Reducing Costs in Courier Operations
Knowing tips and strategies for reducing costs in courier operations is fundamental. Despite the recent price increases in courier services, it may be a good time to develop a new shipping strategy for the upcoming season.
In running its operations, a courier company must incur various types of costs. Unfortunately, not all costs incurred are effective. Sometimes there are costs incurred, but actually there is no benefit.
In fact, the amount of expenditure will affect the profit obtained in that year. The greater the costs incurred by the company, the smaller the profit or gain obtained. To avoid this, the company should start analyzing which costs are necessary and which are not. After that, you can create a strategy to reduce costs. Cost reduction is a courier company’s strategy to reduce costs. Cost reduction is a term for reducing costs as a step to reduce the budget according to each courier company's policy.
In determining the allocation of the courier company's budget, it must have a goal, where the goal is not only for internal interests but also for investors. Therefore, cost reduction will be very fundamental in making a budget.
Cost optimization in courier operations – tips and strategies
Keeping in mind that we cannot expect spectacular savings, it is worth constantly taking care that money does not slip through your fingers.
Cost optimization is the search for a cost structure that will allow you to achieve the greatest possible effects with the least possible expenditure. In practice, a courier business can then generate the greatest possible profits.
1. Record all costs
First of all, you need to understand what expenses your courier business has and look up the history of all of the courier company's expenses. If the goal is to reduce expenses, it is worth paying attention to all expenses in general.
If the courier business has been around for some time, then there is accumulated expense statistics. Even if the courier company has changed directions or owners, or the business is new and has a short expense history, all of this can also be analyzed. Only the expenses of the past period are important, which must be collected carefully and attentively.
It is enough to take data for the last six months. If during this time there were any changes in the company that affected the type and size of expenses, you can take the average statistics of the courier company's work for earlier periods.
Of course, the basis for any action if you want to optimize costs is your knowledge of what you spend money on. Therefore, first, make sure that you have the right recording. Accounting usually gives you only the sum of all costs in a month, or divides it into less useful categories. To start analyzing the courier company's costs, you need something more.
What you need to start with is a division into fixed costs and variable costs. In a nutshell: fixed are those that you incur every month, and variables are those that appear in connection with a specific service sale.
Why is it fundamental to collect all expenses for a period?
If a courier business has a task to simply understand the average monthly level of the company's expenses or to calculate the largest expense items on average, such a detailed analysis is not necessary. For example, in normal courier operating activities, it is enough to simply keep records and at least periodically make groupings and cuts to understand the overall situation.
But in a crisis situation, when you need to optimize all possible expenses, you need to get the most complete picture, because only with this information can you make any decisions.
It happens that a large number of small and seemingly insignificant expenses are collected during analysis into a serious item of the courier company's expenses. A common item for any courier business is representative expenses for business development.
2. Cost optimization by mastering organizational chaos
It's surprising how often courier business owners underestimate how much chaos costs them. How much they refuse to acknowledge that chaos in the flow of information, lack of work organization, lack of planning what will happen next - all this causes not only nerves, mistakes, and stress. It is not just a nuisance. It means additional hours and days (every week) spent searching for information, duplicating activities, undoing mistakes, and doing something in a more complicated and less effective way. These hours mean real money that flows in a wide stream from the courier service owner’s pocket.
When you’re starting out and you’re doing most of it yourself, you tend to undervalue your time. Like it’s worthless. It’s true that you’re not taking money out of your pocket to pay an employee. But dealing with unnecessary chaos means you don’t have time to really grow your courier business.
You need a minimum of organization and a plan. It is fundamental to group tasks. Identify repetitive and undemanding activities and decide whether it would be better to delegate or automate them.
3. Automation, or how can I do it easier (and ultimately cheaper)
Although I mentioned it a moment ago, the topic is very fundamental and neglected in courier companies. I observe that there is a common collective belief that automation and simplification make economic sense and are available to larger courier companies. Most people tend to operate in a single way, the way they have always operated, without change.
If you really want to run your courier business awesomely, you should make it a habit to constantly look for improvements.
Of course, modern IT solutions are of invaluable help to you in this. Some people are afraid of them. However, when you develop the habit of searching in every situation, "How can a program manage delivery tasks for me?, then step by step you will see that your courier company can operate much more efficiently and faster. And what is even more fundamental - at a lower cost.
