Transportation Cost Calculation

In the logistics business, it’s important to ensure that you are doing proper transportation cost calculations to ensure that your company is in profit.

This blog has brought for you where we will see what are the important costs that you need to keep in mind. Let’s begin and see what the important things are to keep in mind.

What’s Included in Transportation Cost?

There are multiple factors that you can consider while counting the freight costs. We have taken all such factors here.

(a) Manpower

One of the most important yet ignored components of costs factor is manpower.

This includes the salaries of drivers, loaders, unloaders, and cleaners. and other people involved in the transportation process. Benefits such as health insurance, pensions, and overtime pay can also add to these costs. However, in India, most of such costs are directly included in the salary. So, you don’t need to separately count it.

(b) Vehicle Fuel Cost
Fuel is another major cost in transportation. The price of fuel can fluctuate based on global oil prices, regional variations, and even the time of year. The diesel price in India is mostly stable. However, it keeps on increasing. So, you need to consider all these and this cost shouldn’t be estimated for the entire year. Also, the disease costs in each state are different. So, you also need to consider the slight change. It’s always best to take the average.

(c) Vehicle Maintenance Cost

Maintaining vehicles in good condition is crucial for the smooth running of transportation operations.

Vehicle maintenance costs can include routine services, repairs, and unexpected issues like tire punctures or engine problems. The terrain on which the vehicle operates can also affect maintenance costs. For instance, vehicles traveling on rough or hilly terrains may experience more wear and tear, leading to higher maintenance expenses. So, consider all these things and keep in mind in which state you’re transporting the goods. That plays a very important role.

(d) Vehicle Rent or EMI Costs

Many businesses rent vehicles or purchase them on EMI (Equated Monthly Installment). These costs are very important and must be factored into your transportation budget.

Renting vehicles involves monthly payments. Please note that it may also increase. Similarly, if you have purchased vehicles on EMI, you’ll need to account for these regular payments.

This is a direct cost and not all business owners will have to incur this cost. This depends on the situation. EMI usually stays constant while the rent may increase after a while. So, you also need to consider this. If you already have the cash, consider paying the entire amount if possible. This will help you in clearing the loans. You need to consider all the finances before clearing it. You can contact a professional or CA before making this final decision.

(e) Road Tax
Road tax is another component of goods movement costs. This tax varies by region and is required for the legal operation of vehicles on public roads. It’s important
to keep track of these taxes to avoid any legal issues and additional fines.
(f) Documentation Fees

Transportation often involves a significant amount of paperwork.

Documentation fees can include the cost of permits, licenses, regular entry tax (in some areas), and other necessary paperwork required for transporting goods. These fees ensure that your operations comply with local, national, and international regulations.

(g) Handling and Freight Charges for Fragile Goods

Transporting fragile goods requires special handling and packaging to prevent damage during transit. These additional handling and freight charges can increase the overall transportation cost. It’s essential to factor in these costs when calculating the total expense of transporting delicate items.

(h) Insurance Costs

Insurance is a necessary expense in transportation to protect against potential losses or damages to goods during transit. The cost of insurance can vary based on the value of the goods, the route, and the mode of transportation.

(i) Warehousing and Storage Costs

Sometimes, goods need to be stored before they can be transported or after they arrive at their destination. Warehousing and storage costs can include rental fees, utilities, and security expenses.

(j) Tolls and Charges

Fastag is cost is something that you need to remember. Toll taxes are very high for loaded vehicles such as trucks. So, you need to make sure that all the Fastags are not only recharged but you also need to consider that as an expense. In this way, you can ensure that all the expenses and costs are calculated properly. For a big journey, this costs a lot.

(k) Technology and Software Costs

Technology and software cost like Transport Management Software (TMS) is yet another cost that one can include. However, if your TMS has an extra monthly cost for each module or pay-per-use cost, you can consider them in transportation cost.

(l) Other Potential Costs

You also need to consider multiple other costs that you might have to incur depending on the place you’re working and the type of business you’re running.

• Insurance Premiums: Regular payments to cover vehicles and goods.
• Training Costs: Expenses for training drivers and staff.
• Licensing Fees: Fees for renewing vehicle licenses and permits.
• IT Infrastructure: Costs for maintaining software and hardware.
• Communication Costs: Expenses for mobile phones and internet for the team.

In the same way, there are many other such costs that you need to consider.

How to Do Transportation Cost Calculation?

We will show you some steps to do the final calculation.

Step 1: Make a List of All Applicable Costs

Start by listing all the costs that apply to your transportation operations. This list should include manpower, fuel, maintenance, road tax, documentation fees, handling charges, insurance, warehousing, tolls, and technology costs. If there are any other costs, make sure to include them too.

Step 2: Calculate the Average Cost of Each Component

Just take the average of each cost. You can use previous data and consider multiple rides to calculate these costs.

Step 3: Tally Costs with Each Ride

Lastly, compare the costs with every ride. This will give you an estimation of whether the costs were accurate or not.

Step 4: Consider Vehicle Condition and Other Factors

Don’t forget to consider the vehicle condition as well as the weather conditions to calculate the vehicle cost.

Step 5: Use Technology for Cost Management

IT Firm provides you with every detail you will need about cost management. It covers every important factor that you need to consider. With this, you can get the most accurate results for your transportation cost calculation.

Conclusion

To conclude, this was all about transportation cost calculations. The transportation cost calculation will include multiple things. So, first, you need to create a complete list of all the expenses that you may incur. Please keep all these in mind before you create a perfect estimation of the list.

You should always consider using tech instead of depending on the manual process. This is where software like Bharat Software TMS comes in. You can use these tools to manage your entire logistics and transport business in one go.