The cost of freight transportation, which is usually carried out in intermodal containers, is considered in distribution costs.
Distribution costs are any type of cost related to the tasks of transporting products from the manufacturer to the consumer. Sometimes called distribution costs, these types of costs are different from production costs, which have to do with the actual process of creating goods and services that are ultimately sold to customers. The range of distribution costs is often related to the expenses involved in transporting finished products from the manufacturer’s location, as well as the costs of delivering the products to buyers. In many cases, the costs incurred to store products between production and transportation are also considered distribution costs.
Distribution costs are any type of costs related to the tasks of moving products from the manufacturer to the consumer.
One of the most common examples of distribution costs has to do with the transportation of goods. Transportation costs may focus on moving finished products from the production site to a storage facility where the products remain in stock until they are used to fulfill customer orders. Costs may be related to equipment maintenance to arrange transportation, or if a freight line or other carrier is used for the tasks, the cost is generally accounted for as distribution-related.
The delivery of goods to the customer is a type of distribution cost.
Along with transportation costs, warehousing expenses are also considered part of distribution costs. Once the goods are stored in a warehouse or other facility, all expenses related to keeping these goods safe and ready for use in order fulfillment would qualify as part of the overall distribution-related costs. This is especially true if the producer absorbs the costs, such as warehouse rent, to protect finished products until they can be shipped to a customer.
Warehouse storage can be considered a distribution cost.
Shipping costs are a third example of distribution costs. This includes all costs related to the actual delivery process at the customer’s end, including the use of local transportation services to manage the delivery, or shipping and handling costs for small orders that are fulfilled by courier or some form of delivery. Messenger Service. In some cases, companies will consider shipping costs as a subset of transportation costs, depending on how accounting records are maintained for tax and other purposes.
Tracking distribution costs is just as important to a company’s bottom line as effectively tracking and managing production costs. By ensuring that all processes and procedures related to the distribution of goods and services are operated with the ideal combination of efficiency and cost, the company stands out for increasing the net profit obtained from the company’s operation. For this reason, business owners and managers often review distribution costs that occur both internally and due to the use of external providers, and seek to keep these costs as low as possible without creating problems that ultimately affect the customer.