Problem Solving - Direct Store Delivery

Welcome to Derek Curtis’ blog! 

After spending the past 10+ years of my career involved with business software implementation projects, I have recently left my PMP designation behind to join the pre-sales team for HighJump Software within the delivery division.

I have never been one to limit my exposure to one area of expertise, as seen with my combined B. Sc degree in Science & Business from University of Waterloo. This trend has continued as I have spent the majority of my career acting as liaison between Business Operations and IT sides of companies. I have used this ability to work both sides of the fence with many different types of software (WMS, TMS, ERP, BI, RAS) across varied industries, including Manufacturing, Distribution, Fulfillment/3PL and DSD.

In intend to share some operational insight into how you could improve your direct store delivery (DSD) business model with modern software and optimal utilization.

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?

I have to admit I am not an avid World Cup soccer fan...but I have enjoyed the coverage and subsequent drama unfold with a few of the higher profile upsets and controversial rulings on the field.  The ironic story regarding the English team's history with the "Ghost Goal" certainly caught my attention (England clinched its only World Cup victory in 1966 with a similar dispute goal line marker) as the one disallowed versus Germany, en route to a 4 - 1 German victory.

What I found particularly interesting was reading how Sepp Blatter (FIFA President) first maintained the "human aspect" of the game was key and could not be replaced, only to later change positions and seem open to technological advances to assist the officials.

http://www.guardian.co.uk/football/2010/jun/29/sepp-blatter-goalline-technology

How does this relate to direct store delivery (DSD) companies and their challenges?  It seems that Sepp did some soul searching and came around to the concept of at least considering, if not implementing, technological advances.  So what are some signs for DSD companies to recognize when it is time to move forward with a project that advances their use of technology?  Below I talk about five points that really should trigger at least an investigation into what alternatives exist.

1.  Hinderance or Help?
Your company bought that software (route accounting systems (RAS), mobile sales solutions, or maybe an inventory application) or possibly hardware with the intent of helping your employees get the job done faster and better than ever.  At first things were great and you saw immediate improvement in your daily process, but those days are gone.  Today you are more frequently forced to create work arounds or miss opportunities all together due to limitations in your technology suite rather than it helping you achieve improved results.

2.  Reliability Issues?
How often do you hear your route drivers complaining of having to "re-key" a route due to data loss?  Or perhaps a rushed purchase order has been placed due to an unrealized inventory issue from a batch posting failure?  A better question would be - how many times can you let this happen before you realize there is a problem?  Whether it is hardware or software that is letting you down, when these solutions start to impact your business due to failure it may be time to act.

3.  Falling behind competitors?
When the calibre of your lawn falls behind that of your neighbors there may be some good natured teasing involved, but not much more.  When your ability to deliver goods, invoice accurately or manage your supply chain falls behind your competitor you have a much more serious issue to deal with.  In today's economy DSD providers are having their margins tightened while dealing with increased costs, so this is no time to give your competition a head start!

4.  Increasing Cost of Ownership?
What did your IT staff look like when you first implemented your route accounting system?  How did you roll out sales process changes with your route salesmen?  What budget do you allocate to these activities now?  Upgrades, maintenance, support and enhancements are all costs that hit the bottom line.  If your IT spend continues to grow but your ability to handle new functionality (or possibly even maintain the status quo) hasn't progressed, isn't it time to start asking why?

5.  End of Life?
Perhaps one of the more feared phrases of the IT world, if the above listed points haven't triggered the proverbial "spidey senses" then this one surely will start your temperature to rise.  When Microsoft or IBM delivers the notice that product "X" is getting the End of Life treatment you may be able to stretch your utilization past the date, but if anything goes wrong the costs to support / correct / replace will be substantial.  Better to act quickly and start identifying alternative paths to support your business. 

The list of compelling events for your operations may be considerably different depending on the circumstances in which you exist.  But by reading this, I trust that you are actively monitoring where you stand in your technology's life cycle...and good luck making your decisions!

The pursuit of revenue growth...while not unique to direct store delivery (DSD) distributors, the challenges/opportunities affecting these DSD businesses, especially some of the smaller distributors, may be. I would like to discuss some of these below.

1)     Market Share: this is a never ending battle. Customer service, marketing, even geographical trends are among the many factors impacting what portion of the “pie” your brand captures.

 

2)     Territories: there have been a lot of headlines dedicated to recent market consolidation efforts. I don’t think I need to say much to illustrate how adding additional territories or “markets” to your existing account base can be difficult for the majority of DSD players.

