Delivery companies are in demand as the world goes crazy for online shopping. Businesses and consumers are in a constant state of ordering things online (sometimes from all over the world), and this puts the onus on delivery and logistics companies to transport goods everywhere. It opens the door for a profitable business idea, though there’s a significant barrier standing in the way of your delivery company: aggressive overheads.
This business model means you’re spending a large chunk of money to keep your company running. Some of these costs are easy for you to identify and work on while others are regularly neglected. The cost of neglect is always high in any business – so let’s dig deep and discover some of the hidden costs eating into your delivery company’s margins.
Shipping & Storage Expenses
When you think about the costs of shipping or storing goods to prepare them for national transit, you typically consider the obvious expenses. Things like the general cost to ship goods or paying for your own warehouse storage come to mind. However, delivery companies are undone by three hidden costs:
- Demurrage Fees: You will face demurrage charges when you don’t pick up shipping containers quick enough following their arrival at port. Ports give you a set number of “free” days to collect your containers and move them to the next stage of the delivery process, but if you don’t grab them until after these days, you’ll be charged a fee per container, per day.
- Detention Fees: When you pick up your container, you also have a few free days to unload it and return the contain to the shipping port. Failure to do this in time will lead to detention charges – again, per container, per day.
- Customs Fees: You may have to gather the correct paperwork to pass your deliveries through customs at a port, but if you provide the wrong paperwork or face other customs issues, you’ll be charged.
The worst thing about these expenses is that they’re very easy to pick up. If you get your timings slightly wrong or there’s a miscommunication with the port, then you end up forking out money that could so easily be avoided.
Transportation Expenses
You’ve collected containers from the port and unloaded the goods onto your delivery trucks; now’s the time to transport these items to their next destination – which will either be a storage facility or the final destination, depending on how your delivery company operates.
While in transit, these goods will incur other expenses. Of course, fuel costs are an obvious one, so there’s no need to mention that here. Two costs that often go unnoticed include:
- Tolls: You may have to pay tolls when delivering goods to various locations or passing through certain areas. Even if you’re taking things from port to warehouse, tolls could kick into place and burn through your budget, especially if you’re paying them multiple times a week.
- Failed Delivery Fees: What happens when one of your deliveries fails? It could be through no fault of your own, but the recipient wasn’t available or they refused your delivery. You then have to cover the costs of returning the goods back to the storage facility and possibly redelivering them. It’s one of those things that doesn’t seem like that big of a problem but will slowly eat into your margins.
Most of the transportation expenses you face will be obvious and easy to spot. That’s why we’ve not mentioned most of them here because they’re hardly hidden. That being said, you should definitely check to see how much you’re spending on tolls or failed deliveries because they could both affect your bottom line.
Warehousing Expenses
This section refers to some of the hidden costs of managing the warehouse your delivery company operates from. Full disclosure: some of you might not have a warehouse or a storage facility. Your business may revolve around taking trucks and vans to other warehouses and loading goods that way. If that’s the case, you don’t have to worry about these expenses.
On the other hand, most delivery companies will have a general base of operations. Warehouses are the chosen option because they allow you to store plenty of goods and items ready for transit. Some warehousing expenses you should already be aware of include utilities, labour costs, etc.
At the same time, you may suffer from these more hidden expenses:
- Storage Overflow Expenses: If you rent your warehouse, you may agree to use a specified amount of storage space within the facility. But did you know that going over your contracted allowance can lead to overflow fees? Landlords can charge you extra for storing too many items and taking up too much square footage, even if you’re the only company using the warehouse.
- Stock Expenses: You must keep track of inventory to avoid any extra stock expenses. The most common examples of this are when you miscount stock in your warehouse and either have too much or too little. This will result in paying fees to get rid of unwanted stock or spending more money bringing in extra stock. It puts the onus on good inventory management to stop money leaking from your delivery business.
- Cleaning Expenses: This is something you often forget to factor into your overheads, but a good warehouse needs to be clean and pest-free. A decent bit of your budget will be spent on keeping your facility clean, but you can reduce this with better day-to-day cleaning practices. If your staff can keep the warehouse clean by themselves, then there’s less demand to bring in a cleaning team every day and you can reduce the frequency to once a week.
Running a delivery business will always be a tough task, yet you’ll make it tougher if you neglect these hidden costs. This guide is an excellent demonstration of just how much money can leak out of your company if you’re not paying attention to the right places. Plug those leaks to protect your company’s margins and put yourself in a better position to turn a profit.
