Bond
Bond

Bond’s approach of visibility into operational spending

Published on: April 1, 2021

Omer Deutscher

Metrics to track for visibility into your operational costs

Every COO knows that logistics are at the forefront of an organization’s budget. DTC Brands are always looking for every possible way to increase revenue and drive sales while keeping costs low. Balancing the line between low operational costs and high yield is a well-coveted skill, that some retailers are still learning. Below we will explore what we believe to be the magic mix of metrics tracking when tackling two major issues in operational spending: operational efficiency and fleet resource management.

Holistic view on operational efficiency

At Bond, we truly believe that combining several data sources is the ultimate way to get a holistic view of your operational efficiency. Specifically, we recommend looking deeper into your fleet data and eComm orders data. They both synergize and complete each other. For instance, your fleet and warehouse team can excel within certain KPIs such as cost per mile, cost per package, accuracy, etc. But what if some of the orders are delivered more than once? What if the address is incorrect and the delivery never makes it to its intended destination? What if the driver wasn’t aware it was a multi-item order that was packed incorrectly and part of the delivery was left at the warehouse? How can we be sure that the route is the most efficient? Too many times we have seen orders be attempted for delivery 2 or 3 times or have large delays in delivery due to simple errors that could have easily been avoided. There are countless solutions currently available on the market to help optimize routes in order to keep this metric in check, however, these solutions fail to address the core issue (or what we feel is the core issue): it doesn’t matter how fast or “efficient” your fleet is if they are making errors. You can have a driver that is delivering at a rate of 6 packages per hour (which is crazy good!) but if they deliver 2 of the 6 packages to the wrong address or forget half of an order at the warehouse your operational efficiency and overhead are effected. These solutions only address ways to optimize your fleet, but they do not address ways to tackle these issues head-on from the ops perspective.

Having a broader look at how your fleet is operating, and what is causing sub-optimal performance shows you where you have room for improvement and how you can optimize your total spend. Looking at your number of deliveries per hour through the lens of the number of attempts allows for “all-in-all operational efficiency”.

Effective Fleet Management

Bond predicts the number of drivers we need for tomorrow, today through honing in on operational efficiency not just fleet performance. When looking at HR planning through a holistic lens, we have to take into consideration what cost we are willing to pay to get the numbers that we want.

It is important to first ask: even if we have zero of the above-mentioned errors, what is the minimum amount of labor needed in order to successfully deliver within the SLA? One of the most commonly used metrics to measure fleet performance is the number of packages per hour. This metric takes into consideration the average number of packages delivered per driver per hour of work. Labor planning is very closely tied to operational efficiency, as the number of packages per hour is greatly skewed by your team’s performance. So how do you know the accurate amount of labor needed each day as you increase your operational efficiency? Additionally, you have to take into consideration the number of predicted orders. Both of these parameters are variable and due to this most companies end up employing a larger fleet than needed as a buffer to ensure the job gets done. This results in overspending when you really don’t need to.

Let’s talk about a practical example: in order to prepare for Christmas, you hire more labor than needed in order to accommodate the unknown influx of expected deliveries. So you now have 10 drivers delivering 6 packages in an hour and several drivers on stand-by. Your delivery rate per hour is awesome but you have poor performance on packages per labor hour. Of course, there are always trade-offs and it is important to man your fleet more than needed for high touch hours, but what can you do to improve this metric?

With all of the data in hand, through Bond you can create reports to show the cost per labor hour, what are your peak hours, what the utilization is over your fleet throughout the day, and so on. Thankfully, it’s 2021 and we can use machine learning and AI to predict these patterns. With some effort, it’s possible to better plan your labor to perform its duties while keeping your best results in other metrics and giving unforgettable experiences to your customer.

Summary

Sometimes the importance is placed into the wrong metric. As mentioned, it doesn’t matter how great your delivery per hour rate is if you are bleeding money to get that metric. That’s why, we suggest focusing on a holistic approach, looking at these two core metrics together to give a well-rounded picture of your operations and efficiency. Looking at the number of deliveries per hour gives you a solid understanding of your operational costs and helps with delivery pricing, but gives no actionable items you can do to improve upon it. We know that by looking at multiple metrics in tandem, we can do better.

Wrapping it all up, we highly recommend looking closely at these 2 KPIs when approaching operational efficiency and fleet management issues:

  1. Number of deliveries per labor hour

  2. Number of delivery attempts per order

Bond reports also provide actionable insights to improve your operations today. Want to hear more? Reach us now and schedule a call here: https://www.withbond.com/contact-us/.

Let's talk today, so you can deliver smarter tomorrow!

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