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Firms losing track of logistics costs


Posted on 15/08/2013 by Wayne Brophy FCILT

As many as one in seven firms cannot estimate their logistics costs, according to new research.

A survey from German think-tank BVL International found that as many as 14 per cent of businesses did not know how much they were spending on logistics, a figure which the report authors describe as “concerning”.

It comes in a report which says that customers are ramping up cost pressure on businesses. In order to stay competitive, companies are seeking out new ways to get the best out of their logistics networks.

Reducing costs has become more difficult, the report says, since after years of a global financial crisis every “easy” saving has already been made. As a result companies are being forced to take a more sophisticated approach to identify further savings while locating business areas where efficiency can be improved.

For example, BVL adds that the era of using suppliers based in cheaper emerging markets is already drawing to a close, perhaps as a result of rising labour costs. In the US less than a third of all logistics activity is now outsourced abroad, although in Germany that figure in 39 per cent. In China, itself a hotspot for outsourcing, half of all logistics activities were carried out elsewhere.

As a result most businesses were keeping track of their logistics spending, with 37 per cent reporting that costs had increased despite their best efforts. Another third said that costs had remained static last year, indicating that where savings are being made they are likely to be offset by rises elsewhere. Fewer than one in five companies said they had spent less on logistics.

But the importance of keeping a tight rein on logistics spending was evident in the survey, which found that these costs can seriously eat into revenue. Logistics can take up as much as eight per cent of revenue in the manufacturing industry. In the automotive sector, this figure fell to six per cent, while logistics cost around four per cent of the total revenue in the electronics industry.

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