Maximizing Profits: A Data Driven Approach
The following is a condensed version “Converting Metrics into Money: Increasing Margins for Profit” – originally publishing in the January/February Issue of Indoor Comfort Marketing
In the fuel delivery industry, analyzing data and metrics is crucial for maintaining profits. From trucks to driver’s wages and delivery costs, there is a wealth of information to consider. In the realm of residential fuel deliveries, all this data, and the metrics it leads to, are much more similar from one dealer to another than you might think. For example, driving more miles between stops in a rural area will increase delivery costs but rural areas typically pay lower wages than urban areas—so these two factors usually offset one another.
As operating costs continue to rise, efficiency becomes paramount to maintaining profits. Many fuel marketers are turning to their data to identify metrics and devise plans for improvement.
Here are some simple points to consider:
- Larger deliveries result in fewer trips and reduced operational costs.
- Fewer deliveries mean dispatching fewer trucks and spending less on fuel, maintenance, wages, and overtime.
- Maximizing truck capacity is a top priority in the industry, it reduces costs and allows for business growth without expanding your fleet or hiring new drivers.
In any given year, a host of outside factors such as consumption changes or market conditions can impact the bottom line. Nonetheless, the benefits of these improvements are embedded in the company’s profits and must be recognized.
Based on industry averages, the cost of a delivery is approximately $65, excluding selling, general, and administrative expenses (SG&A). Consider a scenario where you have 6,000 customers consuming an average of 900 gallons and receiving 150-gallon deliveries. With approximately 36,000 deliveries per year, a 20% reduction in deliveries could result in over $450,000 in savings. Even just reducing variable costs, such as fuel and driver wages, could yield savings exceeding $250,000. Moreover, with effective data analysis and delivery planning, repurposing the excess capacity created by an increase in delivery size could generate over $1 million in company benefits.
Ultimately, at your core, you are a delivery company. If you can improve your costs, you will have a clear and definable set of benefits in terms of costs per gallon, saved deliveries, gallons per HDD, etc. Most importantly, they will translate into increased profits.
It is important to note there are many details involved in delivery optimization and efficiency. Your company will vary somewhat from the industry averages used in the examples provided. In addition, increased cost savings are often achievable by shifting around the timing of certain deliveries using AI/ML (artificial intelligence/machine learning).
The above is a condensed version of the article “Converting Metrics into Money: Increasing Margins for Profit” by Phil Baratz. It was originally published in the January/February issue of Indoor Comfort Marketing. Click here to read or download the complete article.