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The costs of internal logistics

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Focus on your core competencies and outsource the rest to a carefully chosen partner! More and more companies are aware of this, but still fail to identify the costs of internal logistics. When you are thinking about outsourcing your logistics, costs are an important part of your decision.

That’s why we want to give you an idea of all possible costs, which you have to include in your comparison. We make the distinction between fixed and variable logistics costs.

Direct fixed logistics costs

These are fixed costs that are directly attributable to your logistics operation. The best known costs are:

  • the rental or purchase of a warehouse
  • consumption of energy
  • insurances
  • the layout of the building
  • rolling stock in your warehouse
  • computers and scanners

In short, all the investments needed to store your goods and process your orders. Of course, you also need to include the cost of maintenance and renewal in your calculation. You will soon notice that these fixed costs are much higher than you would initially expect.

The big advantage of outsourcing your logistics is that your fixed costs will faster change into variable costs, which is definitely an added value in a rapidly changing market. You have much less ballast into an ever-changing world, limiting the financial impact of change.

bme scanner

Direct variable logistics costs

These are variable costs that are directly attributable to your logistics operation. The best known costs are:

  • warehouse employees
  • transport
  • packing material
  • palettes

Transport is often the simplest cost to compare. As far as employees are concerned, one looks purely at the total cost of labour, but one forgets, for example, the seasonal impact of an operation or, in other words, the impact of over- or under-capacity.

In the event of overcapacity, your variable costs are much less variable than you would like them to be, so it costs much more to make adjustments. In the case of undercapacity, it is difficult to scale up people, because the cost of training is very high in the short term. Finally, you also have to deal with the entire pre-financing of packaging materials and pallets, which you would otherwise only be charged for when they are actually used.

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The benefits of outsourcing logistics

In short, by outsourcing your fulfilment, you could:

  • reduce your direct variable costs.
  • limit the risk of under- or overcapacity.
  • drastically improve your cash flow, because you would have to pre-finance less.

We have therefore mapped out all the direct costs linked to a logistics operation. However, the exercise is not yet finished. In the next article we discuss the IT-costs, the indirect operational costs and finally the opportunity costs. If you have any questions or need more information, don’t hesitate and contact us.