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Are your transport fixed-costs dragging you down?
Story by "Walter Scremin" | September 26, 2012, 9:32 AM
But the incredible thing is how many SMEs choose to persevere with transport as a fixed cost, by owning and operating their transport. Business earnings are rarely fixed – they fluctuate – and transport costs should ideally fluctuate with varying business demand.
If owning and operating your own transport, the following expenditures become fixed:
- Buying/leasing vehicles;
- Driver wages;
- Vehicle maintenance;
- Registration; and
These costs are inflexible, even if deliveries have stalled and business is down. And this does not take into account the ‘unpredictable’ costs of transport – such as breakdowns or unforeseen vehicle repairs.
More businesses are considering options for making transport costs variable by outsourcing, which can reduce transport costs to only what you use. For example, you may negotiate costs on an hourly or daily rate. Transport costs will drop when business is quiet and increase when you are busy; these variable costs better reflect your actual business activity.
However, any outsourced arrangement will preferably become part of your in-house team and actively improve the quality of your transport – better vehicles, better drivers and better service.
Besides the cost advantage, outsourcing provides additional flexibility and scalability, which means a business can maintain its delivery service level while growing.
Walter Scremin is General Manager of national transport & logistics company Ontime Group.
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