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A Commercial is Worth a 1,000 Logistics Words

By Chris Jones | 08/23/2018 | 12:34 AM

When logistics technology is used to transform the customer experience, it has the ability drive revenue and competitive advantage. Even though there are numerous examples of the power of logistics technology, most logistics organizations have a tough time selling the value of logistics to the sales and marketing organizations. So how do leading companies actually use their logistics technological prowess to promote its service value in its market? Let’s take a look at a great commercial from down under. Nothing like Aussie humor to drive home the customer value of logistics technology.

The commercial is from Origin Energy, Australia’s leading provider of propane to residential and commercial customers. Seeing that their customers do not run out of propane is the top priority for the company. Origin has taken this delivery challenge and turned it into a strength, promoting their delivery notification solution as a value-added service in this commercial:

In the commercial you can see how they are increasing customer engagement and satisfaction by letting the customer track their delivery in real-time. Logistics technology is the heart of the solution. Through a combination of intelligent route planning and real-time GPS enabled mobile solution, Origin has the information they need to run their operation more efficiently and provide the customer with valuable information during the delivery process. The challenge for many logistics organizations is to go beyond the former and educate sales and marketing on the value of the latter.

There is another benefit to Origin Energy to engage the customer during the delivery process. One of its biggest challenges to successful delivery is ensuring safe access to the customer propane tank or cylinder location. In many cases these are in restricted access locations that need to be opened by the customer prior to the delivery time. In addition, there is the pet dog problem. While your pooch may be as friendly as mine, many must be restrained so the driver can conduct his or her work safely.

In the animation below, Origin Energy does a phenomenal job explaining to customers the engagement process and its value to the customer and company. For anyone considering using a notifications process, this is a fantastic example of an end-to-end process. Notice the number of touches. Many companies are reticent to have this level of contact, but in Origin Energy’s case, they do a great job guiding the customer through the process and help to ensure that the customer does their part in making the delivery successful.

The propane market is tough, because the only two ways distribution companies can compete is through price and service. Even price is a tough place to sustainably compete as there is little barrier for competitors do the same. That’s why service — which is mostly logistics-based service —  is so important. The lesson for everyone is that companies that perform the best know how to take logistics technology beyond operations and make it a sales and marketing asset. How is your company employing logistics technology to make a sales difference to your customers? Let me know.

Will You Pay Your Customers to Slow Down Their Deliveries?

By Chris Jones | 03/23/2018 | 10:10 AM

In the race to achieve the “instant” home delivery, one company is incentivizing customers to slow down their delivery speed by giving them a discount: Amazon. Yes, Amazon, the same one that made 2-day delivery a standard service (with Prime) and has had numerous announcements recently about grocery deliveries in hours. If immediacy is such a big deal and Amazon has been the vanguard of fast, why would they do it? Because some of their products cost too much to deliver relative to the revenue they receive from the product. While Amazon has changed the game in delivery, it is also recognizing that it needs to offer options that don’t crush the bottom line. Delivery success is not just about choice—it’s about profitable choice and that lesson applies to B2B as well as B2C businesses.

Nothing like reality to prove a point. Recently, I was buying a small, inexpensive item on Amazon. It cost $7.99 and could fit in the palm of my hand. Since I am an Amazon Prime member, the free 2-day shipping appeared when checking out ALONG with another delivery option that would give me $1.00 off another purchase if I waited 10 days to receive the item. It’s not too hard to do the math that a 2-day shipment of something that cost 8 bucks and weighed a couple of ounces is a loss leader. For those of you who pay for Amazon Prime like me, you might say that Amazon Prime covered the shipping cost, but apparently not enough in my case.

Needless to say, I opted for the 2-day delivery, but I am sure others would have taken the buck and waited over a week to get their stuff. That’s the real story here. Amazon recognized that there are different kinds of customers and, just like we segment customer based upon buying patterns, we need to understand their delivery segmentation. Not only can delivery costs be lowered, but there is a significant opportunity to gain revenue with the right segmentation strategy. The following chart is a simple way to understand how to think about customer delivery segmentation based upon the speed and precision (time window) of the delivery.

Customer Delivery Segmentation 23mar18

Source: Descartes

Based on benchmarking retailers and distributors strategies and tactics over the last several years at Descartes, I identified four basic customer delivery preferences. None of them is better than the other and they all don’t apply in every instance; however, some combination will provide the right balance of service, cost and even incremental revenue.

