The secrets of hidden costs in logistics

The secrets of hidden costs in logistics


There are logistics direct costs, indirect costs and hidden costs. Direct bullrings are generated when companies establish control mechanisms to know exactly how much the total cost directed to the product or service, such as raw materials, supplies and direct labor.

Indirect costs however, are those who are not affected by the level of production, but you always have to count. For example, the lease of facilities or equipment, general administrative expenses, insurance, maintenance, among others.

According to the Ministry of Economy (SE) in the Performance Evaluation of Supply Chains in Mexico in 2010, it is estimated that large companies spend between 6% and 7% of its turnover to the cost of storing, distributing and reverse logistics, while smaller companies spend averages as high as 30%

Currently, billing for transportation costs usually is automatic, however, that does not mean that there is no margin of error, in processes such as the location of orders, labeling, shipping and billing.

It is essential to have an outsourced service to devote all its efforts to optimize processes that can generate hidden costs , and this applies both large companies and SMEs.

True logistics costs

Logistics costs are variable, not fixed, so any category of logistics costs is subject to the efforts of each company.

In this regard , the analysis of logistics costs is a fundamental step to find any logistics cost not fit the needs and expectations of the company. In fact, it is the first thing you should do to implement a management strategy complete logistics costs.

Hidden costs most often generated by deliveries that are not made, they were made outside the agreed time or, by poor planning delivery route, which could result, for example, additional consumption gasoline, generating unforeseen expenses and then be recovered.

Good management of logistics costs can save a significant percentage on each transaction you make logistics. Then let’s review the 4 most common hidden costs in logistics.

1) Errors carriers

The error of carriers is usually the largest preventable in the world of logistics costs cause. Most of these errors go unnoticed for months or even years, because they are the result of human error and did not reflect a systematic pattern of behavior that can be easily detected.

The discovery of this problem usually requires a vision of a system providing real-time visibility to all shipments.

And to avoid this, it is important to make a proper logistical planning of deliveries that will make employees, consolidating the delivery of different orders in one area, avoiding long commutes and takes a couple of extra minutes between each delivery.

“Get a strategic advantage from the relationship with loyal customers requires a real difference in the experience you offer. In many cases this includes not only have great products at competitive prices but also depends on the quality of your deliveries, personalized service and a level of responses and high collaboration “Bain & Company Brief

2) Exceptions Shipping

Shipping exception is a situation that causes the delivery of a product must be reprogrammed. Exceptions, such as an incorrect address or absence home customer, can occur for various reasons and are explained in the detailed shipping information.

As we see, the shipment exceptions can arise from a number of causes, but the main reason is insufficient “visibility” process – oriented logistics. Greater visibility equals more drivable for administrators shipping intelligence, thus avoiding handling exceptions. Generally, this will require a radical change in technology that you use to manage your business analysis.


3) Costs for obsolescence

These are costs generated by sudden trend changes in customer interest in a product and / or service. Mainly, this happens with technology products, where continuous developments and changes occur faster.

The same goes for seasonal products, which should be changing from time to time. Is finally the need for quick sale forcing companies to incur a number of hidden costs and unforeseen.

4) Communication costs

Mobile field work is now a trend, but is increasing every day in the world of logistics and processes offices. Current market volatility, in addition to changing consumer tastes, is generating that companies must adapt to this type of management in the field with mobile technology.

This trend translates into hiring cloud services where carriers will be able to be fully aligned with a smartphone and an Internet account among suppliers and customers.

Evaluate who really need to have all the facilities offered by mobility and acquire equipment, will assess whether the cost – benefit ratio is positive and profitable, as well as to anticipate possible hidden costs for errors in delivery processes.

Overall, and considering the above points, the hidden costs can be avoided by taking into account the following measures:

-Make proper logistical planning of deliveries.

To consolidate the delivery of different orders in one area.

Avoiding long journeys.

direct-communication with the transport fleet and end customers

E-reports real-time reports regarding Operational Performance

Ability to measure and analyze levels of customer satisfaction

-Re-design of the logistics process.

-Communication information.


                          [ Deepen these points here ]

Called hidden costs are present in most SMEs and large enterprises. The key is to detect them in time through different measures that automate key processes of the firm and thus achieve the reduction or elimination of these unnecessary expenses.

 Read more related articles here:

New Logistics: applied efficiency through technology

Three criteria to consider before outsourcing your processes

Delivery “on demand”: the new trend of the last mile

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