Source: Establish, Inc. / HWD & Grubb & Ellis Global Logistics.
Total logistic costs reveal much about the locational dynamics of
logistics activities, particularly distribution centers, since they
indicate the weight of most important factors.
Transportation costs remain the dominant consideration as they
account for about half of the logistic costs. Inventory carrying
costs are also significant with a share of about one fifth of total
costs. They include the costs of holding goods in inventory (capital
costs, warehousing, depreciation, insurance, taxation, and
obsolescence) and are commonly expressed as a share of the inventory
value. Labor costs involve the physical handling of goods, including
tasks such as packaging and labeling. Customer service encompasses
receiving and processing orders from customers.
Under such circumstances, distributors are willing to pay higher
rents to take advantage of a logistics site that offers co-location
with an intermodal terminal since this strategy enables them to
reduce transportation costs, such as drayage, as well as improve
their time responsiveness (lead time). Therefore, while
transportation costs remains the most important element of logistics
costs and its friction, non-spatial components such as inventory
carrying and labor costs, are significant components that will
influence locational choice depending on the supply chain.