When you decide how a specific process in a courier company should be carried out or how a given task should be performed, it is worth knowing that investing in courier software is more profitable than investing in another employee.
4. Optimizing small costs, or looking at many small items that add up to big sums
Another issue worth paying attention to is the small amounts spent here and there. And of course we don't pay attention to them, but over the course of a month, they add up to a large sum. It's also hard to analyze and catch them.
The way to control this issue is through the record-keeping I mentioned at the beginning. Specifically, writing down all expenses and grouping them into useful categories. When I see that costs in a given category are starting to grow, I can take a closer look at it, analyze whether there are any unnecessary expenses in that group.
Even if you run a small courier business, you need to be perfectly clear about the fixed and variable expenses you face during the year. If you are not clear about this aspect, the first thing to do is analyze your courier business costs.
You can, for example, create a template in Excel that reports all costs:
Fixed
Variables
Direct
Indirect
Of management
Simply calculating these costs helps you identify areas where you can work. For example, you may be spending more than necessary on:
The shipments
Marketing
Fuel
At this stage, you can take advantage of the support of all your collaborators. They could help you identify a whole series of unnecessary costs or excessive expenses.
In particular, you could start by focusing on fixed costs and variable costs. These are generally expenses that you have to pay every year, which are very high and do not depend on production: rent, licenses, and subscriptions.
After calculating fixed and variable costs, you can move on to analyzing direct and indirect costs relating to service, and management costs, also known as courier operating costs.
5. Adjustment to the scale and capabilities of the courier company’s operation
One of the dangers that can sink a courier business is apparent development, when in reality only turnover is growing. It is a completely natural situation that when you sell more and more from month to month and year to year, you feel that your courier company has finally caught the right wind in its sails.
Of course, increased sales require appropriate investments, to build a larger base. Let's also honestly admit that when you can finally breathe a sigh of relief financially, you allow yourself a few long-postponed non-essential expenses.
6. Employees
Firing one or more employees is a common practice that clearly allows you to reduce courier company costs. Alternatively, you can think about the redundancy fund. The latter is a social safety net that allows you to temporarily deal with a courier company crisis by reducing, for a limited period of time, the expenses incurred for employee wages.
However, both practices have their drawbacks. Firing workers, in particular, involves having to pay them severance pay, an expense that can be very high.
Furthermore, layoffs are practices that indicate poor company health. Not only do you have to bear the moral burden of putting your employees in difficulty, but the company's reputation also suffers negatively.
7. Optimize marketing and communication policies
If your marketing and communication expenses are high, you should consider reducing them. It is true that advertising your courier website and setting up social campaigns are essential actions to make yourself known and acquire new customers, however, the advertising ROI (return on investment) is typically very difficult to estimate.
You might therefore consider spending less on advertising campaigns and at the same time, training your communications staff better, so as to obtain the same, if not better, results for the same investment.
It is no mystery that there are many breath-taking platforms to use for advertising and many marketing techniques. Sometimes small adjustments are enough to benefit from unexpected results, without necessarily having to invest hundreds, if not thousands, of euros every year.
Typically, specific software for marketing and communication allows you to automate a whole series of courier operations. Including:
Campaign creation and management
Integration of different social platforms
8. Review your spaces and work places
Reducing business costs also involves proper management of courier service’s workspaces. Courier service providers, in particular, often have no real need for premises. Remote working is now a reality and technology allows for perfect communication between workers and departments, even if they are connected from different parts of the country or the world.
The rental or lease costs of premises represent an item on the budget that significantly impacts profits. If necessary, before giving up one or more workers, think about the possibility of continuing your business without a physical location.
Warehouse management is one of the many operations in charge of the logistics department. It is the latter's task to offer innovative solutions so that spaces can be organized in the best possible way, avoiding that goods remain inside the premises for too long.
9. Contact an expert consultant in business costs and revenues
It is not easy to achieve an astonishing reduction in courier company costs without laying off any workers and without having to reduce quality standards. As we have seen, there are many areas of intervention and a small mistake could compromise the stability of the company in the future.
You can then think about relying on an external figure, from classic business coaches to consultants specializing in reducing business costs.
An external figure should have a deep knowledge of the business and the sector in which you operate. Likewise, it is good to be qualified and able to propose alternative methods to reduce costs, increase competitiveness, and turnover.
