Project Summary

In 2015, I co-founded DC Tree Delivery. After two strong seasons, an aggressive push for volume in Season 3 strained operations and put us in the red. With strong demand but brutal logistical conditions, our Season 4 goal was to build sustainable profitability through more efficient operations rather increased volume.

Goal

The goal was to increase the average profit margin of our profitable seasons by at least 5% without increasing sales volume or drastically raising prices.

Approach

To identify the areas of greatest impact, I used Excel to analyze 3 years of historical data from our bank, delivery routing software, Shopify, and Google analytics data. I then built an Excel model to manipulate input variables in order to test certain scenarios. This exercise revealed the most effective levers I could pull to achieve our goal.

Priorities

From our historical data I discovered that 70% of our expenses came from transportation (truck rentals) and hourly labor. To reduce our transportation and labor costs, we needed to prioritize the following:

1. Reduce miles driven

2. Reduce the number of days we held rentals

3. Reduce total hours worked (as opposed to reducing wages)

4. Increase deliveries/hour to bring greater efficiency to the overall operation

Solutions

After brainstorming and model testing ways to increase profits while reducing sales volume, these 5 potential solutions surfaced (see appendix for more details):

1. Restrict delivery to just the top 10 zip codes, to increase density & reduce average workday hours and overall time on the road.

2. Only sell our top 3/10 products, ordering initial stock quantities based on each’s profitability to further boost profit/delivery.

3. Reduce idle time (time spent on the clock not delivering trees) by boosting capacity early in the season with extra crews then scaling down quickly as demand dipped. This would ensure every hour we paid an employee was being used effectively.

4. Raise prices on our loss leader— tree removals to increase revenue without customers feeling like they were losing value.

5. Move our base of operations closer to our delivery hotspots to further save on transportation costs.

Outcome

In the end, the steps we took led to our best season yet. Our profit margin increased 9%, work days were 1-2 hours shorter on average, and we had a much shorter selling season after selling out early.

Even more rewarding, we were able to achieve these results while increasing staff wages and making a donation to a local nonprofit helping the homeless stay warm.