Why transport is a top five business cost and how to fix it

Walter_ScreminTNTransport expert Walter Scremin explains how brutal honesty can help you rein in your current transport costs, which could be affecting your bottom line more than you think.

Transport expert Walter Scremin explains how brutal honesty can help you rein in your current transport costs, which could be affecting your bottom line more than you think.

Transport is a top five business cost, yet many organisations either under or over-resource this crucial function, which only ends up costing more.

Getting that 'Goldilocks' moment where everything is just right is next to impossible, because the perfect fleet is only perfect for today. It will not be perfect next week, next month or even tomorrow when there is an increase in business, or when demand dips.

Fluctuating business is why so many miscalculate their fleet requirements for vehicles and drivers. The only viable solution for matching demand and saving on fleet costs is greater flexibility – that’s why outsourcing is becoming more popular in transport because it gives more control over resources, trims costs and relieves logistical headaches.

But a good first step to understanding the resources required is being honest and accurate via a cost analysis of the real demands involved.
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For example, be honest about how many drivers your business needs. Drivers is an area that is typically under-resourced. Five drivers may seem enough, but when you consider annual leave, sick leave and other costs, a sixth driver is often needed to cover the disruptions.

Businesses may cover driver absences internally, but this causes disruptions to both the transport component and the other areas of the business that the ‘fill-in’ staff member is drawn from.

Worse, it may gloss over your actual transport costs – if a paid employee is brought in from another area of the business to act as a driver then the real cost of transport for that period can easily be swept under the carpet. This doesn’t do your business any favours when it comes to reviewing expenditures and aiming for greater transport efficiencies.

It’s similar for vehicles. Financing vehicles is a big expense and it is easy to have either too many or too little vehicles at any one time.

Too few vehicles may mean shelling out extra on delivery services such as couriers, which have a high cost per delivery. If this is not honestly measured in your transport costs, it can become hidden.

Conversely, what is the cost of the van or truck that is sitting idle in the car park due to a slump in deliveries? It costs at least what it needs to be financed each day, yet we often think of financing as a monthly expense, which is how a vehicle that is idle for five days a month can so easily become a hidden cost. Then there is the cost of it not contributing positively to your business.

Only by being brutally honest when analysing your current transport costs and comparing them with other options, such as outsourcing to a transport specialist, can you ensure that this top five cost delivers for your business.

Walter Scremin is General Manager of national transport & logistics company OnTime Group

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