When you buy a new car, you know exactly what you're paying for. You check the catalog and see the prices – including the shiny extra options – clearly listed.
When it comes to the costs of your delivery process, it often turns out to be a different story. Are you surprised every quarter when you look at your financial statements? It might be that you haven't included certain aspects in your calculations. These are the 'forgotten' factors that influence your delivery costs. In this article, you'll read what to look out for and what's involved. This way, you'll maintain financial oversight and know exactly where you stand.
Optimization models are complex puzzles. Calculating logistics costs is therefore a challenge for many entrepreneurs. Moreover, many factors influence the price of an individual delivery stop. You already know that your delivery operation will never be a profitable part of your business. But even if it doesn't generate direct profit, it's crucial to keep logistics costs manageable. If you don't, you risk eroding your margins. Or worse, ending up with sky-high and unmanageable expenses. What a waste!
In short: the cost calculation for your delivery operation is the sum of all components and considerations involved in your delivery process. Time and distance are the most important factors. The rationale is simple: the more kilometers you drive, the more expensive your delivery. The longer your delivery takes, the higher the costs. These factors provide better insight into the cost per shipment. This is necessary to compare your costs against your revenue. If you want to refine this calculation further, several other factors come into play. These are the so-called 'forgotten' factors. These factors are less obvious but nonetheless significantly impact the price of your delivery.
Would you like more insight into your delivery costs? Then include the following factors in your cost calculation:Return trips & re-delivery attemptsYour customer is eagerly awaiting the delivery of their package. You've carefully planned your route and arrived on time as agreed. But then the customer turns out not to be home. You'd rather not leave the package with a neighbor. Leaving the package in the shed isn't a solution either. You decide to drive back and attempt re-delivery later. This is the most customer-friendly solution and aligns with the service you provide. However, return trips and re-delivery attempts have consequences for your delivery costs. The factors of time and distance double, pushing costs up. And what about the costs you incur when you remove the package from the system, reschedule it, or temporarily store it somewhere? These are all additional costs that you pass on in the price of an individual delivery.Nature of the productSo, return trips and re-delivery attempts drive up the cost of your delivery process. But what if the nature of your product requires it to be delivered on the very first attempt? You can't leave a fresh cream cake in the carport. Nor can you deliver it the next day with spoiled cream. Sometimes there's no other option than to invest in same-day delivery. This is a factor that certainly shouldn't be overlooked!Time windowCustomers are becoming increasingly demanding. "Ordered this morning, delivered tonight" is now commonplace in the delivery world. But those last-minute deliveries significantly disrupt your route planning. Extra deliveries – extra stops – are expensive stops, especially if you have to drive a long way out of your way for them. Do you have insight into what that costs?Vehicle type and delivery areaYou've probably already noticed that climate goals are leading to new policies. This includes the introduction of environmental zones in larger cities. This means that in some cities, you may no longer drive your diesel van into the city center. This impacts your delivery process. Delivering with an electric vehicle or a typical urban cargo bike takes more time, which increases the costs of your delivery operation. Don't have a bike or electric vehicle in your fleet? Then your costs will skyrocket! Because, of course, you also need to proportionally factor the acquisition costs into the price of a delivery.Delivering during peak timesIncreased revenue during busy periods is certainly welcome. However, the costs of delivery during peak times also soar. These higher costs are due to hiring and training additional (more expensive) delivery personnel. Sometimes you even need to arrange extra vehicles to handle the increased volume. So, include these costs in your calculations! We'll revisit how to do this in a later blog post.
If you want to get a handle on your delivery operation costs, you must include the 'forgotten' factors in your calculations. By isolating an individual stop from the total overview of all trips in a day and then comparing the costs, you gain exact insight into those hidden expenses. Sometimes, however, it's not possible to accurately estimate these additional costs beforehand. The actual costs will then deviate from your estimate. Don't be discouraged, though! Remain aware of the 'forgotten' factors and train yourself to consider them. This will create a systematic approach to thinking and planning that will certainly help you better predict what awaits you at year-end. The same applies to complex calculations, for example, regarding the deployment of your own staff versus hired staff. Or for the optimization of your routes with different vehicles and multiple stops. Make sure you've calculated these optimizations at least once or have these calculations done for you. Because let's be honest, you certainly don't want any unwelcome financial surprises, do you?
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