 

3)     Product Line: just walk past those refrigerated glass doors in a local grocery store and you will surely be surprised by some new product line / package size that has recently been added. This is certainly an area that has been exploited over the years, but as a consumer of these goods, the product line additions can often be qualified as “more of the same”.

 

I would like to expand a little further on one particular area that I think is under utilized by many DSD players, and that is product line. Rather than focusing on ways to place more SKU’s that serve the same market, what about expanding beyond your traditional product line? Here is one example where I would like you to think of a typical soft drink distributor or beverage route. They have delivery trucks visiting restaurants, bars, and the like on a daily basis and the route salesman are trying to pry more (or better) shelf space from competitive products. Rather than continuing the Red vs Blue product battle (no matter where your soft drink allegiances are, I am sure you can relate) what about carrying other consumables that these customers need? This soft drink company already has a relationship with the customer and an established method of distribution. If their trucks are not loaded to capacity every day, why not add a snack component? Or perhaps their customers have deep fryers requiring cooking oil? Some cleaning supplies may not be suitable for storage with consumable goods, but there are many that are. The options are surely far greater than the three obvious ones that I have referenced.

I have seen a great many operations over the years, and during these visits I have heard lots of conversations about promotions and initiatives that help drive sales. However, the number of times that I have heard conversations about customers expanding beyond their traditional product lines pales in comparison, and I have never really understood why.

With today’s economy presenting new challenges on a seemingly daily basis I think any method of increasing the revenue to offset the existing cost associated to your fleet requirements has to be a good thing.

Food for thought – perhaps others can share their stories on how this expansion of product line has helped or hindered their bottom line?
 

Walmart….I know it is almost universally recognized as a dirty word for the many challenges they create for their DSD suppliers.  However, today I would like to talk about the beneficial changes to operations that have resulted from their ASN initiative.

Let’s first look at how many “traditional” DSD vendors handled their order flow before ASN’s (I am going to state the implied assumption of pre-sold orders rather than peddle sales here, but really ASN is conceptually impossible without pre-sales).

1. Order is received by vendor “X” hours or days in advance of required delivery (the method of entry is for another discussion at a later date) into route accounting software.
2. Order goes through some level of processing to determine how it will be built.  Eg. Products are aggregated with common packages, or order is built specifically for customer (read my previous blog on whether to build by order or not).
3. Pallet(s) are built by the distribution warehouse staff with paper pick tickets / load sheets.  Possibly with, but more likely without checking of pallet content.
4. Driver shows up the following morning and verifies his load content and has to either manually pick additional product to replace short picks / miss-picks, or if they are lucky gets some help from the receiving staff.
5. Driver delivers goods to store where additional invoice/delivery adjustments may be required due to earlier verification issues.

This process obviously has some fairly inefficient steps here, but I think it is safe to say this was generally accepted, and even still is today with many small to medium sized distributors.

The Walmart ASN initiative continues to roll out across North America.  To be compliant DSD suppliers not only have to pick at a rate of near constant perfection, but they also have to submit this information well in advance of the driver showing up at the back door with product.  Meeting these requirements means manual picking processes have to go away and any pick discrepancies must be accounted for AND communicated in advance of delivery.   This means adding a step to update pick quantities and another step to update delivery handhelds have to above process.  It doesn’t take a rocket scientist (no offence to the rocket scientists), to figure out the changes required to complete these tasks cost $$.  But let’s look at how these operational changes provide benefit beyond being able to continue to supply Walmart with product.

1. Productivity Metrics:  by using either a handheld or mobile computer solution you should be able to track more data than just updated pick quantities.  Why not select a solution to track picking time to generate productivity numbers?  These metrics could be used for incentive picker compensation or alternative motivation plans.
2. Driver Check Out:  with loads already reflecting the changes to pick quantities driver checkout processes should take far less time, getting them out into the trade faster.
3. Delivery Time Reduction:  similar to point above, with accurate load/invoice information route drivers reduce time required to handle the administration side of mobile sales, and should be able to spend more time actually servicing stops.
4. Risk of Fraud:  unfortunately fraud happens…but with accurate order/invoice numbers the need for invoice adjustment will theoretically go to zero.  While I doubt the zero adjustment goal will be present 100% of time, far fewer invoice adjustments means those that happen need better explanation and can be investigated to confirm legitimacy.
5. Route Reconciliation:  here is yet another spot where accurate orders result in time savings.  The lack of invoice adjustments, and accurate inventory numbers save labor for route drivers and reconciliation clerks alike.
6. Inventory Accuracy:  actual pick quantities rather than relieving inventory based on expected numbers give your operation and sales teams real on hand data to know what needs to be ordered, and what is available to sell.

