The Fechino Files: Delivery Charges... Rising Fuel Costs Are Changing How We Do Business

Words: Steven Fechino

Steven Fechino

Last Friday, I purchased 22-tons of stone for a project that is about ten miles from the quarry, and I paid $180 for the delivery on top of the material expense. I knew it would be more than I liked, but $180 seemed like an excessive amount. Well, I was really wrong. It was a fair delivery price, and better than what I could get elsewhere.

The first thing I needed to do was adapt to my situation and stop thinking like an Estimator or Project Manager. This fuel thing is going to be around for at least a few more years, so understanding the actual cost of a delivery will be helpful in deciding how to handle the delivery: by sending my own truck, or have the delivery made by the supplier. This article is based on an average $210 delivery cost.

To calculate the labor wages between union and open shop scales, a conversion factor of three usually works for major cities. For this article I will use open shop wages for simplicity. There are two types of delivery vehicles and drivers. A “block” delivery truck, which requires higher-rated tires than a semi-tractor, is usually driven by a professional driver with either a Class A or Class B license, and usually has endorsements. This driver makes anywhere from $21 to $30 dollars per hour and operates the truck as well as the piggy-back lift. Every delivery will take about two hours minimum when you figure traffic, unstrapping, unloading, and return. The plant has a dispatcher, yard man, and a driver that all put your order together.

Let’s assume the following: a truck gets loaded in thirty minutes, forklift and fueling takes another thirty minutes, the dispatcher will have at least thirty minutes taking the order, billing the order, printing the ticket and dispatching. For simplicity, say the Operator is $18.00 per hour, the Dispatcher is $30.00 per hour and the driver is $25.00 per hour. I’ll then assume a 28% burden for all wage rates.

Driver: $64.00
Operator: $11.52
Dispatcher: $16.00
Total Labor: $91.52

Equipment is an entirely separate expense for a supplier.
The truck he is driving costs anywhere from $125,000 to $175,000 paid for over three to five years. Between payment and interest, that truck could cost $4,300 per month (yes, this number could be different depending on size and age of fleet). Using a billing cycle of 21 days per month, that truck cost $204.00 per day. When you add fuel at 5.3 miles per gallon, insurance (too many variables here to include a number), maintenance and strapping accessories, that truck could cost as follows:

Truck: $204.00/four trips per day = $51.00
Fuel: 5.3 miles per gallon X 20 miles per trip = 40 miles / 5.3 miles per gallon X $5.50/gallon of diesel= $41.52 per delivery
Yard forklift propane and equipment cost: $0.00 for this example
Monthly tire expense: (front tires run approximately $1,150, rear tires cost approximately $850) $0.00 for this example.
Total Equipment: $51.00 +$41.52 = $92.52
Supplier cost for your delivery $92.52 equipment + $91.52 labor = $184.04 cost without insurance and profit.

Since we like to make a profit, I am sure a supplier would like to make a profit as well. Limiting to 10% the delivery cost to the supplier would be $184.04 X 1.10 =$202.44 minimum cost for delivery to a contractor.

The second type of delivery option is the driver and small truck. Here is where the economy comes in for the contractor. Unless you have a dedicated driver that is properly licensed and trusted with the equipment being operated, the liability becomes a risk (big or small I cannot define here, it is still a risk). If the driver is part-time, you will lose additional time doing a pre-check and fueling, not to mention taking that person away from the normal daily tasks.

If you have smaller deliveries for a project, say two hacks of brick and nine bags of mortar, then it becomes another set of numbers. The labor will be close to the same, your driver will most likely be someone better trained than your newest laborer, but may not need a Commercial Driver’s License, someone in the $22.00 per hour rate. The one-ton truck can pick this up, requiring a vehicle that does not cost as much to operate or fuel.

Here is the catch, unless you have a yard and a dedicated small delivery person, you will be taking someone off of a project. That someone can drive, but does not drive daily. The current crew on your project will be reduced by one, slowing production by some percentage. The Project Manager will typically not be an expense, most of the expense will be for the Foreman’s time to set it up, coordinate and then set up the return unloading of the materials.

The truck will be figured without insurance but assume a truck payment of $1,083 per month / 21 billable days =$51.59 per day or $25.80 for the half day it will tie up, or the full $51.59 per day if you just keep it on the job and do not return it to the shop till the end of the day. Fuel is an easy calculation, a one-ton averages six to ten miles per gallon, say ten miles per gallon at $4.25 per gallon = $17.00. The operator on the job will need to unload the materials once they arrive, and may even have some set up time. I think you would have about one-half hour total plus a lift expense and fuel. For simplicity just say operators wage for one hour at $20.00.

Using the same 40-mile round trip, your driver will disappear from your project for two hours minimum, but more likely three hours. The driver must: fuel the truck, drive to the supplier, get loaded, strap down the load, stop at a local convenient store for a soft drink, and return to the jobsite.
Driver: $22.00 per hour X 2-hours X 1.28% labor burden = $56.32
Foreman: $30.00 per hour X 1-hour total X 1.28% labor burden = $38.40
Operator, Lift and Fuel: $20.00
Truck: $51.59 per day, Fuel $17.00

Overall, to send someone to pick up a small order will cost the contractor, without profit, about $181.31. Is it worth the extra time and expense to send one of your own people, tie up the truck and reduce crew production to save approximately $40.00? If the driver cycle is more than 40-miles, the expense of picking up your materials increases, quickly making the suppliers delivery service much more attractive.
When I calculate cost for these types of scenarios, I calculate everything that is an actual cost. You may not choose to do it for your job but if straps are missing and you need to buy them, whether you figure it or not, the costs to you are present. My numbers are based on an average non-union shop, and of course my numbers can be challenged, but the process for a delivery is pretty straightforward.

What I really gained from this is that what I think something should cost is far different from what it does cost and even farther from where it will cost in six months. Stay current my friend… Wow, really got off track. Thinking about that beer commercial, you can tell I wrote this on a Friday.

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