Articles
4
min read
Deep Dive: Delivery Economics with Dispatch CEO Andrew Leone
Kelsie Hengel
Published on:
April 3, 2025
Updated on:
Published on:
April 3, 2025
Updated on:
Understanding delivery costs at the branch or location level is critical in the final stage of the supply chain. In our recent webinar, "Deep Dive: Delivery Economics," Dispatch CEO and Co-Founder Andrew Leone discussed the key cost drivers in local delivery operations, inefficiencies in fleet management, and strategies to optimize costs without sacrificing service quality.
Distributors often treat delivery as a necessary expense rather than a primary revenue driver. Cost tracking usually starts with basic calculations on a Profit & Loss (P&L) statement, focusing on major expenses like vehicle costs, payroll, fuel, and insurance.
Companies commonly calculate their delivery expenses at an aggregate level and then drill down into the cost per stop. While this method provides a general cost overview, it can be misleading when it comes to efficiency metrics.
One major inefficiency is the inability to optimize routes due to unpredictable demand. Unlike logistics companies that aggregate and redistribute shipments for efficiency, distributors must manage delivery volumes branch by branch. Seasonal fluctuations also complicate fleet management, leading to periods of underutilization and overcapacity.
Another significant inefficiency is deadhead miles—when vehicles return empty after deliveries. Without strategic route planning, companies face wasted mileage and higher operational costs.
Cost per delivery varies greatly based on order size and value. A large order may justify delivery expenses, but smaller orders can quickly become cost-prohibitive. Many companies struggle with prorating costs based on cargo volume, mileage, and vehicle utilization, which leads to inefficiencies.
For example, a company might calculate an average delivery cost of $100. While a $5,000 order absorbs that cost well, a series of $50 orders using the same cost structure can lead to negative margins.
Leone highlighted the pros and cons of in-house fleets and outsourced delivery models:
A hybrid model, where fleets handle predictable routes and outsourced couriers manage dynamic deliveries, can help distributors balance cost and efficiency.
One innovative strategy involves charging for expedited or specialized delivery services. By offering premium delivery options — such as same-day or job-site deliveries — companies can transform delivery from a fixed cost into a revenue-generating service. Some distributors successfully mark up outsourced delivery services as a value-add, increasing overall profitability.
Leone's experience with Dispatch provided a clear case study on optimizing delivery operations. His company originally developed Dispatch as an internal solution to improve visibility, pricing consistency, and efficiency in outsourced deliveries. By leveraging technology, they were able to:
During the webinar, we also addressed customer questions. Here are some highlights:
How do you recommend starting the integration process of our delivery operations with Dispatch?
What are the benefits of getting an integration set up?
How can operations professionals get leadership buy-in to offload delivery logistics to a partner like Dispatch?
The key to optimizing last-mile delivery costs lies in balancing efficiency with service quality. Distributors should carefully evaluate their delivery models, identify inefficiencies, and leverage technology and outsourcing to streamline operations. By treating delivery strategically rather than as a sunk cost, companies can turn a logistical challenge into a competitive advantage. Watch the full on-demand webinar here.
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