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As the connector between manufacturers and terminals, the greatest value of distributors lies in communication and service. Their most basic function is to deliver products from manufacturers to terminal customers, achieving product distribution and sales. As a vital part of the distributor's operational system, logistics distribution is undeniably important and also becomes a major cost expenditure. So, what constitutes a distributor's logistics costs? And how can they be effectively managed?

Rising Logistics Costs: The "Delivery Fee" Gets More Expensive

Distributors' logistics costs can be divided into three basic parts: direct labor costs, direct material costs, and operating indirect expenses. Direct labor costs include wages, wage allowances, production bonuses, employee welfare, and social security contributions paid to drivers and assistants of operating vehicles. Direct material costs include:

(1) Fuel: Refers to gasoline, diesel, and other fuels consumed during the operation of operating vehicles. (2) Tires: Refers to the costs of outer tires, inner tubes, cushion strips, tire retreading, and minor repairs for operating vehicles. (3) Maintenance and repair costs: Refers to the material and labor costs for various levels of maintenance and repairs of operating vehicles, costs of repairing old parts, and costs of engine oil and gear oil consumed during driving. For enterprises adopting the total assembly exchange warranty method, the material and repair costs for replacing assemblies in the warranty department are also included. (4) Depreciation: Refers to the depreciation of operating vehicles as stipulated. (5) Road maintenance fees: Refers to the road maintenance fees paid to the highway management department for operating vehicles as stipulated. (6) Other expenses: Operating indirect expenses refer to costs directly related to the operation of vehicles that are not included in the above items. They mainly include vehicle management fees, accident losses, vehicle license and inspection fees, insurance premiums, vehicle and vessel usage taxes, car wash fees, bridge tolls, etc.

Among all costs, direct labor and direct material costs account for the largest proportion. Labor costs can account for 50% of total costs, direct material costs about 35%, and the remaining costs 25%.

With the continuous increase in the above costs, the rise in logistics costs has become the most prominent among the rising costs for many trading companies. Compared with before, the average annual increase in logistics costs for each trading company in the past two years has been around 20%. Among them, wages for drivers and assistants have increased by 20% to 30%, fuel costs by about 25% to 28%, and maintenance costs by an average of about 20%. The other two major expenses mainly arise from adding vehicles and insurance premiums. Vehicle insurance is a point that every trading company takes very seriously, and many people take out full vehicle insurance. With the continuous upgrading of insurance business in the past two years, this part of the cost has increased by about 20%.

Looking at Distribution Costs from One Vehicle

Mr. Zhou, a businessman in Yueqing City, Zhejiang Province, has run a supply and marketing supermarket company for many years. Currently, the company has 11 vehicles and over 40 employees, with annual sales exceeding 50 million yuan. The products it distributes are mainly leisure and convenience foods. Talking about the company's development in recent years, Mr. Zhou looks serious. He believes that the standard for company development does not necessarily have to be reflected in profit growth rate, but the profit growth rate has been getting lower and lower in recent years, forcing him to put more thought into cost control.

Mr. Zhou calculated the logistics costs: based on the maximum radiation distance of 40 kilometers per vehicle, a vehicle's monthly fuel cost can reach 2,500 yuan; with one driver per vehicle, the monthly salary is 3,500 yuan; maintenance and repair costs can reach 600 to 800 yuan per month; and the annual insurance premium for each vehicle is at least 5,000 yuan. In this way, the total cost of several major items is about 7,500 yuan per month in fixed expenditures, plus various other expenses, the total monthly expenditure for a vehicle is about 10,000 yuan.

Given that the company's network mainly covers several large supermarkets in the urban area and many small and medium-sized outlets, Mr. Zhou combines vehicle management with personnel management and implements a customer manager system. According to the principle of one person, one vehicle responsible for one area, Mr. Zhou assigns 11 vehicles to 11 area managers, who are fully responsible for vehicle allocation and terminal customer visits. Under this allocation model, under normal circumstances, within a service radius of 40 kilometers, a vehicle delivers once. If the vehicle is not in trouble, considering distribution costs, the vehicle's load rate cannot be less than 60%. Once a vehicle only delivers half a load, the profit for that vehicle is zero or even a loss. During the peak sales season, a vehicle can make at most two trips, and the load rate can basically reach over 80%. To encourage more deliveries during the peak season, Mr. Zhou also gives appropriate subsidies to drivers who make extra trips.

Don't Let Profits Slip Away from Your Vehicles!

To reduce logistics costs, there are several hard costs that cannot be reduced, such as driver wages, fuel costs, and insurance premiums, which even increase year by year. To motivate delivery personnel, it is difficult to retain people without a relatively high basic salary guarantee. Now, the wages of delivery personnel in general express companies can reach about 5,000 yuan, which forms an invisible comparison. As for insurance, Mr. Zhou believes that full vehicle insurance is very necessary. So, how should distributors save logistics costs?

First, try to reduce vehicle wear and tear and depreciation costs. This can be achieved by focusing on vehicle stability. Mr. Zhou's company generally does not easily swap vehicles and personnel because each person has feelings for the vehicle they are used to and understands its performance, which can invisibly avoid many consumption losses caused by the磨合 (running-in) between people and vehicles. In addition, when introducing vehicles, Mr. Zhou generally chooses second-hand vehicles with a service life of about 5 years, so that there will be no disputes caused by people picking vehicles during use.

Second, in vehicle route planning, try to achieve no blind spots and no detours. Mr. Zhou has clear requirements for customer managers: within the distribution range of one vehicle, there are about 200 outlets. A customer manager can take on the triple roles of driver, delivery person, and terminal maintenance staff. In one day, a vehicle can serve 10 to 12 terminal outlets, and most outlets can accept a visit frequency of once every two weeks. Of course, the prerequisite is that the inventory of each outlet cannot exceed 45 days, which the customer manager must control.

Finally, in terms of the mix of products delivered, it is also necessary to consider both weight and profit to ensure the vehicle's load rate. A high load rate does not necessarily mean high profit, but if the load rate is low, the distributor's profit is definitely low. Therefore, Mr. Zhou believes that most leisure and convenience food products are light in weight and large in volume. If they can be paired with some products that are small in volume and heavy in weight, it will improve delivery efficiency, while also considering overall sales profit to achieve twice the result with half the effort.

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About us: WeChat name: 快消品经销商专业咨询管理 (FMCG Distributor Professional Consulting Management) Account introduction: 20 years of experience in FMCG distributor operations and management, professionally targeting distributor internal management.

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