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Free
Delivery
Frequently, I find the sales department offers free delivery. I
agree; this is a great selling tool. Customers always look
favorably when free delivery is offered. The cost to the dealer,
whether it is free delivery of a $10 cartridge of ink or a 500
pound copier, must be absorbed by someone. How this cost is
internally allocated can create unassigned profits or losses.
All too often, the chore of delivery falls upon the service
department. “The tech can drop off the toner on their way to
service call,” or, “The tech can deliver the equipment and then
install it,” is often used as the scapegoat for using service
technicians to make the free delivery. Rarely does the service
department receive any type of internal monetary transfer of
revenue from another department to cover the cost of the required
service department’s labor needed to provide the free delivery.
The true cost of one hour of service technician labor is in the
$60 to $90 range. This depends on their hourly wage ($15 to $25)
and other overhead factors. No matter which level of the range
your tech falls into, asking your service department to act as a
free delivery service is an expensive proposition.
When you add the cost of using a company vehicle or paying a
mileage reimbursement fee, your free delivery continues to
escalate in cost. As of January 1, 2008 the IRS now allows
non-taxable mileage reimbursement of 50.5 cents per mile. This
free delivery of a container of toner can easily cost more than
the price of the supply, much less the profit margin on the item.
When a trained service technician is required to deliver and
install a piece of equipment, the long term cost of the delivery
can astronomically accelerate. First, consider the cost of the
technical and customer relations training your company has
invested in each of your technicians. How much would it cost to
locate, interview, hire and train another person to take the place
of the technician you are asking to deliver a heavy piece of
equipment?
What is the age range of your company’s average technician? What
kind of physical shape are they in? Are they able to bend over and
safely lift 50 to 100 pounds? Would the physical attributes of
your technician inspire you to make them the ideal candidate to be
hired as a delivery person at $10 per hour?
Think risk - reward. Is it worth risking a back injury and
long-term disability of a trained service professional to provide
free delivery that is costing your company $75 to $300 in service
labor?
The cost of a workman’s compensation claim can cost in excess of
$100,000. Claims can extend for years. Your workman’s comp rate
can escalate far beyond the total yearly cost of outsourcing all
your deliveries. The injury of an employee can be devastating to
the morale of other workers. Feigned back injuries can be a way
for a disgruntled employee to make sure they are never asked to
deliver another piece of equipment. For others, once an employee
is legitimately hurt while lifting a machine, their likelihood of
re-injuring themselves increases. The prudent employee and
employer will not allow the previously harmed person to lift
equipment in the future. Too bad this decision was made after the
injury had occurred.
A diplomatic way to remove your techs from the delivery circle is
to tell end-users, “Our field service techs workman’s compensation
classification does not allow for equipment delivery or in office
movement. I can quote you a cost to have the vendor we use for all
of our deliveries make this move for you.”
Very often dealers tell me, “We only have the techs deliver our
smaller machines.” Smaller equipment is usually sold at a lower
price, with lower margins. Can your company afford for a tech to
deliver, install and train on a low priced multifunctional piece
of equipment? Is enough profitability included in the sale price
to pay the cost of having a tech install the print drivers, phone
lines, and instruct on scanning, email copying, storing, faxing,
printing and copying functions? When a tech delivers equipment,
the customer usually expects much more than if a delivery person
does the work.
Dealers need to consider other forms of delivery that are more
cost effective. When dealing with smaller equipment, always ask
the customer if they would like to will-call the equipment or use
their own choice for freight forwarding. Ask for the buyer’s FedEx
or UPS shipping account number to eliminate any additional freight
charges. Equipment can be shipped in the sealed original box. The
customer may have their own delivery van that can pick up the
machine. Otherwise, the selling dealer must accurately figure out
the cost of delivery, including an acceptable profit margin and
add that on to the cost of the equipment.
If you want to do self-delivery, consider using (part-time)
warehouse staff or a third party trucking company. Many
metropolitan areas have trucking companies whose prime business is
office equipment delivery and installation. When considering the
true cost of self-delivery, these companies provide an enormous
service and profit center to the dealership.
When customers know that the dealer does provide self-delivery,
they are likely to try to negotiate free delivery and future free
moves of their equipment. It is very easy to say ‘No’ to the
customer who calls requesting (demanding) free movement of their
copier when dealer personnel can unemotionally explain, “We do not
have a delivery truck nor delivery staff. We use an outside
delivery company. If you would like to use the same company we
trust for all of our moves, I can quote you the cost for moving
and handle all the details. I just need to ask a few questions to
clarify your needs.”
Once your movement co-coordinator (dispatcher, service manager,
shop tech) confirms the size and weight of the equipment, total
travel miles required for the delivery, requested time of delivery
and if there are steps or other special circumstances involved in
the delivery, a price quote can be given. When arranging for a
customer’s move, it is good business to include an acceptable
profit margin in the quoted price to pay for your staff arranging
the details of the move. Your service department invoices the
customer directly. If additional network administration is needed,
the service department can arrange for the additional (chargeable)
service requirements.
Some of the advantages of using a third party (outsourced)
delivery company include:
• There is no cost of maintaining a delivery truck.
• No delivery employees are on the company payroll
• No need to schedule overtime pay for month end deliverers.
• No workman compensation claims for injuries while delivering
heavy equipment.
• No liability for machines damaged during pick-up or delivery
• Ease of charging the customer for outsourced delivery.
• Ease of tracking real cost of equipment delivery.
“
Free deliveries, like the Emperor’s imaginary new clothes, can
create havoc for those who refuse to deal with reality. When free
delivery is offered, the dealer must pay the full cost.