Costs of land transportation of logistic cargo: examples and types

Last mile delivery services account for 50% of all logistics freight transportation costs for companies, according to McKinsey & Company's study Parcel delivery - The future of last mile. In this sense, the more cost savings can be achieved at this stage of the supply chain, the better prices can be offered to the end customer.

What are land transportation costs?

The costs of land transportation of logistic cargo are the expenses borne internally by the company or the supplier that performs goods transportation functions by land means (trucks, vans, cars, motorcycles, bicycles, etc.), either from the logistics center to the final customer (last mile), or between different points in the supply chain.

Types of land transportation costs

The whole process of goods mobility has a direct impact on the different types of land transportation costs, being these higher in the initial or final stages of a movement, also known as the first and last mile.

Within this context, 3 types of land transportation costs can be distinguished in logistics:

- Capital costs: these are the transportation costs that apply to the physical assets related to transportation, which are mainly infrastructure, terminals and vehicles.

- Terminal costs: these are land transport costs arising from the processes of loading, transshipment and unloading of goods.

- Line transport costs: these are the logistics costs that vary according to the weight of the goods and the distances traveled to get them from one point to another.

5 examples of land transportation costs of logistic freight

According to Deloitte's Supply Chain Efficiency report, 39% of companies in Mexico have managed to increase profits and reduce logistics costs by optimizing their land transportation processes.

However, before developing optimization initiatives, it is first necessary to understand very well how the costs of land transportation of logistic cargo originate, in order to design strategies that allow their reduction, such as those being implemented to reduce land transportation costs in Mexico.

For this purpose, let's see below some examples of land transportation costs:

Logistic land transportation costs due to maintenance.

The constant use of transportation units generates wear and tear in their automotive parts. To prevent these parts from deteriorating, it is necessary to carry out maintenance work on the vehicles to extend their useful life, and it is this work that generates a series of land transportation costs due to mechanical personnel, spare parts, lubricants, tires, etc.

Fuel costs of land freight transportation

The transportation of goods is a process that, undoubtedly, will always generate land transportation costs due to fuel consumption; the longer the distribution routes or the greater the number of deliveries to be made, the more fuel will obviously have to be spent. However, that is not the problem. The problem is when delivery routes are not planned correctly and then carriers end up running very long routes instead of the most direct routes to each point. This mismanagement leads to hidden costs associated with indiscriminate fuel consumption.

Costs for training of freight forwarders

These costs of land transportation of logistic cargo have to do with all the training that the transportation personnel must receive regarding the correct handling of merchandise, customer service in home deliveries, knowledge of routes, safety regulations, among others.

Inland transportation costs for failed deliveries or shipment exceptions

In the case of last mile deliveries, when these are unsuccessful because the customer was not at home or for any other reason, then the company must assume a series of logistics transportation costs associated with the next day reshipment process.

Land transportation costs for tracking technologies

In an attempt to optimize last mile logistics transportation, many companies invest large amounts of money in acquiring GPS systems for each of the transportation units. However, this investment initiative generates significant land transportation costs, since they are expensive devices to purchase, and the installation and periodic maintenance processes also generate permanent expenses.

How to reduce land transportation costs in logistics?

Taking into account the types and examples of land freight logistics costs explained above, here are a series of recommendations so that you can reduce them as much as possible in your company:
  • Plan distribution routes, finding the best routes for each delivery.
  • Consolidate deliveries of different orders in a single distribution area.
  • Prevent carriers from making long trips for a very small number of deliveries.
  • Maintain direct communication with carriers to be informed about any incident on the routes.
  • Access real-time reports and analytical reports on the operational performance of deliveries.
  • Redesign the logistics transportation process to adapt it to market needs.
  • Implement specialized logistics transportation technologies that are cost-effective and accessible.
Finally, it is important to have tools to optimize multiple logistics distribution processes in order to reduce the costs of land freight transportation. For example, a very effective system is PlannerPro by Beetrack, which digitizes and automates the planning of delivery routes. Also, there is LastMile by Beetrack, a software that allows you to monitor in real time all carriers during their delivery processes, without the need to purchase expensive additional devices.