The Logistics Cost Ratio

Logistics cost as a percentage of revenue is how supply chain leaders and investors benchmark distribution efficiency. With the defaults, a company with $2,000,000 in revenue carries $750,000 of logistics cost — $300,000 transportation, $200,000 logistics services, $150,000 warehousing, and $100,000 inventory holding — a 37.5% ratio that leaves a 62.5% margin before other operating costs.

Transportation is the largest single slice, which is why freight procurement and route optimization dominate logistics improvement programs. Track the ratio monthly: a stable or declining ratio with growing revenue is the signature of a well-run supply chain.