The other day a marketer called me because he and his CFO were working on a lubes bid. It was an interesting project because it entailed about a half million bulk gallons to a single user that would be delivered via tanker in bulk. The CFO (fairly new to the job and industry) wanted to know “typical” delivery costs on a cents-per-gallon basis.
As we talked further, and I explained that he could get himself in a world of hurt and/or lose the bid using typical rather than actual delivery costs, I realized after a few circular conversations that he didn’t know the company’s true delivery cost at all. That got me wondering about other marketers.
So, I did a quick poll of our clients and found out some pretty interesting things from the 250 companies who responded:
- Over half (53.2%) of all responding marketers don’t segregate their trucking in any way. My conclusion – it’s hard to know costs when you can’t get at the data easily.
- Only a little over half (50.8%) actually want to make money on trucking! About 23% had no strategy and the rest said breakeven was fine. Ouch!
- Yet, profitability was the main concern at both for tanker and tankwagon operations
- And, only 16% had full truck automation
Wow! So right after I revealed all the survey findings and had a really interesting www.PetroAnswer.com webinar on trucking efficiency ideas with some trucking experts, we decided to delve more into trucking costs. Right now Meridian is in the midst of a more specific survey so that by the time our Focus on Competitive Advantage event rolls around (www.BestPetroEvent.com ) we’ll have some really good, factual data to help push efficiency.
Another discovery from the poll was huge discrepancies in dispatch efficiency. That really hit home with me once again when I was visiting with a marketer a week later. This was a GOOD, forward-thinking, high profit marketer and guess what I found in his dispatch office? — Orders being taken on pink telephone message slips, then being rewritten by the dispatcher onto a white card, which was then given to the driver as his delivery ticket. Oh my goodness!
This is all to say that lowering delivery costs starts with efficient dispatching and efficient dispatching starts with:
- Automated fuel best buy that takes into account all your “special deals” on fuels
- Really efficient warehousing (including packaging process) and staging on lubes
Then you ruthlessly drive efficiency into all your procedures from the time a driver sets foot in your plant, all the way through the actual delivery and the delivery information (accurate of course) getting to the home office.
So all of this is to say, if you want to boost profitability at your company, and you are already doing a great job with pricing, margins, sales and marketing, then I would highly suggest you spend time working on lowering your delivery cost by doing the following:
#1) Segregate trucking costs so you know how much a delivery actually costs (yes accounting will hate this at first but do it anyway!)
#2) Automate (as much as you possibly can) including prices flowing into your system, accurately accounting for off-rack contract deals and your entire dispatch trucking system (accounting will love this, IT and dispatch may hate this – but do it anyway).
#3) Automate delivery data capture for billing/EFT collection (Drivers will hate it at first, then they’ll love it since automation means less work, accounting will be scared to death of this and IT may swear it can’t be done accurately – make them do it anyway!)
If you start promoting this 1-2-3 punch as a mandate, anticipate strong kick-back from your troops. Involving them in your process changes and supplier selections usually helps lower resistance, but know you will not eliminate it. Many of your loyal employees hate change and fear for their jobs. You will need to do plenty of reassuring as you undertake modernization.
So, my final piece of advice is to seek champions at every level of your organization. These are the staff that catch your vision and will be your head cheerleaders, especially when new projects don’t go smoothly. They will forewarn the rest of your team to expect the bumps in the road –that even in the best-managed projects not everything goes as planned, that it’s actually normal for chaos and pain to go on for months when new systems are implemented. Your champions will keep the rest of your team focused on the outcome goal, where every delivery is smoother, more efficient and less costly!
And yes, I do firmly believe you should be making money on trucking! If you are an owner or strategic manager, come join us at Focus on Competitive Advantage on October 12&13. It promises to be an exciting event this year sure to help you lower your delivery costs and you may just find that one killer revenue idea as well!