As you can see there are definite benefits to implementing a process solution where actual picked quantities are efficiently tracked.  To truly reap the benefits of this process though, operations should be applying this supply chain improvement not only to their Walmart ASN accounts but to all (or at least the majority) of their accounts!

Traditional perceived challenges to dealing with Walmart aside, I think this is one area where the supplier integration changes they have created in the DSD supply chain best practices are actually forcing operations to become more efficient!  I hope that you consider some of the points above and how they could help your direct store delivery operations as well.
 

No this blog entry is not going to be a behavioral reminder from your pre-school teachers…rather this is about how the supply chain software market continues to change, specifically for DSD users. Long gone are the days where features and functionality were the key factors to any software purchase decision. It is true that without solid functionality and key market features software will quickly drop off the desirable list, but these two points are merely the first gauntlet to pass towards a positive decision regarding software selection.

Today, being able to provide “out of the box” integration options, tool kits and breadth of product solutions are more important than ever in the DSD world. A next generation RAS is great, but what else comes with it? Does it provide a flexible mobile sales solution? What about your inventory and truck loading solutions? Traditional (aka Green Screen style) RAS solutions have been able to provide batch data entry for inventory, and load sheets for your picking team but does this technology really cut it in today’s world? That covers some of the basic points of entry of data into your system…but what are you going to do with it once you have it there? Do you have a robust report generation solution? Even better than that, how about a data mining tool with not only canned reports, but also an easy interface where users can define their own “custom” queries to identify the exact data elements you want and need for executive dashboards?

Beyond what I would consider fairly “standard” offerings listed above, many operations are running back end ERP software solutions as well. Being able to provide reproducible integrations to these solutions is quickly becoming as important as the software solution itself. Software users today have existing structure and systems that are not going away, and any future solutions must integrate easily and seamlessly in order to maximize benefit of your DSD solution. This is one area where most companies want to avoid being on the “bleeding edge” of technology, and would really prefer to see an offering that can reference others.

Another reason to consider integration options is as simply as taking advantage of the strength of other solutions. Leveraging the functionality of other solutions not only provides the users benefit, but can do so in a more cost effective manner (if done properly) than building additional modules outside of your core competencies. This may be a difficult decision for some to make, but I think that this is an area that can definitely be used to your advantage if properly evaluated.

I will end this post with the following question…can you really only consider one component to your DSD solution in isolation, or will you look at the end to end integration of all components?
 

I spent last week at the BevOps show in Tampa, Fla. During this show there were lots of great conversations about methods to reduce operational costs and conserve resources. One topic I heard several case study speakers discuss was route optimization. Route optimization is not new. Whether it is done by software with cool algorithms that connect stops with lines and dots, sales managers with spreadsheets & maps or even to a degree by drivers, it has been going on for a long time for direct store delivery (DSD) players. However, when fuel prices dramatically jumped in cost I think most DSD customers immediately started reconsidering how frequently they were looking at their routes, and optimization software became an instant hot button for many.

The ability to reduce the number of wheels &/or miles on the road is certainly appealing to fleet managers as they attempt to control cost of goods sold. My question is not whether or not you should optimize routes and potentially consolidate routes…my question is, how do you evaluate the cost savings versus customer service levels?

If we were dealing with another industry where your delivery driver just dropped goods off at the back door and then went on their merry way, this would be easy. Find an optimization package that works for you and run with it. However, DSD does not work that way. Route drivers have many different roles to fulfill. Those roles change drastically from one DSD organization to the next, and even within an organization they change from route to route. These drivers interact with customers on many different levels. Perhaps your route driver is responsible for product placement on shelves / merchandising? They may be responsible for taking pre-orders from customers as well for the next day’s delivery. Or they may be even more involved and actively assist the customer with the management of their inventory levels. The bottom line is a DSD route driver is far more than a delivery driver. These route drivers are far more likely to be a key part of customer relationship management, than just a part to be interchanged at random to save a few bucks in fuel.

I am not saying route optimization doesn’t have benefits…it absolutely it does. What I would like to hear from people considering implementing an optimization solution is that they actively considering how to best manage that customer-driver relationship as well. Perhaps this means having dedicated pre-sales teams? Or identifying those customers where the tolerance for change is far greater versus those that require active management of that key relationship and flagging those for a static route/driver assignment.   

