While business may have limited control over some costs, such as utilities or insurance, there are some areas which are ripe for further examination – one of these is delivery transport.

For any small business that relies on delivering goods, transport costs are usually a top five cost of doing business. A saving of five, ten or twenty per cent on these costs can make a big difference to your bottom line.

Finding the time to re-assess your delivery transport arrangements can pay substantial dividends down the track.

What are some common ways to reduce costs?

Start by addressing the fixed costs in your set-up. Many businesses have a mix of fixed and variable costs underpinning their delivery fleets, usually because they operate some of their own vehicles and drivers, and outsource some of their needs to specialised delivery transport providers.

A timeless challenge is being on top of the fixed costs. For example, if you own or lease vehicles which aren’t being used at their optimum, it is costing you. That transit van which has been parked for the last week is costing you. And it’s costing you more than it was two years ago, because all the intrinsic expenses of running a vehicle, such as insurance, maintenance, and fuel continue to increase. 

Isolating your fixed costs is especially important for companies that experience high variability in demand, but any business can benefit by looking closely at fixed costs and pruning the dead wood.

The more you can turn fixed costs into variable costs the more you will only pay for what you need, and save. The key is taking the time to partner with good providers. 

The best, most efficient transport fleets are responsive. They can increase or decrease their resources at short notice. This is only possible if you have partnered with an operator that has the reach and the resources to look after you. With the right partnership, it is possible to achieve higher performance at a lower cost.

Another worthwhile cost-saving exercise is conducting a true audit of your delivery fleet – a fleet x-ray, which brings the myriad costs into light. This is a great opportunity to bring hidden costs into the open and to see exactly what can be trimmed.

Fleet efficiency is also paramount. While the technology is available to reliably track the movements of deliveries, many smaller fleets don’t take full advantage. 

A little bit of time every day to ensure your fleet is route-optimised and efficient can pay dividends. Companies which focus on their efficiency often find they can perform more deliveries in the same timeframe. Importantly, this means better delivery services for your clients. 

This technology can also save you in fuel costs, and prevent vehicles from being used inappropriately. 

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Here are some of the most persistent delivery transport myths to watch out for:

Myth One – All transport companies are the same

Many businesses have discovered this myth the hard way. Anyone can buy or lease a few vans and call themselves a transport company. This creates huge variability in the professionalism and capabilities of different transport providers.

To tell if a delivery transport company is right for you, take the time to get to know them and their capabilities first. It’s essential they can support you at your absolute busiest periods, and can quickly organise replacement delivery vehicles and drivers at a moment’s notice.

Start with a small commitment, such as a trial period, to gauge their responsiveness and quality, and increase your commitment accordingly.

Myth Two – It’s cheaper if I just do the deliveries myself

Some small-business owners get into the driver’s seat themselves, or requisition staff from other areas to do delivery runs. But if you crunch the numbers, this approach never adds up.

For starters, what is your time worth?

The DIY approach often leaves the business ill-prepared for surges in delivery demand. There is no system in place, and it cannot perform under pressure.

Myth Three – It’s all about speed, speed, speed

This is partly true. Some industries rely on speed. But accuracy and reliability can be at least as important.

Reliability means consistently delivering during times of absenteeism, or peak demand. Key issues include customer service and communication, and having the right systems to ensure accuracy and proof-of-delivery. You may be an hour or two quicker, but if the above aren’t in place and you deliver the wrong item then it may not mean much to your customers.

Myth Four – Delivery is not a dealbreaker for our customers

Research suggests customer expectations around parcel deliveries are rising. Customer service shouldn’t stop once a deal has been done – it needs to be fulfilled up to the critical delivery stage.

Too many businesses fail to communicate with their clients regarding deliveries. Those who keep clients informed and execute with professionalism go a long way to fostering loyalty.

Myth Five – Outsourcing takes away some control

This is a classic myth. But if done properly, outsourcing does the exact opposite – it gives you more control.

Outsourcing provides more control and flexibility over resourcing and costs. It provides access to resources that match your business demands, including reliable extra resources when needed during periods of absenteeism or peak periods. If your outsourcing solution isn’t providing more control, it’s time to look for a solution that will.

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Many small businesses will be somewhere in between, yet most will benefit from some improvement.

