What are the types of costs involved in logistics operations?
Expense management in logistics is a tedious task owing to the complexity of the industry that involves both expenses within the firm and on-road expenses while delivering shipments. The costs involved in logistics revolve around the invoice expenses, operational expenses and risk mitigation expenses.
- Invoice expenses: Invoice expenses are one of the major costs involved in logistics as shippers and carriers transport goods on a daily basis including warehouse charges, on-road expenses, loan repayment, administrative costs, salary for drivers, fleet managers and similar logistics expenses.
- Operational expenses: Transportation costs are much higher in the logistics industry due to operational expenses like toll payments, fuel expenses, parking charges, maintenance costs, food & lodging expenses for truck drivers while traveling for long distances and similar logistics expenses.
- Risk mitigation expenses: The logistics industry is the most vulnerable to risks as vehicles travel on a regular basis to deliver shipments in unpredictable weather conditions and improper roads. Moreover, distracted drivers and speeding can cause accidents. Therefore, there are logistics expenses associated with risks.
Why is managing logistics expenses challenging?
Increasing costs is a major challenge recently in the logistics industry. According to a study, 44% of fleet managers say increasing costs is a top challenge (Source: G2 Tech Marketplace). Moreover, payment processing in logistics is often time-consuming and prone to error owing to the enormous amount of paperwork and manual processing of invoices. According to a study, 49 percent of fleet managers spend 1.5 to 2 hours on invoicing (Source: Netradyne).
Also, limited payment options are a major challenge. It can be difficult to make on-road payments when drivers only have cash or lack an exact amount of money, especially in an economy that is rapidly becoming digital. It might also lead to theft or misuse of cash if there is a lack of real-time visibility.
How to manage costs involved in logistics with technology?
As mentioned earlier, there are multiple logistics expenses that need to be streamlined efficiently. However, unified payment services with online bill payments, spend control and real-time visibility will be the best solution to manage costs involved in logistics.
- Cashless payments: Fuel and operational expenses account for almost a majority of the total logistics cost. Moreover, cash payments are subject to theft or misuse. Therefore, fuel cards and expense management cards provided by fuel companies and fintech companies will be the ideal solution for managing logistics expenses. They also enable discounts, setting of transaction limits and real-time transaction updates.
- Financial assistance: In times of crisis, emergencies and other crucial requirements, it is important to receive financial assistance to have seamless operations in logistics.Fintech companies provide scope to receive capital loans for fleet operations, insurance for vehicles and drivers, and also provide an escrow service for a secure transaction between parties.
- Preventive maintenance: Vehicle maintenance is a major financial burden as commercial vehicles undergo rapid wear and tear costs because of traveling for long distances frequently on improper roads. However, telematics technology can efficiently help to predict maintenance issues and alert drivers to resolve them at the earliest to avoid major repairs that incur heavy costs.
- Fleet management: Fleet operations are expensive, however certain expenses can be reduced with tracking technologies. GPS and fleet management solutions help to save fuel and reduce accident costs and more by tracking speed, fuel consumption, monitoring driver behavior and detecting maintenance issues to avoid high costs.
Let’s Wrap Up!
Expense management in logistics is a time-consuming and complex process as it involves managing payments within the premises as well as while on the road. The costs involved in logistics include invoice expenses, operational expenses and risk mitigation expenses. However, unified payment services with online bill payments, spend control and real-time visibility can help with efficient payment processing and cost management in logistics. Moreover, implementing technological solutions for cashless payments, financial assistance, preventive maintenance and fleet management will increase efficiency and aid in cost reduction.
Axlerate provides a unified digital logistics management platform with transportation management solutions to simplify tolls, fuel purchases, fleet expenses, loans, insurance, escrow, payments, truck booking, fleet management and the buying and selling of logistics products and services.