DSD distributors make cost versus customer service decisions all the time (as do all companies). This is merely another one of those key points that need to be addressed. Quoting cost saving statistics with graphs and ROI projections may look sexy in boardroom presentations, but without considering customer service levels and the impact to sales you may be selling this decision short. Looking at the other side of route optimization should really be part of this project evaluation.

Related Resources
HighJump RouteTrack Datasheet

I thought I would discuss the picking process further given the number of comments and questions generated from my last blog entry of a similar topic. This time I would like to discuss some challenges and solutions associated with voice picking in the DSD process flow.

Voice picking basically follows some similar steps, the picker receives instructions like “Go there (insert locator ID, whether that be a location code, or sequence #) and pick that (insert product indicator and quantity). ”After completing this task with a product scan and quantity validation, the picker is then given the next set of similar instructions (the details and variations of how to complete this task are for another entry). Typically order header-type instructions will also be provided at beginning or end of these steps. But the problem that I see for many DSD customers is that they have limited visibility as to what product is going to come next. Forget about a user friendly way to see an overview of what is going to end up on this particular pallet. Without these two key things you end up trying to stack a stable pallet without knowing what real estate you are going to need to use next. So the user is left with dealing with one task at a time, leading to a lot of re-stacking halfway through the pick. Sorting of these tasks is your best option to limit the issue, but most techniques can be boiled down to one of two basic algorithms, each with benefits and limitations:

1.       Efficient walk path. 

a.       PRO: You walk the most efficient path possible, therefore reduce the number of steps required to get from A to B.

b.      CON: Without any consideration of individual SKU order quantity you may end up with a pallet appearing to mimic the Leaning Tower of Pisa

2.       Pallet Stability

a.       PRO: By considering the order quantity of individual SKU’s you get a very solid pallet, therefore reducing the probability of damaged goods.

b.      CON: Given the unpredictable nature of DSD ordering patterns, your picker may need to invest in a new pair of walking shoes as they bounce back and forth from one corner of your warehouse to the other.

You may also be able to use slotting logic of your products based on overall volume to align products with your picking patterns. Or perhaps apply some secondary logic to limit bad combinations of products to reduce the issues with either option above, but you are likely still dealing with at least some of these problems (and possibly reducing the beneficial factors as well). I have helped our customers do similar steps in order to get them through these issues but my concerns with these limitations remained.

Lately when discussing their desires for paperless voice picking with customers I have been addressing a different method of implementing this…a mostly paperless solution with voice confirmation, rather than true “picking.” Instead of feeding out the pick commands over a headset the picker gets his pick ticket, with order lines and quantities sorted in one of the methods listed above in addition to his handheld gear. The picker can then identify which product to use as the pallet base. This is of great significance for DSD accounts because all products are not created equal when it comes to providing a stable base upon to build (or for that matter ability to withstand the weight of products stacked above). Look at the PRO/CON list of this offering compared with above:

PRO: 

1.       Pallet stability is maintained by selecting the most suitable base

2.       Pallet stability is enhanced and re-stacking limited (or avoided) based on seeing subsequent pick lines/quantities

3.       Walk path efficiency maintained, with the possible exception of that base product selection

CON:

1.       Selecting of the first “base” product may contradict walk path efficiency

2.       Paper pick ticket still printed rather than pure paper-free voice solution

In HighJump’s voice confirmation solution, the core validation pieces of voice picking are still maintained, i.e. the scan validation and verbal quantity confirmation. In addition, at the end of the pick the picker is prompted with any products missed from the pallet (the main concern of most operational contacts when hearing of this solution for first time).

I think this combination, while not truly paperless, provides the benefits of voice picking and ability allowing instant human interaction to build the best possible pallet. 

Related Posts
Sideload Truck Deliveries: To build by order…or not?

When I first started implementing warehousing solutions for direct store delivery (DSD) and mobile delivery customers, I had come from a WMS background where picking activities were specific to a customer. The idea of aggregate picking was basically a foreign concept. So when a customer would ask for my insight into which picking method I would suggest, the answer always seemed obvious. My belief that this was the best way seemed to follow the industry “trends” at the time as well.

After gaining more experience, and perhaps more perspective on this issue, I now ask customers to question these points prior to committing to a build by order (or palletized) solution suggestion versus building by package (or aggregate) for their sideload truck deliveries. Given some of the responses I have received I think that the trend of palletizing may be losing some steam too.

