Considering the millions of words written about good customer service it’s probably safe to assume that most of us put a premium on good or great customer service. We make sure our customer contact people are well trained and understand and buy into our service objectives.
But let’s take a look at the delivery part of the customer service experience and how it might actually hurt cash flow.
First, how do you deliver, your own vehicle fleet or common carrier? If the answer is your own fleet the next question is do you know and factor in all of the costs of operating that fleet? Maybe, maybe not.
Every cost of operating a business can be broken down into a basic unit cost. It can be a very general cost or it can be a very refined cost. Delivery is a good example of a very refined cost since it is best expressed as cents per mile with several factors combined to make a dollars per mile cost.
For the period of 2008 – 2015, the American Transportation Research Institute reported that the average cost per mile of operating trucks was $1.6203. Of that, the average fuel cost was $.5483 per mile. Fuel is far and away the largest component of delivery cost. The same report indicated that the average fuel consumption was 6.3 mpg.
Let’s say your truck averages 100 mile per day. At the average cost per mile, fueling that truck costs you $54.83 a day; $274.15 a week; $1,178.85 a month; and $14,146.14 a year.
On top of that are driver costs, tires, maintenance, insurance premiums, licenses and don’t forget the actual truck payment itself. In other words, the daily 100 miles cost $162.03.
OK, OK enough math for now.
Now that we know what our deliveries cost we can weigh the value of that service, or can we? One thing that can be easily overlooked in understanding delivery cost is routing. Is the truck (or are the trucks) going back and forth across town all day? Is one item being delivered today that could be combined with other things and delivered tomorrow? Is a straight truck being used when the salesman’s car would be enough? Do the customer service, sales and dispatch people talk to each other?
Any loose end in the delivery process can add miles. Added miles mean more cost. More cost is the nemesis of good cash flow. So maybe an extra 50 or 100 miles here and there doesn’t seem to matter…but it matters a lot.