Like anything fitness-related, beware of fads and quick fixes – a truly efficient transport division takes some discipline and smarts, but is completely achievable. Start by nailing these five challenges:

Challenge one: Staffing issues

Managing staffing has always been a priority for a well-functioning delivery fleet, particularly regarding absenteeism. Yet talent shortages in transport and logistics continue to test small business.

A fit delivery fleet is set up with enough flexibility to adjust quickly – they can access resources at short notice to cover for absenteeism or unexpected peaks in demand by partnering with the right specialists.

Challenge two: Cost blowouts

There will always be unexpected accidents and breakdowns, and other unforeseen disruptions. But the risk of cost blowouts can be reduced with some discipline.

Success comes down to several factors: understanding all costs involved in your fleet; having the right fleet structure, such as the blend of in-house and outsourced resources you use; and the technology and systems you use.

Challenge three: Reliability during peak times

Whether your customers are B2C or B2B, expectations around parcel delivery continue to grow.

All fleets experience peak times where they are potentially stretched. A fit fleet is prepared for these inevitable peaks by having a fleet structure which is responsive and adaptable. It has never been more important to analyse your fleet performance and address any weaknesses – because when that next peak comes you want to fire on all cylinders and enjoy the spoils.

Challenge four: Technology

Small-to-mid-sized transport fleets have been under-resourced in this area, but there are now so many affordable options available that any fleet can access a basic level of tracking and proof-of-delivery.

A commitment to using the technology on a regular basis will bring several benefits, such as greater efficiency and lower fuel costs.

It’s also important any technology is resilient to the risk of cyber-attacks, which can disrupt operations and compromise customer data.

Challenge five: Consistent professionalism

A key to being consistently professional is having the right resourcing in place, including transport suppliers that can respond to your needs and make you look good.

There is a huge difference in professionalism among different transport suppliers, and you must ensure any supplier is appropriately licenced under your state’s labour-hire laws, as major penalties can apply.

Once you have the right resourcing in place, and you are on top of the other four challenges above, your professionalism and level of transport fitness will lift, bringing huge benefits to your business.

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There’s one particular detail that is easily overlooked yet must be accounted for when hiring people via an agency or other outsourced provider – ensuring the provider is licenced.

Engaging unlicenced labour-hire workers is a sleeper issue because not all companies understand their responsibility. It’s a mistake to assume the responsibility lies solely with the labour provider.

All states have their own labour-hire laws, and there are huge fines for breaches. According to the Labour Hire Authority in Victoria: Maximum penalties exceeding $600,000 for a corporation and $150,000 for an individual applying under the Act for providing labour-hire services without a licence or engaging in unlicenced labour-hire services.

The important point here is it’s not just the responsibility of the supplier providing the talent – it’s also your responsibility as a business hiring the labour. Any small business engaging third-party resources is therefore responsible for checking their providers are properly licenced.

The other potential trap for businesses is thinking this may not apply to their sector or industry. There’s a perception that labour-hire breaches are only an issue for industries like fruit picking or construction, due to media coverage. But the rules apply to any company outsourcing talent – whether it’s technology, professional services, marketing, or manufacturing.

Consider outsourcing to a sole operator, such as a web developer, marketing consultant, tech support or business advisor – if this supplier brings in some extra support, can you be sure these extra resources are covered under a labour-hire licence?

It’s a common risk in my industry of delivery transport. Anyone can buy a van and call themselves a transport solution. But business can be caught out when their regular driver brings in a brother, cousin, or a couple of friends to help – it’s a detail that is easy to overlook. But it’s up to us to ask: do you have a labour-hire licence?

To ensure compliance when engaging labour-hire services, it’s best to ensure the appropriate licences are in place when you commence.

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The other bigger transport headache is the cost, which can easily blow out on you.

So, how can small businesses regain control and solve these parcel delivery headaches?

There are five keys to consider:

Understand your goals: Start with the basics: how important is delivery to your business? Consider how often do you need to deliver items, and how fast do you need to respond to customers – how many deliveries need to be performed each day, week, month. What kind of items are being delivered? Are they small parcels, or products which are large, irregularly sized, or fragile? These may demand specialist care. Be realistic. Understand the role delivery plays in yourbusiness. Do you need a permanent delivery fleet, or something more flexible? Do you need vehicles and drivers branded with your company? Are your drivers the face of your business? This will influence the level of professionalism you require.

