This is Part 2 of “Shifting Profit Drivers,” a periodic collection of essays
The bottom-line profit driver has migrated from “Can we charge more for studs?” to “How can we control cost to improve our operating profit?” Reducing overtime is almost always the first emotional response, but a fact-based analysis of the overtime is needed.
The questions to be asked are:
- Is the overtime due to the lack of management control over employees?
- Is the overtime a result of yard and warehouse and delivery inefficiencies?
After more than 15 years facilitating industry roundtables, I have developed a list of key performance indicators to measure the efficiencies of a dealer’s yard and warehouse and delivery processes. Dealers achieving these KPIs as a minimum typically produce a 6% to 8% operating profit line. This KPI list is from dealers identifying themselves as contractor-oriented and delivering at least 80% of their sales. Here they are:
- Delivered sales (not total sales) per delivery truck: $1,750,000
- Delivered gross profit dollars per delivery truck: $425,000
- Delivery cost as a percent of delivered sales: 2%
- Delivery cost as a percentage of delivered gross profit dollars: 7%
- Total sales per forklift : $2,600,000
- Total gross profit per forklift: $650,000
- Average turn time (time on the yard between deliveries): 20 minutes
Delivery Cost includes delivery vehicles plus any towable or truck attached lifts that are used primarily for delivery. Expenses to be included are fuel, oil, maintenance, depreciation, lease payments (if applicable), repairs and other expenses of this nature. If the dealer has a maintenance shop, they prorated a portion of the total shop expenses. Not included is vehicle insurance, drivers’ wages, or costs involving any non-delivery vehicles.
Delivery Vehicles includes delivery vehicles only. We’re talking here about primary vehicles only, not trailers or towable lifts. Not included are pick-ups, even if used for delivery or any other company vehicles.
Forklifts includes all forklifts in the yard and warehouse. Those in manufacturing are excluded. This benchmark also excludes any lifts used primarily for jobsite unloading.
