How Much Did That Cost? A Call for Improved Transportation Cost Transparency

Abstract

In 2021 business logistics costs in the United States were 8 percent of the nation’s GDP. However, significant discrepancies exist between aggregated transportation costs and those recorded at the firm level. Under generally accepted accounting principles (GAAP)—a standard for publicly traded companies in the United States must abide—transportation costs are generally recognized as direct expenditure on transportation services, such as when firms pay a carrier for transporting freight. On the other hand, expense items such as fuel, driver wages, leases on transportation equipment are instead broadly grouped under operating expenses despite their specific transportation purposes. In doing so, these expenses that are typically recorded internally as transportation costs are obfuscated to investors, scholars, or other users of financial statements filed along with company quarterly and annual reports. As recent supply chain disruptions due to both natural (e.g., pandemic) and manmade (e.g., foreign conflicts) causes have highlighted, there is an urgent need for various stakeholders to be able to evaluate firm logistics and transportation strategy with better salience. To that end, improved transportation cost visibility is urgently needed. Therefore, our objective is to provide a research agenda for academics to broach the subject of transportation cost transparency.

The Noble Quest: Navigating Toward Sustainable Transportation

“…Second, transportation is progressively coupled with production and consumption, making it difficult to separate and measure transportation. As we elucidated in a previous editorial (Swanson, Jin, and Ashenbaum 2022), a lack of centrally accounted transportation costs on a company’s financial statements means that when transportation cost is allocated to other line items such as costs of goods sold, it obscures managerial visibility. Moreover, even as logistics and transportation professionals are adroit at discussing and managing transportation needs through purchased transportation, leased vehicles, depreciation of owned equipment, 3PL costs, fuel, maintenance, and driver salaries, their dispersion and obfuscation on accounting statements inhibit both the incentive and ability to optimize transportation’s value proposition.…”