The Early Bird Catches the Customer
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.
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.