What sales model works for you, and why?
Today I would like to discuss some of the points associated with three business models for managing the point of sale inside a direct store delivery (DSD) operational cycle.
The “traditional” view of a DSD route driver is probably best described as one of the peddle salesman. The driver takes his load of goods to his list of daily stops and restocks his customer’s shelf space, while attempting to leverage that relationship by getting the product(s) into more & better shelf space. Despite the changes over the years, this model definitely still exists in one shape or form in many operations. This model certainly helps many smaller-end clients minimize their costs by making last minute purchases of minimum quantities. However, the cost to taxi product from place to place, and the operational requirements to restock the truck at the end of sales cycle (typically per day) is definitely not favorable for the DSD distributor. It also creates obvious supply chain challenges ensuring sufficient stock is allocated/available, while tying up inventory on the truck that others may have been able to sell had it been in a central location.
If you move beyond the traditional, many suppliers go with what I would call a “Hybrid Presell” model. In this case the driver delivers goods, as well as places the order for replacement stock for future delivery. This model provides the distributor with advanced knowledge of order quantities and can therefore use operational capacity to build deliveries/loads with appropriate resources. However, this combined role can generate new challenges. Traditional compensation/incentive model (i.e. per cases sold) means the driver is better served by having a relationship between the driver and the customer, thus prohibiting the possibility of utilizing a route optimization solution. You also suffer from having contradicting requirements for the driver. This driver wants to get in/out of stops as quickly as possible to maximize delivery cases, but should also want to spend sufficient time to develop account relationships to enhance future opportunities.
If you complete the division between sales and delivery roles, you end up with dual resourcess: one delivery driver responsible for product movement, and a pre-sale resource that is responsible for managing orders and perhaps some additional tasks like merchandising or helping with vendor managed inventory. There are definitely benefits to this model, as you get to utilize resources for specific tasks to their strengths, without having to divide their energy/attention. You also get the freedom to effectively utilize a route optimization package given the established relationship between pre-sales and client with limited risk of damaging customer relations (see my previous blog post on that topic). However, this obviously means an extra set of wheels on the road to get face to face customer interaction, and the costs that go with that.
Changing from the traditional "face to face" model of sales, and utlizing either tel-sell or web-based ordering is yet another method to split the delivery and sales roles. This reduces the costs listed above, perhaps giving the DSD distributor an "easier" fit, since the benefits remain but you then have to determine the value of that customer interaction. Is your sales force going to continue to be as effective without it?
So which one is the “best” scenario? As with most things in life, I believe the answer is “it depends”. There are great many factors to consider, some key points to consider are:
- Geographical distances between stops on your routes and from warehouse to stops.
o The further you are driving the less likely you want to send a second vehicle to service customers.
- Ability of resources to handle dual responsibilities.
o Obviously you need this skill set if you are going to attempt the hybrid model so resource limitations may force your decision making as well.
- Supply chain costs associated with building orders in advance or at the last minute.
o Stripping trucks, operational down time during the day, and night crew efficiency all factor in here forcing you to make difficult choices regarding servicing your customers.
- Customer size and their ability to predict future order requirements.
o Smaller customers typically suffer from more extreme peaks and valleys of demand, so being able to handle/support these is of utmost importance here.
- Customer is willing (and able) to support a non face-to-face sales model.
o Possible resistance to technology changes or ordering limitations may limit the opportunity for benefit here.
What were the key factors that you used to determine your sales model?