How to Calculate Cost per Drop for Multi-Drop Deliveries

The formula

Cost per drop = (driver cost + vehicle cost + fuel + overhead share) / drops delivered. Work it out per round per day, then average across a normal week. A single day can be skewed by a breakdown or a light Monday.

Use the costs you actually pay, not list prices. Driver cost should include employer's National Insurance, pension and holiday accrual, not just the hourly rate. Vehicle cost should be spread across the days the van actually works.

A worked example

The figures below are illustrative, not benchmarks. Swap in your own. Take one van on a foodservice-style round, out for a ten-hour day:

• Driver, including on-costs: £150 for the day
• Van lease, insurance and maintenance, spread per working day: £45
• Fuel: 90 miles at about £0.25 a mile, so £22.50
• Share of planner time, depot and admin: £20
• Total cost of the round: £237.50
• Drops delivered: 35, so cost per drop is about £6.79

What actually moves the number

In that example, fuel is under a tenth of the day's cost. Cutting 10 miles from the round saves a few pounds. Fitting three more drops into the same day, so the round makes 38 drops instead of 35, cuts cost per drop by about 54p without the van costing any more. That's why route planning for multi-drop work is mostly about time, not miles. The levers, roughly in order of size:

• Drops per round: the same driver and van spread over more drops. Better splitting across vans and better sequencing both help here
• Time between drops: rounds that criss-cross an area spend their day driving instead of delivering
• Time at each drop: slow access, waiting for someone to sign, or trolleying a long way from the van all add up across forty customers
• Failed and repeat deliveries: a missed window that means a second visit doubles the cost of that drop
• Very small orders: a drop costs roughly the same to make whether the order is worth a lot or a little

Using cost per drop to make decisions

Once you have a number you trust, compare it with the margin on a typical order. If an order's gross margin doesn't comfortably cover the cost of delivering it, you have three options: set a minimum order value, add a delivery charge below a threshold, or deliver to that area less often so each drop sits on a fuller round.

For a fairer view of individual customers, allocate cost by time rather than by drop count. A customer on the edge of your patch with a 25-minute drop costs more than one on a high street with a 5-minute drop, even though each counts as one drop. Drop time and travel time from your run sheets give you most of what you need.

Measuring it without a lot of extra work

If you plan rounds in a spreadsheet, add a column for the round's total cost and divide by drop count (see planning delivery rounds in Excel). If you want to estimate what better planning would save, the ROI guide walks through the maths. vRouted shows estimated miles, time and cost for each planned round, so you can compare plans before the vans leave, and the pricing page has a 14-day trial to test it against a real week of your orders.