Hidden Cost of In-House Deliveries
Last mile delivery is one of the most complex, time-consuming, and expensive parts of the supply chain. In fact, it accounts for 53% of all delivery costs. But there’s much more to it than just the financial aspect. With all the hassles and complexities that come with it, building a seamless delivery operation is similar to founding a new business from the ground up, especially for those who don’t have an experience in the field.
Additionally, the pandemic also changed the shopping behavior of many customers and dramatically increased online sales, making deliveries a crucial element of the shopping experience. But the expectations were already very high with Amazon Prime’s guaranteed two-day delivery being the new standard for many customers.
In other words, you should maintain a complex operation while providing an impeccable service to delight your customers. But when it’s done right, you will see happy customers keep coming back, skyrocketing your business.
We have helped many growing companies with their logistics in the past two years, and we learned a lot through this process. This article will discuss our findings about the actual cost of having in-house delivery operations.
Labor
After analyzing thousands of driver job posts, we found that a rough average hourly rating for a driver is around $20 with some variation across different industries. But with the Great Resignation and the rise of the gig economy, finding a driver has become much harder, and hourly ratings continue to go up.
Companies also need to hire significantly faster when expanding to meet the customer demands and other logistics requirements like late night pickups. If sales and orders increase during busy seasons due to the business model, like florists, it becomes much more tricky to find a reliable driver leading up to these periods.
Vehicle
Purchase or lease, having vehicles requires considerable investment, with the average cost of leasing a box truck being around $1000 a month. Maintenance & insurance costs and other liabilities are additional expenses to add among fixed costs related to vehicles.
Need for investment increases if a business transports items and products in varying volumes. In this case, a company will need a variety of vehicles to maintain delivery efficiency.
Almost all the small business owners say that they prefer investing their resources in sales and marketing to grow their businesses rather than spending it on fixed and operational costs that don’t generate revenue.
Software
Without route optimization software, it’s impossible to have an efficient, cost-effective delivery operation. Gas expenses will kill profit margins if drivers take unnecessarily longer routes to deliver items but more critically, late deliveries will likely prevent customers from repeat purchases.
Some advanced route optimization tools have modern features to improve the delivery experience for customers. Live tracking, smart reminders, and recipient dashboard are the most appreciated ones by senders and recipients. The price tag of such software starts from $350 per month.
Time
Our most surprising finding is that most business owners and professionals don’t consider the hidden cost of time when calculating the actual cost of having in-house delivery operations for their businesses.
A recent survey on how business owners spend their time shows that 68 percent is spent operating the business (daily tasks, dealing with errors). In comparison, only 32 percent of their time is dedicated to growing the business, working on long-term goals, and making the company more profitable.
Training and managing a delivery team already requires many hours, and you’re lucky if you find a reliable driver in a short time due to Great Resignation and the rising gig economy. And the complexity of delivery operations will undoubtedly bring mistakes with it. Our findings show that some business owners spend up to seven hours per week fixing errors and managing deliveries. We strongly advise companies to optimize certain tasks and save time on delivery operations so they can focus on growing their business.
At Metrobi, we connect companies with highly-rated local drivers and a large variety of vehicles. With our preferred driver program and dedicated account management, we become an extension of your team.
Our mission is to help you save time and money so you have more resources for what matters. Contact us to learn more about our service and grow your business with confidence.