Analyse your current performance: Bring everything out into the open. Ask your customers about their experience with your deliveries – consider an anonymous survey so you know responses will be truthful. Try to get a picture of your speed and consistency – is it up to scratch? Examine things like driver absenteeism, accidents, insurance claims or WorkCover claims. What is working, and what can be improved?

Be honest about your shortcomings: Honesty in your assessment is a critical step. It can be tempting to sweep real problems under the carpet. But how much are these shortcomings in your transport operations potentially costing you? For example, if corners have been cut, or if ‘false economy’ decisions made – such as opting for the cheapest provider – it’s important to recognise them. Consider how these shortcomings impact your customers. And consider the opportunity to improve your company’s reputation, trust, and client loyalty by rectifying these issues.

Analyse your current costs: Delivery transport costs often trouble small businesses because they can easily get away from you, and ‘hidden costs’ can be a real problem. It’s best if you have access to an impartial financial tool which allows you to input all the data to understand your total costs with complete transparency. Transport can be a major overhead for small business yet it’s amazing how many small-to-medium companies don’t accurately know what their transport is really costing them.

Put steps in place to make a change: Sometimes you need to make a big change, or even start again. Key is engaging with transport suppliers who put more control in your hands. Be wary about how you engage transport suppliers. Remember, cheaper can often cost you more in the long run. And consider the all-important resources on offer – can they adapt with your business, can they manage all those little headaches, whether it’s a quality proof-of-delivery system, or a broken down vehicle, or an absent driver? Finally, can your transport supplier support you when you need resources at short notice, and deliver the professionalism your customers expect?

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It’s no small deal, either. Transport is typically a top-five business cost, and companies that manage their transport efficiently enjoy greater profitability (not to mention happier customers).

Reducing transport risks provides huge opportunity to make your SME more resilient and high performing. 

What are some key risks to identify in delivery transport?

Costs of implementation: Decisions around how you structure your delivery fleet may be hard to correct quickly, leading to excess costs. For example, do you invest in your own vehicles and drivers, or do you outsource this role to a specialist? Do you do a little bit of both? Business needs to consider the risks in taking on a fixed cost versus something which is flexible, and the implications of a large upfront cost versus spreading costs throughout the month or year.

Logistics of implementation: Having the logistics required to perform a reliable service is a challenge, and involves reducing the risks of potential disruptions to your supply chain. 

It’s essential to communicate with customers and understand their needs – ideally, you build a fleet structure which is responsive to fluctuations in demand, and which can cope with issues like absenteeism or vehicles off the road. 

Supply chain risks can be unpredictable if they are coming from further down the supply chain – we’ve all seen and experienced the results of supply chain issues since Covid – the onus is on companies to try and reduce their risks by engaging with different suppliers, communicating regularly, and having flexibility built in to the supply chain.

Potential debt problems: Debt can be a business killer. There are enormous benefits in avoiding too much debt when establishing a delivery transport solution. Consider the ongoing costs in leasing vehicles and equipment versus an outsourced solution which may be available on a daily or hourly rate. Avoiding debt solves a potential headache and may enhance your profitability.

Unexpected maintenance/accidents: Surprise maintenance issues or repairs can be countered by having a delivery fleet structure which is flexible in the first place – you may not be able to remove the risk of the unexpected, but you can reduce the risk it will then hamper your business operations.

Safety/chain of responsibility: No business wants to breach chain of responsibility laws, which often apply to transport divisions. Breaches may result in harm to drivers and attract severe penalties. This risk is a factor for those who wish to operate their own in-house delivery fleet, because taking it in-house means you are fully responsible for these issues and for WorkCover claims. Outsourcing may lower these risks because the responsibility for WorkCover claims belongs with the transport supplier who provides the resources. 

Technology implementation and reliability: Technology brings huge potential to lower the risks of cost blowouts and the risk of you being misinformed about your delivery fleet. It can reduce the risks in lost or misplaced deliveries and provide ‘proof-of-delivery’, which protects you. Technology can also protect your vehicles and related equipment by monitoring usage. But there are some risks in the vast choice of tech support available – it’s important any technology suits your customers and suits your business. 

Privacy and security: Every day we see stories of privacy breaches and cybercrime. Taking steps to reduce this risk is now fundamental for business operations, and delivery transport should not be overlooked.  

