Do you know what it costs to deliver?

By WALIY LYNCH

These questions on delivery costs were generoted by suggestions offered in our July issue by llally Lynch, president of Builders Express, Dollos, Tx.

Lynch has just completed a study on delivery costs for the National Lumber and Building Materisl Dealers Association. His research will be part of a seminar at the notionol convention in October.

Ifyou have questions on delivery costs, see the box accompanying this article for the way to find arcwers-ed.

Q: Is there a way to determine how good, or how bad, a company's delivery is being handled that can be identified without a full blown accounting search?

A: Not absolutely, but our company and its people have used one way many times. It will require however that you identify "delivered sales." There are several quick ways to do this: (1) contractor and commercial sales accounts generally purchase 8090 to 85qo of what is delivered. (2) total receivables will be fairly close. (3) 6590 of total sales will be reasonably close to the maximum delivered for all dealers selling to both contractors and consumers. (4) companies dealing strictly with contractors and subs can use 8090 as a factor to determine delivered sales.

Once the amount of "delivered volume" has been determined, count the number of vehicles used in the delivery function. Divide the number of vehicles into the total delivered sales. Our range of experiences shows that between $750,000 and $1,000,000 per vehicle annually is what dealers are achieving with what appear to be well run operations. Some chains talk $1,250,000 per vehicle, but I have not seen it demonstrated. Therefore, ifyour trucks are delivering less than $800,000 to

$850,000 each, they are not being used effectively and remedial work should be begun by management. With our clients, with over two million in sales, we have no trouble demonstrating effective delivery with two trucks. Below this figure, the $1,000,000 per vehicle will not hold. This means that up to $500,000 or $600,000 in delivered volume can be handled with one truck and customers kept happy. After that, a one ton truck or a pick up will also be needed; then the one truck per million takes over as delivered sales volume rises.

Q: Our company would like to charge for delivery, but our competitors will not let us. Is there a way to do this in spite of our competitors?

A: Yes, absolutely, but how do you know that your competitors are not themselves charging for delivery? Most dealers are, in one way or another, charging in part for delivery. Our company does a survey on the competitors of our clients. In the last four years we have never found anyone who was not charging in some way. Everyone has geographic limits-the town, the county or other parameters-then a charge. Delivery

Story at a Glance

services-handling merchandise after it has been delivered, like shingles and wall board-are often charged. Have someone in your organization call your top five or ten competitors and find out what they do. When you have your competitor's delivery posture really identified, then and only then decide what charges you can go after.

Multiple price lists, minimum values, mile limitations, per mile charges, etc. are in use all over the country to charge for delivery. They deal with how to charge. The who to charge is another story. Your company, like others, does about 8090 of delivery business with 2090 of its customers. Identify who is who and then go after those 8090 of your customers doing 2090 of your business. You can best charge these people because they probably represent the bulk of your delivery expense on a per delivery cost.

How much to charge cannot be determined from this ivory tower, but it must be considered and handled locally. Some make money, some break even and some iust ease the pain.

Q: How do you handle 20 "first outs" deliveries when vou onlv have four trucks?

A: Obviously, like what happens when the irresistible force and the immoveable object meet, there is no answer to the question, but it is often asked. The problem is caused by mismanagement and poor communication. The poor communication is evidenced by the fact that the company has not made known the limits of what commitments for deliverv