Labor Cost

The most basic argument for palletizing versus aggregate is that labor costs more for delivery drivers, so you should try to minimize their effort. At face value this seems straightforward and an obvious reason for palletized order building. However, you should be sure that you are able to reap the benefits of reducing the delivery driver labor. If your driver takes an 8 hour shift to deliver while handling aggregate loads, do they really cut their time down to 7 hours (or less) if you provide them with palletized loads? Compare this with your warehouse staff where you have active management in house and stop the shift at the end of the work (or redeploy to other tasks). This type of control over a delivery workforce is difficult to achieve

Cost of Damage (Damage Prevention)

I have never done any research or statistical analysis on the frequency of damaged product that has been built aggregate versus palletized…but I have listened to a lot of warehouse management voice their concerns! A typical first step to alleviate this damage issue is to wrap customer pallets. This normally addresses the issue, but now you have to account for an additional time & materials component when comparing the costs between aggregate & palletized. 

Vehicle Cube Utilization

This is probably one of the most basic arguments against palletizing. Utilization of vehicle cube is obviously much higher while building aggregate. The utilization argument assumes that there is sales volume to get to that level of capacity, which may or may not be the case…but assuming you do have the available volume, by improving cube utilization you may be able to remove vehicle(s) from the road.

Depending on your customer base you may also have to consider dock access. If your sideload trucks are servicing customers with docks where there is the potential of forklift pallet removal, this is a huge swing factor obviously. 

If after considering these factors you decide building palletized orders by customer is the way to go, then more power to you! However, I hope that you consider some of these points before you make a decision based on the assumption that it is “cheaper.”

We have hit another month end and I can’t help but sympathize with those warehouse managers and accountants working in the DSD arena. It seems that in nearly every operation running a legacy route accounting system (RAS) for its inventory solution that I have been involved with, the challenge remains the same, month end. The tasks associated with this event have grown over the years, and mean the same thing to all. In a word…Extra! Whether it is time warehouse staff spend counting and re-counting, or effort spent trying to figure out what report supports your reconciliation trouble shooting requirement, it is this “extra” effort that is tying up resources that could be used elsewhere!

After a month of daily sales / loads transactions (and of course the corresponding adjustments to both) it seems a lot can go wrong in that calculation of expected quantities for your on hand inventory! Rather than leaving this challenge for another day of “extra” at month end, here are some simple (and decidedly low-tech) steps that I have seen some of our HighJump customers use to help remedy this situation.

UPC Scanning: yes I know that your warehouse staff can recite product numbers off the top of their head, but what about that temporary receiver filling in when the regular is out sick? Or perhaps the inventory clerk who missed his morning cup of coffee? This simple act limits the exposure to human error…and it is exactly that human error that can create headaches when trying to figure out why numbers bounce all over the place during the month.

Cycle Counting: a daily count, whether it be of a select few packages of high movers, a scheduled percentage of inventory like 20% of SKU’s per work day (typically by brand/package) or a full scale review of your on hand (as required). No other single act can offer as much valuable information as this assessment. Using this information to identify potential problems and acting to resolve them now, reduces the effort significantly.

Watch the Trend(s): by watching where your inventory numbers are heading you may be able to catch the single events that are distorting your results, or perhaps even identify systemic issues present in your operations. Whether you are looking at day over day, or month to date style data, clues are waiting to be discovered that will help you trigger further investigation! Identifying that sudden spike in variance or worrying baseline trend may be step #1 in saving your company from a costly shrinkage write off in the coming weeks.

Sweat Equity: forgive me for stealing a term from one of those home renovation shows, but HighJump inventory management provides you with all sorts of tools and reports to dig further into inventory variances…the trick is, you have to use them! As a customer I have worked with for years recently said “I want to learn to fish for myself”. This request was a perfect example of wanting to work smarter rather than harder and we spent time after that learning how to dig deeper into data with tools available. Rather than using the same reports that partially satisfy your requirements, and then merging data to investigate, why not ask about alternative tools and techniques? Spending time learning how to troubleshoot your inventory challenges is a valuable investment in yourself and your company.

You can decide to continue with your status quo as your month end rapidly approaches. Or you could try to avoid that phone call from your spouse asking whether they should eat alone while you struggle to reconcile variances generated weeks ago and ask yourself – is there a better way? I certainly think so…