The worst of the cost-of-living and interest rate crisis should now be behind us and the economic environment will gradually start to improve. Progress, however, is likely to be slow. Cost pressures have still not totally gone away and the scope for Government to stimulate growth by tax cuts is severely constrained by the level of Government borrowing and continued high interest rates.
As a result, profitability for many companies in 2024, is likely to be very dependent upon their ability to control costs as opposed to a relying on sales growth or a real increase in prices.
For those companies that use the services of distribution contractors, managing costs will be of critical importance if margins are to be maintained. Usually this is best achieved by working with your contractor to jointly manage costs. Depending on the nature of the service and pricing method, key focus areas include:
- Ensuring that the correct charges have been applied in accordance with the agreement
- For dedicated vehicle operations, ensuring both vehicle utilisation and productivity are continuously measured
- Ensuring that the correct level of service is provided to meet the delivery promise
- Requiring the contractor to subcontract where it is more cost effective to do so
- Insisting that any ‘specials’ are approved prior to commitment
- For cost plus agreements ensuring that all costs are properly challenged
- Working with the contractor to introduce different delivery commitments for remote areas or for deliveries that have special requirements
- Ensuring that if the operational requirement has changed, the distribution contractor and type of service and agreement is still the most appropriate for the operational requirement
Consideration should also be given to whether your transport contractor is still the most appropriate choice to meet the operational requirement. As time goes by, operational needs change and a contractor that was right for yesterday’s requirements may not be the best choice today. Davies & Robson has supported companies both large and small in a variety of industries to ensure that their outsourcing operations assist in providing real competitive advantage at a competitive cost. If you would like to know how we can assist your company, please call us on 01327 349090
