Rising costs are being seen seemingly everywhere you look these days, and business operations are no exception. This puts businesses in a position where their three main options are to reduce costs where possible, raise prices for customers, or lose margin. The most appealing option here is of course to reduce costs, so as not to risk pushing customers to competitors or shrinking your own bottom line.
The increases in costs are attributable to two main areas: fuel and personnel, which we will look at in more detail in this article, as well as other factors and how logistics software can help against these rising costs.
Rising fuel costs
Due to international sanctions imposed on Russia, the world’s second-largest producer of oil, as a consequence of its invasion of Ukraine, the supply of oil has staggered and, with continued removal of lockdowns, demand has continued to rise. All this has meant that petrol and diesel rose by 7% in March, with peaks of 167.3p per litre of petrol and 179.9p per litre of diesel.
The exact proportion of overall costs that fuel comprises will differ from business to business, but for all companies in the transportation sector, fuel makes up a large part of costs.
Logistics software can help here in a few ways, chiefly with route optimisation and vehicle monitoring.
Route optimisation is about finding the most efficient route for a driver to take – whether that be for deliveries, collections or appointments.
Now, the most efficient route may not necessarily be the shortest route – a good route optimisation tool will know when certain areas are likely to be congested with traffic and will find an alternative route, saving the fuel that would otherwise be wasted in slow-moving, bumper-to-bumper traffic.
As well as saving on fuel – and the financial and ecological costs that come with it, route optimisation also saves your route planners time, gives customers realistic and up-to-date delivery windows, guides your drivers along their route and keeps them abreast of any changes, and means vehicles don’t do unnecessary mileage resulting in more wear and tear.
A good route optimisation tool won’t focus solely on route optimisation, it will take into account many elements of running a logistics business, including taking care of the vehicle fleet.
Vehicle check functionality helps drivers to keep an eye on their vehicles before they leave the depot. This involves logging any defects or issues in the app, with photos to highlight the points of concern; fleet managers can then review these and take remedial steps. This automatically creates a permanent archive which makes servicing vehicles easier.
Keeping an eye on a vehicle’s condition means it can stay healthier for longer, resulting in more economical fuel consumption and a brighter bottom line.
The RHA (Road Haulage Association) estimates that there is now a deficit of more than 100,000 qualified drivers in the UK. The coronavirus pandemic (and the lockdowns that went with it), as well as Brexit, are both major contributors to the shortage.
With travel becoming increasingly restricted in the early stages of the pandemic and with huge parts of the economy shutting down, many European drivers returned to their home countries and simply didn’t return to the UK. A further complication was that the pandemic caused a huge backlog in testing new HGV drivers, so there are fewer newly qualified drivers than there would have been if there had been no pandemic.
With the UK no longer being part of the EU single market, European drivers simply do not have the same freedoms they once had to live and work in the UK. It is still possible for European drivers to work in this country, but there are added layers of bureaucracy now, as well as a fall in the value of the pound compared to the Euro, the UK is a notably less attractive place to work for EU nationals.
Logistics software can help make the most of the existing staff a company already has.
Another great benefit of the previously mentioned route optimisation software is that it means jobs can be allocated effectively, meaning drivers can cover more deliveries within the same time period. This boosts productivity and the number of customers served while minimising reliance on additional drivers.
Good logistics software includes apps, particularly easy-to-use apps on standard mobile devices. This makes it more accessible to more people, reducing the need to invest in specialist software, expensive software or training, and it means new starters can get on the road more quickly.
Electronic proof of delivery (ePOD) automates much of the paperwork involved in logistics – job information is passed automatically to drivers’ devices, signatures can be obtained in-app and delivery confirmations are generated instantly and shared with customers and management. All this means drivers don’t have to spend their time on paperwork and can instead be out on the road.
There is a global semiconductor shortage which is affecting the supply of new vans (and cars) – semiconductors are crucial in modern vehicles for safety, electrification, communication and connectivity purposes, so there really isn’t a way of making new vehicles without them. This is causing havoc with production and has caused some brands to temporarily close manufacturing plants.
This is having a knock-on effect on suppliers of used vehicles, as companies who would usually be upgrading to new models are having to keep hold of their existing vehicles for longer, meaning there are fewer used vans and lorries available.
Regular checks, which can be prompted by logistics software as mentioned above, can have major positive effects on vehicles.
Firstly, regular checks, as well as annual maintenance, mean issues are more likely to be spotted early on and can be prevented before they turn into major failures, which almost always cost a lot more than preventative maintenance.
Having a vehicle out of commission while it’s awaiting repair costs money in unfulfilled orders, so keeping a healthy fleet helps keep the wheels turning on the profits.
A vehicle that’s been well-maintained will last longer than one that hasn’t been looked after. At the moment, keeping your vehicles working well for longer means being less beholden to the semi-conductor shortage and the increased costs and wait times for new (or used!) vehicles.
Here’s a handy snapshot of how to keep vehicle maintenance costs down:
- Spreading the wear and tear of daily usage across your fleet evenly
- Reduce mileage through efficient routing
- Identify faults early
- Have regular vehicle maintenance scheduled in
- Train staff to drive gently
The increasing importance of customer relationships
Business adage tells us that retaining customers is more beneficial than attracting new ones – this remains true to this day and it’s for several reasons. Loyal customers are more likely to buy, they’re more likely to spend more, and it’s 7x cheaper to keep a customer than to find a new one.
Keeping customers is just as important as it’s ever been, but it’s not getting easier. More competition, and the rise in comparison sites, mean customers are less loyal than they have been in the past. This means managing customer relationships is crucial to keeping customers happy and coming back.
Logistics software as a customer service tool
Drivers utilising a route optimisation app has many benefits, as we’ve discussed, but one of the most powerful elements is that it means customers can see where their order is when it’s out on the road. This means a customer knows not only that their order will arrive on Tuesday, but they’ll also have an accurate timeslot on Tuesday and be able to track the driver’s progress, so they can see if they’re the next stop or if their order is still another 5 stops away.
This knowledge is incredibly powerful because it means a customer can plan their own day more accurately and if there is a delay for whatever reason, they will receive an updated ETA. Sharing this information keeps a customer happy and it means they are less likely to ask for a refund or discount in the event of delays.
A customer having a more accurate time increases the likelihood they will be able to receive their order, which reduces costly repeat deliveries.
How can PODFather help?
At PODFather, we develop and deliver solutions for improving more efficient business operations, from finding optimum routes to utilising digital solutions. For more information, get in touch.