Cost, Cost, Cost: This is a pretty self-explanatory delivery choice. These customers are extremely cost-sensitive and will take the slowest delivery service if it saves them money. They are willing to wait days for the product and care less when the delivery will arrive during the day.

Parcel Mentality: Typical parcel deliveries are fast, but not necessarily time definite at the point of purchase. The majority of goods such as apparel and other smaller items are delivered this way. These customers are happy with the fast delivery cycle and don’t care if the package is left at the door step sometime during the day.

Convenience Matters: Many large format items fit into this category. These customers don’t value fast; they value a tight time window. For instance, when I renovated my kitchen, I purchased five appliances, but didn’t want them delivered the next day because they would have taken up half my garage for five weeks until the kitchen was ready for them. Instead, I wanted them on a specific date and time when my contractor said he was ready to install the appliances.

Time Is Their Currency: There is a class of customers who are cash rich and time poor, or spend a lot of money if the goods aren’t delivered in a tight timeframe. They want their delivery ASAP and won’t sit around waiting all day for it. This can be high-value impulse purchase goods, replacement items or even building materials for example. These folks are also most likely to pay for the privilege and it doesn’t take too many of them to offset a lot of the overall delivery costs.

Don’t get fooled by the delivery hype that still exists in the market. I see studies that highlight that consumers want more free and speedy deliveries. It is somewhat true, but incorrectly skewed by poor questions such as “Would you be more willing to buy from a retailer if they had free and fast delivery?” Who would say no to that question? Unfortunately, it fails to understand the delivery segmentation that really exists and misses the opportunity to diversify delivery options and put more on the bottom line. What is your company doing to segment its customer delivery strategy? Let me know.

 

Still Don’t Believe in Premium Pricing? Go Pound Sand

By Chris Jones | 03/06/2017 | 12:41 PM

For the last 5 years, I’ve been saying and writing that differentiated delivery service allows companies to premium price their products and services. Yet, too many companies still don’t believe it. Recently, I found the ultimate example of premium pricing because of differentiated delivery service. The company is BC Sands. Yes, they sell sand and, if someone can sell sand at a premium, then you should be able to do it too for your products. You just need to understand where the differentiated delivery service value point lies for your customers.

BC Sands is a mid-size Australian company that sells and distributes sand to construction and landscaping sites. The construction and landscaping business is very dynamic with project schedules in constant flux. Because labor is such a high cost, contractors place considerable value on being able to make orders for building supplies at late as possible and get visibility about when to expect those orders to keep their crews productive. For BC Sands, many of those orders require same-day delivery.

Many companies struggle to provide same-day delivery because of the inability to offer notification of an impending delivery and high operational costs. What differentiates BC Sands is that it can offer same-day deliveries to its customers. Their customers are willing to pay a “premium” for the speed and reliability of their service. The same technology that is helping BC Sands be faster and deliver with greater precision is also helping them reduce delivery costs by keep the fleet in motion and productive throughout the day. Through a combination of GPS tracking and real-time planning, new orders are automatically evaluated against the live dispatch schedule providing BC Sands’ customers with delivery choices that consider the different costs of those choices.

If you want to know more, BC Sands is coming to the US and speaking at Evolution 2017, Descartes Global User and Partner Conference on March 29th. They have an amazing story and one reinforces the notion of delivery service as a competitive weapon and top line growth opportunity. How is your company using superior delivery service to advance? Let me know.

Trouble Justifying a TMS?

By Chris Jones | 01/26/2017 | 2:14 PM

Based upon my conversations with customers, industry analysts and others, you would think that TMS justification shouldn’t be an issue. But it still is. In the recently completed transportation management benchmark “Transportation Management Strategies and Tactics of Top Performers”, only 1 in 4 respondents indicated that they had no issue justifying a TMS, but half did. Responses to other questions clearly demonstrated that companies are not thinking broadly enough about the value that a TMS can bring. It’s time to expand the benefit horizon beyond the transportation department and even beyond the supply chain organization.


Figure 1 shows the breakdown of the survey respondents that said that they had obstacles justifying a TMS. For those companies struggling with justifying a TMS, “Payback not clear” was the top issue. However, “Not a priority to the executive team” was number 2 and is a proxy for not having a compelling value proposition to get management’s attention. Clearly, the potential value of TMS is being short-changed.

