Is Your Business Losing Money on Shipping and Deliveries

There's a cost almost no Mexican business has properly measured: what it costs to deliver. They know what the product costs, they know roughly how much was sold, and they know more or less what payroll costs. But when you ask how much it costs to get the order to the customer, the answer is usually "gas" or "well, we already have the truck." Neither is a real answer, and that's exactly why shipping eats into margin without anyone noticing.

The problem isn't delivering. Delivering can be a huge competitive advantage and is the reason many customers choose you over someone cheaper. The problem is delivering without knowing what it costs, because then decisions get made that sound good and turn out bad: free delivery above a certain amount, special runs for a customer in a rush, expanding your coverage area because "we're heading that way anyway."

What does a delivery actually cost?

To find out, you have to add up four things that almost never get added together. The first is the obvious one: fuel and tolls. The second is the driver's wage, prorated by the hours they spent on the road instead of doing something else. The third is the vehicle's real wear and tear, which includes servicing, tires, insurance, inspections, and the fact that the truck loses value every year. The fourth, the one nobody counts, is administrative time: whoever plans the route, whoever answers "is my order on its way yet?", and whoever has to reschedule when there was no one home.

Do the exercise once with a real month's numbers. Add up everything above and divide it by the number of deliveries you made that month. The number that comes out tends to be a surprise: almost always two or three times what the owner thought. And when you compare it against the average margin on a small order, you'll often find that small deliveries are being made at a loss.

That first number is already enough to decide with. If your cost per delivery is three hundred pesos and you're delivering eight-hundred-peso orders with a 25% margin, every one of those orders leaves you a hundred pesos in the red. It's not that the customer is bad; it's that that order, delivered, isn't good business at that size.

What are the signs that shipping is eating into your margin?

• You're selling more than last year, but the money in the bank hasn't gone up the same way.
• You offer free delivery above a threshold you set years ago and never revisited, even though gas has gone up.
• You often make special runs outside your route, because a customer ordered late or something got forgotten.
• A percentage of your deliveries fail on the doorstep and have to be repeated, and nobody's keeping count of how many.
• You deliver to distant zones at the same price as nearby ones.
• You don't know how many deliveries you made last month without stopping to count.

That last sign is the most important one. If you can't say how many deliveries you made last month, that's not a logistics problem, it's an information problem. And a business that doesn't measure its delivery cost ends up financing the customer's convenience out of its own margin.

Free delivery is never free. Someone is paying for it, and if you never calculated it, that someone is you.

What do you do when the numbers don't add up?

The typical reaction is to just start charging for shipping. That's almost never the best move, because in many businesses free delivery is exactly why customers buy from you. There are three levers worth pulling before touching the customer's price.

The first is the minimum order amount. Instead of charging for shipping, raise the threshold for free delivery, calculated with your real cost per delivery instead of the number you set three years ago. That doesn't scare customers off: it makes them bundle their order, which also raises your average ticket.

The second is routing by day and by zone. Many businesses deliver as orders come in, which means crossing the city several times a week for the same neighborhood. Setting fixed days per zone lowers cost immediately, and customers care about it far less than you'd think: what they want is to know when it's arriving, not that it arrives today.

The third is reducing failed deliveries, which is the most silent loss of all. Confirming the day before, giving an arrival window, and having someone to call if nobody's home eliminates most of the repeats. This is where custom software solves the problem better than any spreadsheet: a dashboard that logs every delivery, its estimated cost, whether it succeeded on the first try, and which zone it went to gives you, in a month, information you've gone years without having.

Where do you start this week?

Do one single thing: log every delivery for thirty days with four pieces of data, even on paper. Date, zone, order amount, and whether it was delivered on the first try. By the end of the month you'll be able to calculate your real cost per delivery and see which zones and which order sizes aren't profitable. From there you can decide with numbers in hand, instead of continuing to assume that delivering is cheap just because the truck was already paid for.