Cost to Serve Concept in Logistics

Cost to Serve Concept in Logistics

If you are thinking about starting your own shipping company, you have to consider the cost to serve the concept. It makes it possible to calculate the service costs for a particular customer. The right calculations help you save money and time. 


Cost to Serve Concept in Logistics

Every time a person starts a business, he or she should take into account lots of details and aspects. It’s clear that the major goal of any venture is to make money. It’s of prime importance to figure out possible risks and preferable profits no matter whether you are going to sell books or deliver freights. 

For the logistics segment, the cost to serve concept is of prime importance. It allows calculating the service costs for a particular customer. If you still wonder why you need this information, consider the following facts. With the help of this concept, you get a perfect opportunity to analyze how much costs are consumed through the supply chain. Then, you are able to manage profitability in accordance with the data you acquired. It doesn’t matter whether it comes to <a href=””>truck logistics</a> or ocean shipping, you have to take into account definite cost elements. The most significant of them include:

  • Order processing costs.

If you think that it doesn’t cost any money to place an order online, you are wrong. It’s necessary to create and maintain a website. You need people who will process all the orders and sort them;

  • Picking and packing expenses.

There are various <a href=””>freight forwarding services</a>. Although some companies do not offer packing options, it’s in great demand among customers. Proper packing is not an easy thing. It’s necessary to pick up the most suitable packing materials and find experts who will actually pack cargos. The main thing you should remember about packing is that it should be reliable and of good quality. Its main function is to protect content from possible damages;

  • Storage and handling expenses. 

The freight forwarders differ in size and capabilities. Some of them possess warehouses in each state while others prefer to rent storage areas. Even if you have your own warehouse, you should pay money to keep it on order.

The next major expense is the handling of the orders. It’s necessary to obtain the needed technologies to make the process faster and more convenient. Even if you prefer to work with automated technologies, you still have to be ready to pay money for their maintenance;

  • Transportation.

Any mode of transportation requires the input of significant financial resources. Even if you choose the most cost-effective tuck or tail shipping, you can’t avoid such expenses. Moreover, you should pay salaries to drivers;

  • Marketing. 

Marketing is a must if you want to promote your business. Good marketing is not cheap. You have to promote your company to get new clients.

It’s not the whole list. The points may differ depending on the type of your company. The next step you should take is to define the number of clients. You are to realize how many people you are able or you are going to serve. Nowadays there are lots of useful and helpful applications. They help you to cope with this task. 

To sum it up, it’s worth mentioning that it’s not a good idea to ignore the cost to serve concept when organizing the operation of the supply chain. If you do everything in the right way, you may promote the benefits of your enterprise fast and easily.