Figure 1
Just TMS Fig 1
                                                                                                                                                                        Source: Descartes


Why the disconnect? There are 2 other questions from the survey that point to the challenge that companies face.


The first one addresses how TMS value is measured (see Figure 2). The top measures of customer service (71%) and cost (63%) are just focused on transportation itself and not its impact to the greater organization. Metrics that get executives’ attention are revenue- and competitively-focused. There are many instances where transportation-based services are making a difference, but if you don’t measure them you won’t know the true value that a TMS can deliver.

Figure 2
Just TMS Fig 2
                                                                                                                                                                          Source: Descartes


The second question addressed the use of TMS information across the enterprise and beyond. Transportation management is a multi-party process. Keeping the valuable transportation bottled up in the transportation department or even the supply chain organization diminishes TMS value and management understanding of its strategic role. See how, in Figure 3, there is a drop off in the sharing of TMS information with some of the most critical company organizations, like sales and even customers – the ones that get the “lion’s” share of management focus. Some of the problem is self-inflicted. If a company does not believe that transportation management can provide competitive differentiation, then it is considerably less likely to broadly exploit that information.


Figure 3
Just TMS Fig 3
                                                                                                                                                                        Source: Descartes


The value of transportation management is there, but too many transportation organizations struggle to externalize that value in areas where management will give it greater emphasis and more readily buy-in to new transportation strategies and technologies. Top performers – the ones who see the competitive advantage opportunities - are much more likely to act and measure their success more broadly. The results are a self-prophecy.


If you would to learn more, join us on February 22nd at 2:00 pm ET for a web seminar where we review the results of the “Transportation Management Strategies and Tactics of Top Performers” study. See how top performers’ transportation strategies, tactics and technologies differ from the rest of the pack and what recommendations will make a difference for yours.

Inbound Transportation: The Elephant in the Room

By Chris Jones | 01/16/2017 | 3:05 PM

For a lot of reasons, outbound transportation gets more management focus than inbound transportation. It’s what the customer sees and the costs are more easily quantified. Inbound transportation gets much less focus because it’s typically embedded in the supplier’s costs and not controlled by the transportation organization. Preliminary results from a recently completed survey “Transportation Management Strategies and Tactics of Top Performers” shows that only 24% of the respondents considered inbound strategies important to improving the value of transportation management to their company. Yet, 50% of the respondents struggle with showing the value of transportation management. If your organization is looking for logistics cost savings and improving supply chain effectiveness, inbound transportation could be the welcomed “elephant in the room”.

What are the transportation opportunities?

There are numerous inbound transportation strategies that can be deployed to significantly lower inbound transportation costs. Here are just a few.

  • Suppliers don’t optimize their logistics for your supply chain. This means that, across your supply base, there are transportation inefficiencies where smarter consolidation or leveraging economies of scale can lower transportation costs. For example, a midsize distribution company had many bulky LTL shipments could save $4M per year by taking control of the freight from those high-volume suppliers.
  • Parcel is another area where there may be a high volume of small time-sensitive shipment and even “drop shipping” to customers where inbound is now actually outbound too.
  • Utilizing the delivery fleet open backhaul to minimize inbound costs or take advantage of supplier pick up incentives can quickly result in lower overall transportation costs.
  • Companies who are considerably larger than their suppliers can use their higher shipping volumes to create considerable savings without significant reengineering of the inbound transportation network.

Savings beyond transportation

Controlling the inbound movement of freight can also benefit other areas of the supply chain. There will be better visibility to the status of purchase orders and their related shipments. Volume can also be leveraged to have smaller shipments more frequently to drive down inventory and reduce out-of-stocks. Cycle time can be reduced as goods can be pre-deployed and cross-docked when they arrive at your DCs. There is also greater ability to make last minute changes due to supply chain disruptions or other events when freight can be controlled in transit.

Total supply chain effort

Creating an inbound transportation management program requires broader supply chain involvement. Inbound transportation costs are owned by purchasing/buyer organizations and tend to be set during supplier negotiations or baked into the product costs. Getting their buy-in is critical to establishing and maintaining an inbound transportation program. Establishing a case for reduced costs and faster and more flexible delivery will be consistent with their objectives and creating shared metrics will keep both organizations aligned. Another important ally is the finance organization. There is no company I know where the finance organization isn’t looking for cost reduction opportunities. They will also be an excellent source of information you will need and the validators of the opportunity.