The choice of whether or not to rely on an external figure is personal and depends on many aspects. However, it is undeniable that these figures can actually offer an external point of view and operation, helping you to identify those areas that require immediate intervention with a view to greater sustainability and cost reduction.
10. Manage your working time
Time is money, right? When we work inefficiently in the courier company, we waste money. For this reason, it is worth starting to plan and manage our work time wisely. Limit time for unnecessary meetings and activities that do not translate into results. Get rid of all distractions that attract your attention and do not allow you to concentrate.
It would be a good idea to introduce tools into the courier company that monitor working time, record time spent on a given task, and help with concentration or project management. Proper planning and management of working time is crucial to increasing employee efficiency and increasing revenues in the courier company, thus enabling a reduction of operating costs.
11. Throw all possible expenses into the company's costs
Including as many expenses as possible as costs of obtaining income can significantly reduce the courier company's tax burden, and consequently the cost optimization process. Often, entrepreneurs of small courier companies do not include all expenses in the costs of obtaining income because they do not have sufficient knowledge on the subject.
12. Use internet marketing
Nowadays, online marketing has a huge potential to gain customers. A proper marketing strategy adapted to the business definitely helps to increase the profits of the courier company. If you do not use such online activities and invest only in offline marketing, try to change it. However, if you already use it, but it does not bring the expected financial results, maybe it is worth trying other marketing channels in your courier company?
As you can see, there are many methods of reducing costs in a courier company. This can be a reduction in company expenses, better budget planning, or proper management of working time. It is certainly worth optimizing costs in a company to maintain financial liquidity and profitability. It is worth remembering that it is better not to do this at the expense of losing quality or employee morale, because it can bring the opposite effects, e.g. mass layoffs or costs related to complaints.
What is meant by hidden costs?
Hidden costs of logistics are all those costs that are not informed at the beginning of the work. You may think to yourself that this problem can be overcome by making a firm contract with the couriers and specifying all possible details, and forever be relieved of dealing with motor couriers and vans and sending parcels and such.
But unfortunately, this incident is more like a dream than something that happens in reality. It should be noted that such events do not in any way indicate the lack of transparency and honesty of the motor courier with you and are only related to events that are unpredictable for both parties.
Does it always make sense to optimize costs and how to check it?
First of all, it is worth paying attention to whether cost optimization in a courier company is profitable. It cannot be art for art’s sake. Before you make this effort, you need to weigh the costs (financial, time, and organizational) of such an operation and the potential benefits from it.
The optimization process for the courier service’s costs should look like this:
Diagnosis of the situation and specification of possible directions of changes that could impact costs.
Choosing one course of action from which we expect the greatest benefits and in which we can introduce changes most easily and quickly.
Orderly implementation of changes in the courier operations.
Monitoring the effects of the introduced changes, not only in financial terms, but also in terms of organization and quality of courier operation.
What's stopping you from optimizing your costs?
One of the fundamental problems of courier companies and the fear of making a reliable optimization is the fear of change. This applies to both the management level and employees. Business owners, on the other hand, are afraid of the additional costs associated with new implementations, without considering the benefits they may bring in the long term.
I do not hide the fact that the optimization process itself is not easy and can be very time-consuming. It requires delving into many elements and the functioning of a given organization. However, I believe that every courier company should constantly look for solutions that will seal unnecessary expenses and help find new profitable solutions that increase the chances of developing the courier company.
I perfectly understand that in difficult moments, it is sometimes difficult to catch a distance in the courier business and soberly analyze all the options, threats and opportunities. This can be a blockade to implementing changes in the courier company, but it should not ultimately cross them out. It is worth remembering that you can always use additional support for courier service’s operations.
Conclusion
Monitoring costs of courier operations is extremely fundamental, but it is only an auxiliary activity. It is about making sure that the money you earn is not wasted. And this is what true cost optimization in a courier company is all about. However, the main task of a small courier business owner is to earn money in the simplest and most effective way.
Each of the above points assumes long-term actions influencing the optimization of the company's costs. Also, remember that optimization is not about watching every penny. In a situation of economic crisis or recession, keeping an eye on costs is extremely fundamental, but it is even more important to keep your courier company afloat. Focus solely on whether the money invested in the courier company is not wasted.