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Technology & Logistics

Delivering Value

by Gordon Travers

“Delivery will become the one area in which a business can truly distinguish itself”

– Peter Drucker

The new business model is having an effect on all facets of organizations. Most companies have responded to this change by investing heavily in ERP solutions that focus on administrative functions such as accounting, purchasing and order entry and may have a dot com strategy to deal with Web-empowered consumers. What the majority of businesses have not done is developed and invested in a delivery management strategy.

Delivery management has the following four basics components: Business to business (B2B), Business to consumer (B2C), Common Carrier, Private Fleet.

B2B and B2C define the markets to be served. Common carrier and Private fleet define the methods to service those markets.

In the B2B model we are seeing a move towards synchronizing procurement to production. This shift from push to pull logistics places new importance on inbound receiving as well as outbound shipping.
In the B2C model, according to Foster Research, residential package delivery will grow from 1999’s 2.98 million shipments per day to 6.53 million shipments per day in 2003.

Are common carriers ready to accommodate this fundamental shift in transportation logistics? I think the answer is a clear no. Transportation services provided by common carriers have become a commodity – with little to differentiate one service provider from another, aside from price.

Courier and package service providers have invested in technology to improve outbound shipping and track and trace functions. However, the shipping systems at a customer’s back door and the mobile computers for scanning and signature capture represent an investment designed to lock customers in and eliminate labor and expense from the carrier’s system. This technology is all proprietary in nature and does nothing to facilitate receiving or the exchange of information in the logistics pipeline.

As well, these companies are doing little to respond to the trend toward home delivery. Like banks in the 80s and government offices today, they provide the service exactly when it is not needed – when the buyer is at work. What is the point of Web shopping if the buyer has to get in the car and go to pick up the product? They might as well have gone to a store instead of shopping online.

Less than truckload (LTL) carriers, for the most part, have done even less to meet the challenges of the changing marketplace. Their investment has mirrored that of most organizations; the focus has been on reducing costs in administrative functions such as accounting and operations rather than on creating customer- focused value-added solutions.

There is a simple solution to respond to the problem of data exchange, one of the primary problems facing business in this new environment. This solution involves moving away from proprietary shipment labelling to an industry standard. Such a standard does exist. American National Standards Institute (ANSI) has established a standard that all members of the supply chain can use that specifies the structure, physical parameters, placement and coding to convey data between trading partners. This standard ensures scannability and enables consistency of data transfer across multiple industries and trading partners.

Because the information travels in a machine-readable format with the shipment, the benefit of this standard is the sharing of information with all parties in the supply chain. The standard facilitates the automatic transfer of all necessary data between computer systems throughout the logistics process including the transfer of detailed delivery information directly into the computer system of the ultimate consignee.

Some firms, because of the nature of their business – for example, field service or food service – require private fleets. As well, organizations with the necessary order volume, such as grocery or retail chains, use private fleet because of flexibility and marketing opportunities. Unless managed correctly, private fleets can add costs with no improvement in delivery to customers.

How often have you sat at home waiting for a delivery because the company couldn’t give you a reliable arrival time, other than morning or afternoon? Scheduling becomes a major factor both for customer satisfaction and cost management. One home grocery chain with a private fleet, was proud of their 99 percent on-time delivery record, based on a one-hour delivery window but found that their cost-per-stop to provide this service was high.

Another home delivery company faced a delivery error rate of 30 percent, meaning that three times in ten their customer received the wrong goods. The result: a dissatisfied customer, increased transportation costs correcting the error, and increased time per stop as repeat customers checked the delivery against what they ordered. It is easy to see why most home delivery firms aren’t making money.

A simple, and very attainable model for home delivery, is as follows: a Web-based order is placed, the customer selects a delivery time from a list of available times, the scheduling program confirms and updates the scheduler for continuos re-optimization, the order is picked and prepared for delivery, the driver scans the order onto the delivery truck confirming the shipment, at delivery the order is scanned off to confirm the right order is begin delivered to the customer

Throughout this entire process the host system is continually updated to provide customer service transaction-based activity.

The key to delivering value is the use of standards-based, proven, cost effective enabling technologies to deliver value-based solutions to customers. Companies that make the effort to understand the evolving delivery model and develop a strategy to respond to it will have a competitive advantage and reap the rewards of satisfied customers and reduced costs.