Where to focus

There is money and other benefits to be had, but transforming to direct control of inbound transportation is real and continuous work. The focus should be on high-return inbound shipments and defining where not to put any effort. For example, start with the top 20 suppliers in terms of inbound shipment volume, LTL shipments of larger goods, or geographies where there is a significant concentration of suppliers. Equally, question the need to take control of goods where shipments are infrequent or there are no real opportunities for consolidation.   

What about the rest of the inbound freight?

Just because you won’t control it, doesn’t mean that your organization won’t want the same detailed purchase order and transportation information you will have for the inbound freight under control to better utilize the goods as they arrive at your facilities. Establishing communication guidelines for the purchase order to delivery life-cycle and leveraging visibility and dock appointment scheduling technology can help provide better the key information to improve inbound operations.

With all the pressure for better customer delivery performance, it’s easy to miss the inbound transportation opportunities that exist. However, the cost savings could be significant and it’s time to stop stepping around the inbound elephant that is in your transportation room. How is your company tackling its inbound transportation opportunities? Let me know.

The Early Bird Catches the Customer

By Chris Jones | 09/23/2016 | 10:47 AM

Recently, I had the chance to catch up with three companies who are in the middle of logistics transformation initiatives. While they are in diverse industries such as food manufacturing and building material distribution, they all had one thing in common – the desire to deliver more to customers earlier in the day. Not only is this strategy making customers happier but, for two of them, it is directly related to increased sales. This approach drives home a point that I have been making for the last several years: B2B customers want delivery choices that benefit their business models, not just faster deliveries. Logistics operating strategies, technology and metrics need to change to reflect the value of early delivery choice.

The value propositions for early deliveries are easy to understand.

Retailers have been pressuring food manufacturers to not make deliveries to stores during peak customer times. They don’t want cases in their aisles, and they do want their store associates on the floor and not receiving goods in the back room. Early deliveries (e.g., before 8am) are favored to keep shelves from being restocked during peak shopping times and address out of stocks before consumers enter the store. Food manufacturers that can drive a higher percentage of their deliveries early in the day are in a better position to move more product.

In the construction industry, contractors like to ensure that their crews – one of their greatest expenses – are fully utilized. Since construction tends to have a fluid schedule most materials are ordered within 24 hours of use. If the materials aren’t there at the start of the day, crews sit, costing contractors time and money. Contractors favor the distributors who can deliver early and consistently.

Driving more early morning deliveries and measuring their value.

Rather than a monolithic daily delivery strategy, the strategy needs to evolve during the day. The early morning needs to emphasize a greater number (or $ volume) of deliveries. After the early morning period is maximized, the strategy needs to focus on more cost-effective delivery.  Static delivery routes and manual planning are no longer effective. To maximize early morning deliveries, a dynamic planning process that considers the order mix and customer locations is required. In addition, delivery routes might extend over early- and later-day deliveries and need to optimize route for volume early and cost later. For short order lead-time businesses, the ability to reliably promise an early delivery appointment during the buying process is important to capturing the order.

Measuring the value of early deliveries is also a challenge for most logistics organizations. Logistics organizations are measured primarily on delivery costs and simple customer service metrics like complete and on time. However, determining the value of early delivery points to two other metrics that are equally important: incremental revenue and customer satisfaction. Tracking incremental revenue for early deliveries is possible, but requires cooperation from the sales organization (e.g., how much more did we sell when we increased our early deliveries). Tracking the service level improvement of early deliveries can be as easy as “How much did we deliver before 8am?” That is still, however, an internally-focused metric. Instead, customer focused metrics (e.g., through delivery surveys) are more telling when you are trying to determine if you are making a difference.

Conclusion

From the examples above, there is clear value to customers for early delivery and it is one of the many ways logistics can make a material impact beyond traditional roles. However, this requires delivery operations to be more dynamic to maximize delivery volume while keeping costs down. Technology becomes increasingly important to supporting these more complex delivery requirements.

What is your organization doing to use concepts like early morning delivery to drive more business and delight customers? Let me know.

