Many businesses know their freight cost, but not their total logistics cost. Real logistics cost includes direct charges, hidden charges, delay costs, inventory impact, administrative effort and service failure.
A logistics cost audit helps identify where money is being lost and where process improvements can create savings.
Areas to review
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1
Freight cost
Review ocean freight, air freight, inland freight, fuel surcharge, documentation charges and accessorial costs.
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2
Customs-related cost
Review customs brokerage, examination, storage, duty planning, documentation errors and regulatory delay.
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3
Detention and demurrage
Track how often these charges arise and why. Repeated charges usually indicate process failure.
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4
Transport cost
Review vehicle utilization, route planning, waiting time, empty return, ad hoc hiring and vendor rate variation.
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5
Warehousing cost
Review rent, handling, storage duration, space utilization, labour, damage, insurance and inventory holding.
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6
Damage and claims
Identify where damage occurs: packing, loading, handling, transport, storage or unloading.
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7
Vendor performance
Compare vendors by cost, reliability, communication, claim ratio and delay frequency.
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8
Internal process cost
Measure employee time spent on follow-up, duplicate data entry, unclear communication and emergency firefighting.
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9
Reporting and visibility
Check whether management receives timely shipment, cost and exception reports.
Signs your business needs a logistics cost audit
- warning Freight cost is rising but reasons are unclear
- warning Detention and demurrage occur repeatedly
- warning Warehousing space is underused or overloaded
- warning Vendors are selected only by lowest rate
- warning Teams spend too much time chasing updates
- warning Management lacks shipment-level cost visibility
- warning Customers complain about delivery uncertainty
Final advice
A logistics cost audit should not only reduce cost; it should improve control, visibility and decision-making.