Strategies for Mobile-Storage Companies to Remain Profitable

Randy Weissman Comments
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The rising cost of diesel fuel is putting added stress on the mobile-storage industry. With profitability a pipe dream for many in the industry, how companies cope with operating expenses will dictate whether they survive or fail.

As we experience $5 per-gallon for diesel fuel, transportation costs are creeping close to $4 per mile. The table below is a typical breakdown of per-mile transportation expenses. Evaluating each trip on a cost-per-mile basis allows a true evaluation of each individual trip. Remember, during the lifecycle of a customer, mobile-storage trucks are at each home or apartment four times: delivery, pickup, re-delivery and pickup of the empty.

Mobile-Storage Transportation Costs

 

Monthly Expense

Annual Expense

Average Miles per Year

Cost per Mile

Truck Lease

$1,400

$16,800

30,000

$0.56

Truck Maintenance:
per-mile charge from leasing company

$200

$2,400

30,000

$0.08

Truck Fuel: 5 mpg @ $5/gal

$2,500

$30,000

30,000

$1.00

Trailer Expense: 7-year amortized @ 8% Interest

$285

$3,420

30,000

$0.11

Trailer Maintenance

$100

$1,200

30,000

$0.04

Mounted Forklift: 7-year amortized @ 8% interest

$689

$8,268

30,000

$0.28

Forklift Maintenance

$125

$1,500

30,000

$0.05

Forklift Fuel

$150

$1,800

30,000

$0.06

Truck/Cargo Insurance

$242

$2,900

30,000

$0.10

Driver Wages

$2,600

$31,200

30,000

$1.04

Driver Burden: 30%

$1,560

$18,720

30,000

$0.62

Total Transportation Budget - Per Truck Basis

9,850.67

118,208.00

30,000

$3.94

The numbers may vary slightly based on driver wages, equipment type, etc., but they do not change the fact that the cost of delivering a container is a major controllable operating expense. If not managed properly, it will quickly erode your bottom line.

Obviously, passing increased costs along to the customer in the form of higher delivery charges is a simple solution. However, today’s consumers are cost-conscious, shopping for the best deal. In addition, the self-storage industry seems to be stuck in an endless cycle of concessions, enticing new customers with deals that require little if any money at move-in. A recent Internet search of delivery fees showed no significant price changes versus last year despite the fact that fuel costs have nearly doubled. Some companies are offering free delivery as a promotion to attract new customers.

Efficiency Is Paramount

Since increasing the delivery fee appears to be difficult, controlling delivery costs through efficient routing and scheduling of stops is key. Here are some suggestions from mobile-storage industry experts:

Confirm reservations. Making a “dead run” is a sure way to waste money. Confirm all deliveries and pickups before dispatching your truck. Driving 10 miles to pick up a container that isn’t ready is wasted money.

Payment in advance. Allowing drivers to collect money at delivery is a recipe for wasted trips. Expenses are too high to risk someone changing his mind after your driver gets there. Get money up front.

Route in sectors. Do you operate in a large metropolitan area? Consider dividing your market into sectors, limiting deliveries to certain days of the week.

Minimize trips to the warehouse. The empty container you pick up from your vacating customer should be the same container delivered to a new customer.

Stage. Consider renting a parking lot in high-transaction areas where you can “stage” empty containers for delivery and temporarily store full containers for transportation to the warehouse at a later date. Schedule pickup and delivery to and from the staging lot during the evening when there is less traffic.

Avoid traffic. Sitting in traffic is costly and burns fuel. Consider not running one day per week in exchange for Sunday deliveries, when traffic is the lightest.

Institute a fuel surcharge. One way to pass along increased transportation costs to customers is by charging a fuel surcharge. Consumers are more apt to understand the “temporary” surcharge versus an increased delivery fee. The surcharge should be based on distance from the warehouse.

Silver Lining

Rising fuel costs may contain a silver lining for mobile-storage companies. Fuel also affects the cost of driving a rental truck. Controlling costs through increased routing and scheduling may actually make mobile storage an attractive alternative to truck rental.

Randy Weissman is president of Storage Banc, a St. Louis-based operator offering conventional and mobile storage from the same location. He is also a founding member and the current board president of the Mobile Self Storage Association. For information, visit www.mobilestorage.org.

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