We Have to Get Smarter About Logistics for Cities

By Chris Jones | 09/07/2016 | 2:03 PM

Cities are where the most opportunity and challenges will be for logistics for the next 10 years. They’re where the world’s population will concentrate and, consequently, where demand for logistics services will be the greatest. However, cities are trying to be more livable and green and, as a result, it will be harder for logistics organizations to operate efficiently. Instead of trying harder, logistics operations need to become smarter about how they serve cities.

Shifting Demographics

A combination of changes will drive more logistics activity into cities. According to a study by the McKinsey Global Institute, by 2020, cities will see 90% of the global consumption growth. Also by 2020, growth in younger and aging populations will account for 50% of the consumption growth. Mobile and intelligent-device-based ordering by over 900 million people will reach $1 trillion by 2020 with most of those mobile purchases requiring some kind of logistics support to get the goods to consumers.

 

Smart Cities Graphic 7sep16

Data Source: McKinsey Global Institute


Will Governments or Mass Transit Make an Impact?

The answer is yes but, unfortunately, not in a way that helps the movement of goods. City-based governments are actively shaping city logistics and moving much more rapidly than state and local organizations, but they’re focused on improving logistics conditions for people rather than freight. In fact, they’re making changes that actually adversely impacting freight, such as restricting delivery times, locations and vehicle size, charging for intercity access and imposing penalties for “non-green” behavior (e.g. idling). Intercity mass transit investment has also almost exclusively been targeted at better movement of people. While, private logistics organizations are trying to leverage the existing infrastructure (e.g. subways), it has been limited to “parcel-oriented” deliveries and in low resource cost countries such as China.

As a result, for the next 10 years, traditional over-the-road transit will still be the prime mover of urban goods, but it will have to get much smarter to do it efficiently, effectively and in compliance with regulations.

Three Ways to Address the Urban Logistics Dilemma

Intelligent Route Management

Delivery productivity will be key to servicing the increasing demand while maintaining compliance with a greater number of delivery restrictions. Logistics operations and drivers need to be better equipped to be more effective via smarter delivery route planning and execution. The route planning process now needs to understand a city’s operating hours and road restrictions, including construction, and the driver’s navigation system must support those commercial and physical restrictions. Because cities have such dynamic traffic conditions, the route plans must take into account time-based road speeds and when routes can be run, and real-time traffic feedback will be important to help keep deliveries in-process on track. Delivery density will also be an important factor, driving productivity. Logistics operations need to book delivery appointments that drive density and combine delivery modes to make routes more productive. For instance, routes should combine store, office, home delivery and locker deliveries.

Pool Distribution

Multi-party delivery collaboration drives delivery density and route efficiency beyond what any single logistics operation does. Pool distribution, a form of multi-party delivery collaboration, has been around since the 1980s and may be more relevant now than ever. Used heavily by specialty retailers to service malls, it uses its economy of scale and standardized processes with pool operators across North America to give participants the speed of parcel with the cost of LTL transportation. Cities are much like malls and intercity delivery could benefit from highly dense routes that reduce the truck traffic in the city. Clearly, this type of thinking needs to companies to be able to work together, even if they’re competitors. However, the pool model shows that it works and all participants benefit.

Controlled Inbound Flow

Another multi-party delivery collaboration opportunity to remove or reduce traffic congestion in cities is time-phasing the flow of goods into a given area. I had a chance to see it in Melbourne and Sydney, Australia this summer where in-town malls, multi-use developments and construction sites were using dock appointment technology to control the flow of deliveries. Much of the congestion in cities is due to the limited parking, especially for trucks. So, it doesn’t take more than a few trucks showing up at the same time and waiting in the same area to significantly affect traffic. By time phasing and load leveling available delivery locations (e.g. docks), a mall or facility operator like the Emporium in Melbourne can keep the streets clear and reduce excess driving and demurrage associated with truck waiting for openings. It also helps ensure timely delivery as the appointment times are guaranteed and stores can more effectively plan their resources. The city of Sydney is also experimenting with using parking lots and dock appointment scheduling to do localized consolidation to reduce the number of intercity trucks. This approach shows that it doesn’t take a massive infrastructure change to improve intercity delivery and there are opportunities for logistics services providers to offer new services to cities and city-based businesses.

Conclusion

Changing demographics say that cities will dominate the logistics agenda for the future as what has been a tough place already will become even more important and tougher to serve. However, there are a number of ways to better serve customers in cities and comply with increasingly stringent city commercial transportation requirements. There are clearly roles for retailers, distributors, logistics services providers and even facility operators and local governments to make goods move more freely though ever crowding cities. What is your organization doing to improve city logistics? Let me know.

