If there is one thing logistics providers can be pretty sure of, it’s that customers will be looking for lower costs. After all, buying a logistics service is not like buying designer clothes – there is no kudos attached simply to spending a lot of money.
Kudos comes from getting the right service level at the right price. There are plenty of organisations for which that is a critical balance, having an impact on both the availability and pricing of products.
So it comes as something of a surprise to find a report that suggests that 14 per cent of companies struggle to measure their logistics costs.
The study, Embracing global logistics complexity to drive market advantage, has been produced by BVL, the German supply chain network, and reflects the views of some 1,757 individuals working in major companies around the world.
It found that 37 per cent reported an increase in logistics costs in 2012, while 32 per cent said costs had stayed the same. But 14 per cent didn’t know – a surprisingly high percentage. Of course, it might be a statistical anomaly, but that seems unlikely given the thoroughness of the report.
The report notes that this result can, in part, be explained by increased uncertainties and volatility in international markets. “Clearly analytical tools and standards are needed that enable managers to have a better ability to measure logistics cost data,” it says.
An interesting finding on a number of levels. First, it begs the questions: what are companies including in their logistics costs and how comparable are logistics costs between different organisations?
An organisation that struggles to measure the costs of its logistics operations, will also struggle to analyse the cost-effectiveness of its logistics strategy. And that clearly has significant implications for the broader supply chain strategy.
Some industries are going to feel the impact more than others. The report found that logistics costs as a percentage of overall revenue varies significantly. In electronics it is about four per cent, it says, while in retail it is about nine per cent. Top of the list is materials and mining where logistics costs account for about 13 per cent of overall revenue.
There is no indication in the report which sectors struggle most to measure their logistics costs – presumably those with highest exposure to volatile markets. There could be a big reward for whoever comes up with a better tool to analyse that.
Malory Davies FCILT,