University of Hrvatsko zagorje Krapina

Three – year professional study in Traffic logistics

LOGISTICS EXPENSES
Seminar paper

Petra Golub, 0299011348

Mentor: dr. sc. Biljana Stojaković

Krapina, May 2018.

Content
1. PROLOGUE........................................................................................................................... 3

1.1. Subject and goal of seminar paper................................................................................... 3

 1.2. Sources of informations and information collecting methods......................................... 3

1.3. Content and structure....................................................................................................... 3

2. LOGISTICS EXPENSES....................................................................................................... 4

2.1. Definition of logistics expenses....................................................................................... 4

2.2. Types of logistics expenses.............................................................................................. 4

2.3. Managing logistics costs.................................................................................................. 5

2.4. Amortization.....................................................................................................................6

3. CONCLUSION.......................................................................................................................8

Literature.....................................................................................................................................9

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1. INTRODUCTION

1.1. Subject and goal of seminar paper

Logistics expenses may take up to 30% of ''economic circle'' so their thorough planning is
crucial for companies business activities. The main goal of this seminar paper is to explain
what logistics expenses are and what is their role in the entire logistics system.

1.2. Sources of informations and information collecting methods

In the process of writing this seminar paper there were used competent articles about logistics
expenses as well as the literature which provided relevant informations about mentioned
topic. Furthermore, in this seminar paper there were used online data bases which provided
insight about economic aspect of logistics costs.

1.3. Content and structure

Seminar paper is divided in three parts. After prologue, in the second part of this seminar
paper the term of logistics expenses and their part in logistics system is explained. In third
part of this seminar paper are presented cognitions during the writing of this seminar paper.

2. LOGISTICS EXPENSES

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2.1. Definition of logistics expenses
Some companies manufacture products that rely on the use of raw goods from another
countries, while other choose to locate their manufacturing plants overseas. Keeping
production costs low by producing or sourcing raw goods in different countries allows
companies to make more profit, but the logistics expenses of transporting and storing products
can lower those profits.

2.2. Types of logistics expenses

Types of logistics costs depends on various supply logistics tasks preformed within the
company. Each task preformed in the logistics system incur cost. Strict cost calculation in the
logistics system allows to distinguish logistics costs from the overall costs of the company.

Generally, logistics costs include:

 Transportation costs

 Inventory carrying costs

 Labor costs

 Customer service costs

 Rent for storage costs

 Administration costs

 Other costs

Logistics costs are defined differently by different companies. Some companies do not
account interest and depreciation on inventories as logistics costs, while others include the
distribution costs of their suppliers or the purchasing costs. There is no generic definition of
this term but every company needs to define the logistics costs for itself and choose a strategy
to lower them.

Generally, companies have to do a trade – off between cost and performance while managing
logistics costs. This is because the lowest cost transportation may not be the fastest one (just –
in – time delivery and performance need to be optimized).

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Above mentioned chart shows different logistics acts and their cost share in overall logistics
process. It is apparent that majority of logistics costs appertains to transportation as this is on
of the most complex parts of logistics.

2.3. Managing logistics costs

To be successful, companies need to manage their logistics with a balance
between cost an performance, since the lowest – cost transportation
path is not necessarily the fastest. Logistics costs relate to the charges for various
transportation methods, including air travel, trucks, and water
transport. Additional logistics costs include fuel, packaging,
warehousing space, security of goods, materials
handling and duties.

Lots of
companies
plan out their logistics costs using diagrams resembling flowcharts, or software that can do the
diagrams and simulate the supply chain. This method helps to analyze each phase of the
goods journey through the supply chain to calculate the time and related logistical costs for
various sections of the shipments travel.

Furthermore, there are three types of cost analysis in the logistics field. First type of analysis
comes from the point of transport users and it is consisted of: storage and identification of
goods, loading of goods, costs of forwarding department. Second type of cost analysis are
social community costs whose task is to improve or fix and maintain the good quality of the
transport infrastructure. Third an the last type of cost analysis comes from the transport
companies which main task is to settle their costs of transport production.

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2.4. Amortization
Amortization is the paying off a debt with a fixed repayment schedule in regular installments
over a period of time for example with a mortgage or a car loan. It is also considered as
paying off an amount owed over time by making planned, incremental payments of principal
and interest.

In the terms of logistics, there are two types of amortization. First one is time amortization

which is used for calculating of how long will the purchased device last.

p r o cu r a t i o n   w o rt h
t i me=
pl anned   y ear s  o f  
d e v ic e   l a s t in g

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 Second type of amortization is called functional amortization which is used to show the
intensity of purchased device usage.

p r o cu r a t i o n   w o r t h k m
t i me=  ( )
p l a n n e d   y ea r s   o f h
d e v ic e   l a s t in g

3. CONCLUSION
Logistics expenses may take up to 50% of overall company costs so that is the main
reason why they need to be thoroughly calculated and planned. Using diagrams and
different types of charts it is possible to be more efficient and correct in case of costs
calculations and planning. To be successful, good managing of the entire logistics system
with a balance between costs and performance is crucial.

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Literature
1. Zelenika R. (2005.) Logistički sustavi. Rijeka: Ekonomski
fakultet Sveučilišta u Rijeci

2. Kovačević B., Vojnović S. (2000.) Amortization – A specific

form of business expenses [online]. Dostupno na:
https://hrcak.srce.hr/65498