How quick will your next logistics systems implementation be? Look in the mirror

By Chris Jones | 11/16/2015 | 5:57 AM

I recently had a conversation with the North American head of implementations at a logistics technology company about a customer who had a very complex home-delivery system implementation go live in a matter of 10 weeks. His comment was “don’t expect this to be the norm—these guys were decisive and prepared to move fast.” While there is a difference in the market in terms of logistics-solutions implementation complexity and time frames, the biggest driver in implementations is always the customer. Here are some points to consider if you want to move fast, or at least faster, in getting your next logistics solution live.

Be decisive. To move quickly through the implementation process, your organization needs to make decisions as issues or options occur. Company culture is a leading indicator of how decisive your organization will be. If your company culture is one of inclusiveness and debate, then you can forget a fast (or cheap) implementation. To know whether your organization is decisive, consider how your organization would deal with the following example: If you were implementing a mobile solution and needed to determine the reason codes for a missed stop, can you do it in less than an hour with the people in the room doing the solution design, or do you need to bring it back to a group of 30 “stake holders” who need 5 meetings and 3 weeks to hash out the options?

Kill scope creep and enhancements. Most kids growing up learn the difference between “needs” and “wants.” But that lesson doesn’t seem to apply when it to comes to logistics systems implementations. I have seen more projects go “sideways” from a time perspective—and way over budget—when the scope is constantly evolving. It’s one thing to get buy-in from the end-users and another to let them drive the requirements. Every business has some unique aspect to their operation. The fact that “we’ve always done it this way” is also not an argument for more changes to adapt the solution to the past. The same goes for perfection. For a fast implementation, your organization’s mentality has to be to use what is in the product and only ask for changes for mission-critical issues.

Integration has to be a core competency. There is no doubt that IT competency integrating applications will speed up, slow down or, even worse, cripple your logistics systems implementation. It all comes down to skill set and resource availability, and the IT organization needs to be honest in its integration capability self-assessment. Don’t be afraid to call it out as a risk factor in fast-moving projects and recommend outside help and integration tools to get it done. Equally, don’t let IT “gild the lily” with some next-generation message-bus technology when all you needed was a flat file from your existing solutions to the new one. 

Know what key capabilities drive business results. Every logistics technology project should be about achieving some set of business results. However, moving fast will mean making compromises. Understand what really matters to the business and when those times arrive—and they will—know what capabilities you are willing to trade off to deliver the business value. You may not have to give up something completely, but it may be the depth of functionality provided that gets cut short.

Speed is important when implementing logistics and supply chain technology today, as the underlying business models are changing so quickly. There is an old saying, “I found the enemy and it is us,” that is so applicable when it comes to quickly implementing logistics systems. You can predict if your organization is going to be able to realistically get the job done fast or needs to change to do it. How is your company rapidly deploying logistics technology? Let me know.

What do customers really say about your omnichannel supply chain performance?

By Chris Jones | 09/21/2015 | 7:18 AM

One of the biggest challenges in omnichannel retailing, and for any other industry where selling and delivering occurs through multiple channels, is measuring customer satisfaction. Customers have expectations based upon the company’s brand and they expect it to be consistent across all of the company’s delivery channels. Too often, companies measure customer service performance using internally focused supply chain metrics that mean little to the customer. If you offer omnichannel choices to your customers, this makes understanding the impact that the supply chain has on customer performance harder to grasp, because customers often don’t rate the buying and delivery experiences separately, but rather as a bundled experience. Leading companies are trying to simplify the issue by analyzing their supply chain performance based upon what the customer really says. 

The following are two examples of retailers using customer-focused metrics.

The first retailer is considered a leader in omnichannel retailing with a good mix of online and in-store sales. They use just about every customer delivery channel possible: stores; click and collect; home delivery; and drop-shipping. They also use Net Promoter Score (NPS) to measure overall customer satisfaction and as a critical supply chain metric.

Recent customer analysis conducted by the retailer showed that they had better NPS results from customers who only shopped in single channels rather than across channels. As you can guess, this was quite alarming because they were fully committed to an omnichannel strategy. When they dug deeper into the issue, they found that delivery performance was inconsistent across all delivery channels and not in line with customers’ expectations of their high service brand. This doesn’t mean that customers were expecting the same performance (e.g., next-day delivery) across all of the channels, but rather that the customer experience was not uniform (e.g., delivery visibility and in-home service quality differed for similar products delivered through different channels).

