do not account interest and depreciation on inventories as logistic costs. Others include the distribution costs of their suppliers or the purchasing costs. In some cases, even the purchase value of the procured goods is included in the logistic costs. So, there is no generic definition of this term but every company needs to define the logistics costs for itself and the KPI’s it will be tracking to lower the costs.

Total logistics costs consider the whole range of costs associated with logistics, which includes transport and warehousing costs, but also inventory carrying, administration and order processing costs.

Logistics costs arise in the following stages of production:

• acquisition of materials, intermediates and other products from suppliers,
• storage of materials and waste,
• external and internal transport,
• production planning,
• storage of semi-finished products,
• storage of finished products,
• transfer of finished products to customers.