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A critical top five cost for many smaller companies is delivery transport – it’s a constant challenge for businesses that rely on shipping goods to customers because delivery transport costs can easily run away from you.

There’s a huge opportunity in analysing your delivery costs because almost every business has inefficiencies in this area which can be tightened up – often significantly.

To save money on delivery costs, businesses should consider:

Preventing lost or damaged deliveries: A great place to start is getting the parcel delivery basics right. Use appropriate packaging, and clear, accurate labelling. Combine with a good RFID/telematics system to assist with proof-of-delivery and cut down on misplaced parcels.

Understanding all costs: There are myriad costs involved with deliveries. Using an impartial delivery fleet audit helps you to isolate and understand these costs, and is a crucial first step in making changes to bring these costs down.

Avoiding ‘false economy’ decisions: Most SMEs with delivery demands rely at least partially on external suppliers for support. It can be tempting to go with the cheapest provider when outsourcing your delivery requirements. But going cheap can end up costing you more if that supplier cannot provide a professional, reliable service.

This is a classic ‘false economy’ scenario, which creates many problems including the potential for dissatisfied customers and lost business. Make sure to research potential suppliers. Be prepared to start slow and gauge their service before increasing your commitment.

False economy part two – staffing: It’s not uncommon for small businesses to pinch staff from other departments to run deliveries during peak times, or when a regular driver is not available. Some business owners have even been known to race around town themselves, desperately trying to get their deliveries done. It’s another false economy mistake. It means other areas of your business suffer and become less efficient. Ensuring you have the resources on hand to cover any demand peaks or absentees can actually save you money in the long run.

Going flexible: There is a danger in delivery fleets of taking on too many fixed costs – this is especially so if you decide to do all your deliveries in-house using your own fleet and drivers. Having flexibility in your fleet means your costs better reflect your business activity. A flexible structure that responds to short-term fluctuations is key and can save considerable money.

Tracking your efficiency: Telematics technology not only assists with proof-of-delivery, it also tracks drivers and is an important tool in driving efficiency. This tech can lower delivery costs, including fuel costs, and protect assets from inappropriate use.

Not letting standards slip: It’s important not to cut corners regarding your fleet assets during tough times. For example, skimping on regular maintenance schedules. In the bigger picture, these activities make your fleet run more smoothly, and more efficiently.

The post Tighten up: how to save money on this key business expense appeared first on Inside Small Business.

The festive season is also a great time to stress test certain aspects of your business – an opportunity to watch and learn how your business functions during peak season.

If things go wrong then try not to waste this valuable learning insight – so much of building a successful business is being able to notice and learn from mistakes. Those willing to watch and learn tend to be the most adaptable, long-lasting, and successful companies.

Any small business will have their pain points which will flare up over Christmas and the festive season generally.

One business area which is famously stretched over the festive season is the parcel delivery function – a cause of untold stress as goods need to be shipped for an immovable deadline. In fact, for businesses that rely heavily on delivering goods on time, parcel delivery success during peak periods like Christmas can be make or break.

But your festive season pain points may well be different – it could relate to personnel, customer service, inventory, or supply chains. No matter what stresses emerge, the keys to successfully stress testing your business include:

Being honest: If an aspect of business isn’t going so well it can be awfully tempting to find something or somebody to blame.

Aim to honestly understand the potential weak points in your business, free from judgement. Try and measure your performance wherever possible. Some things are easier to measure than others, but looking at data over periods of time can be illuminating. You may see patterns emerge which surprise you.

Honest communications with customers and/or stakeholders may also inspire crucial feedback, such as anonymous surveys, which allow them to share their thoughts freely and be more critical than if you asked them face-to-face.

Naming the main causes of stress: If you’re honestly watching, measuring, and seeking feedback then it will soon become apparent where your business is experiencing poor performance.

It’s important to acknowledge the areas which are letting you down at peak times, to fully understand how they are operating and where the weak points are. By identifying and understanding the areas which can be improved, there is opportunity to track performance.

Taking meaningful steps to address your pain points for next festive season: After an honest appraisal of your business, highlighting key areas of concern, it’s time to think about rectifying them. But the steps toward a seamless next festive season need to be taken earlier in the year. If you know where the key problems are then you’re already on the way.

For example, you may need to re-evaluate your suppliers if they have been letting you down repeatedly. Or maybe it’s time to outsource certain aspects of your business to specialists so you can concentrate on your strengths.