The second retailer is enhancing its omnichannel strategy through more advanced home delivery capabilities, and was struggling with assessing its performance. Their traditional “all-day window” had a higher on-time delivery rating than the newly introduced 2- and 4-hour delivery windows. The retailer’s immediate thought was that they needed to focus on improving their on-time performance before moving forward. However, when they asked customers for feedback on delivery performance, their customer-focused metrics showed that the scores were higher for tighter time windows even though they weren’t as well executed as the all-day window. In the customer’s mind, they were happier sacrificing a little reliability to not have to wait at home all day for a delivery.

As you can see, it’s pretty easy to get caught up with traditional internally focused metrics and not understand what really matters to the customer. We can find ourselves wasting time on things that are insignificant to the customer or completely miss what is significant. This is why I am a big believer in the concept of the Customer Facing Supply Chain and what it takes to create one. These lessons apply to more than just the retail industry. How is your company using customer-focused metrics as part of your supply chain strategy? Let me know.

Geography Drives Home Delivery Strategy

By Chris Jones | 09/04/2015 | 11:47 AM

It seems to me that many companies implementing home delivery strategies are trying to ignore the impact that geography has on cost and customer service. The fear of not offering, same day, next day or even a uniform home delivery service across a broad market or nationwide is driving these companies to make poor delivery strategy choices. It’s time to reassess the impact of geography and whether a uniform service and delivery strategy is best for your customers or company.  

For example, a company in the process of implementing a nationwide home delivery service was evaluating the delivery performance in 2 of its markets. One market (a region) was performing well in terms of cost and service. The other was struggling to meet customer service targets and keep costs down. When I looked at the geography of the 2 markets, it was immediately apparent that one was conducive to short lead-times, tight delivery windows and more reliable delivery and the other one was not. The better performing market was not only dense, it was compact and there were not a lot of physical limitations to moving easily throughout the market. The poorly performing market was much wider spread, with a few pockets of density and a lot of physical limitations such as bridges and lakes that constricted easy movement. All things considered equal, one market was destined to be a winner and the other one would struggle to adequately serve customers and cost more doing it.

While it would be great to offer all customers the same home delivery service levels, it may not be practical or cost effective and could possibly damage your customer relationships. Companies with divergent geographies in the markets they serve should consider multiple service strategies to best serve individual markets and minimize the cost to serve. For example, the geographically ideal markets should get the same/next day and one hour delivery window offerings. In the case of the less than ideal markets, the home delivery service offerings should be more limited (e.g. next day and four hour delivery windows) to help ensure that deliveries can be made as promised and deliveries costs are properly managed. My experience says that home delivery service policy can be localized and customers value delivery execution as promised more than they do making more aggressive promises and not consistently keeping them.

Another way to offer greater services and minimize costs in geographically diverse markets is to use multiple transportation modes in a home delivery strategy. For example, private or dedicated fleets might be highly effective in a dense part of a market, but not adequate for widely dispersed customer bases or specific regions. In addition, the ability to be more reactive to customers is a function of being able to service an area on a frequent basis. Commercial carriers can leverage their transportation density in particular lanes to offer faster service to specific customer geographies, and most likely more effectively too. The challenge in a blended home delivery transportation mode strategy is to ensure that the modes deliver a similar “door step” level of service and provide the electronic tracking and proof-of-delivery information critical to the customer’s home delivery experience expectation.

Home delivery is experiencing a renaissance of invention and there are many new delivery models being developed that are dramatically improving the customer experience. However, geography is a “natural law” that cannot be ignored in last-mile logistics strategies. How is your company adapting its home delivery strategy to address geographic diversity? Let me know.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Chris Jones

Chris Jones

Chris Jones is Executive Vice President of Marketing and Services at Descartes Systems. Jones has spent more than 30 years working with manufacturers, retailers, distributors, and logistics providers to improve their supply chain operations. One of his primary missions is to identify and leverage new and counter intuitive activities that make a difference in the business. Jones has held senior positions at Kraft Foods, Descartes, and Gartner. He has a B.S. degree in Electrical Engineering from Lehigh University.



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