How to Calculate the Cost and Performance of Logistics

Maintaining low logistical costs while guaranteeing great product performance is critical to the profitability of your manufacturing organization. Logistics expenses encompass all expenditures incurred in addition to the basic manufacturing costs of a unit. Service expenses, transportation costs, inventory costs, and warehousing costs are all examples of logistics costs.

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Determine Total Sales Revenue

Examine your sales in terms of total sales income minus total production costs, which include materials, labour, utilities, and space. This amount is referred to as profit since it indicates the gross profit within a given time period before you compute the logistical expenses. It is worth noting that the logistics cost and revenue statements begin with the profit value and then show the profit loss due to logistical issues such as service, transportation, warehousing, and inventory expenses.

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Calculate Service-Level Costs

Determine the unmet customer demand based on industry constraints to calculate service-level costs. Include production restrictions like being unable to satisfy large orders owing to scheduling constraints or lost production days. Include ordering delays such as order processing time, delivery time, and managing back orders. Include charges for product damage during delivery, manufacturing faults, and returned items.

Calculate Warehouse Costs

Calculate warehouse expenses as the cost of long-term storage for manufactured goods. Include the expenses of land, building, utilities, payroll, and any unique expenditures incurred if your items require particular storage conditions, such as refrigeration. Include any additional warehouse space required for out-of-stock products, which are frequently held so that your organization may utilize them for components later

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