Make stress testing a habit and you’ll continually improve, and make the most of each festive season.

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These mistakes are even more jarring due to current issues around rising business costs, inflation, staffing, and supply chains.

Having worked in delivery transport for 35-plus years, the most common mistakes I have seen include:

1. Parcel problems

It sounds so obvious, yet many a headache has resulted from parcels that were miss-labelled, inappropriate, broken, flimsy, or not properly sealed. A particular classic is re-using an old parcel that has multiple addresses on it, without an obvious updated destination. Then there is the rookie mistake of not protecting the item properly.

Any of these mistakes could prevent the parcel from reaching its destination, leaving you with dissatisfied customers – and grumpy delivery drivers!

2. Delivery issues

Physically delivering an item is not always as simple as it sounds. Plenty can go wrong between the time a parcel leaves your premises and the time it reaches your clients or customers. Reliability is the key challenge, having drivers you can trust, a responsive fleet, and the ability to communicate with clients quickly.

A key mistake is not having adequate proof of delivery. Another is failing to provide care for unusual, large, or fragile items – break the item and you not only face another bill, you also break the trust with your client.

The other classic mistake is when the business owner or senior managers are running around doing deliveries themselves due to staff shortfalls – owners and managers should be focused on bigger things!

3. Ignorance of costs

This is a big one, because if you don’t know exactly what you are spending, including all those pesky little costs which fly under the radar, how can you know if you’re running your fleet efficiently?

4. Over-committing to a delivery solution

A big transport mistake is going all-in on one approach, such as running your own delivery fleet. You might find out the hard way that running a fleet isn’t for you.

The same can happen for small business which over-commits to a third-party logistics provider. Rushing into a huge agreement can cause massive headaches later on if they repeatedly let you down, or if you have other problems with their service.

The best approach is generally to dip a toe in the water first. Interested in a new third-party supplier? Start small, take it slow and see how responsive they are to your needs.

5. Being inflexible

You may have the perfect system for a period of time, but things change, and if you are not flexible enough to adapt then you may be left with a transport system that no longer delivers for you. The same is true across all aspects of doing business.

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Delivery transport is a top-five cost of doing business for many companies which rely on deliveries for their existence. Transport has remained a top-five cost even with the many efficiency improvements which have been delivered over recent decades. For small businesses which don’t analyse transport fleets, there is potential for transport to become a top three or four business cost.

Not every small business can pass inflation increases on to their customers, so it makes sense to be smart about outgoings.

Some common cost areas for delivery transport, which demand vigilance and control include:

In-house delivery fleets: There has been a trend toward in-house fleets as companies become fed-up with the major postal services. But in-house fleets entail many large fixed costs, which can easily balloon out. A big problem are all the hidden costs that mount up – things like unexpected repairs or breakdowns, increases in insurance premiums, and vehicles that aren’t being used to their optimum. Finding and controlling these hidden costs is essential to keeping a lid on things.

Responsiveness and flexibility: High performing delivery fleets have great control over their resources, which means they can scale up to meet peak demands without having to break the bank. Likewise, they can scale down and reduce costs when business demand drops off. Flexibility can be particularly challenging for in-house fleets, but can also be a challenge for those who don’t have the right structure for their delivery transport.

Fuel costs: High fuel costs are putting pressure on delivery prices everywhere. Yet while we cannot control the price at the pump, delivery fleets can strive to cut fuel costs by using technology to become more efficient. Telematics tracking technology rewards the time put in by helping to find the most efficient routes for delivery fleets. Benefits include cutting down on vehicles doubling up on delivery routes. Telematics can also reduce missed deliveries and assist with proof-of-delivery, increasing accuracy and reducing wasted time. Many systems can also track the use of the vehicle, helping cut down on excessive idling and so on.

Quick fixes: It’s easy to get into the habit of using couriers and other relatively more expensive options for those peak times. When analysed on a cost-per-delivery basis there are usually better approaches. If you’re using couriers or other services regularly, it’s a sign your delivery fleet is not as responsive as it could be.

The headline inflation rate, at just over five per cent, tells only part of the story – many small businesses have had to negotiate much steeper rises in costs due to supply chain disruptions, labour shortages and surges in materials costs. By keeping hard-to-pin-down areas such as delivery transport under control, businesses give themselves a better chance of surviving the inflation surge.

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