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« Shared Services - Is this for you? | Main | The Market for Delivery Drivers »

Delivery Driver Issues – What’s a beer wholesaler to do?

On October 26, 1986, the United States Congress passed the Commercial Motor Vehicle Safety Act. This law required each state to meet the same minimum standards for commercial driver licensing. The standards require commercial motor vehicle drivers to get a Commercial Driver's License (CDL).  For many of you, the bane of your existence… the CDL… and the most notorious of all, the Class A CDL.

Ever since this law went into effect, every industry that moves product by truck has had to deal with this reality.  It is an on-going problem for all of them.  Finding and retaining quality drivers is a serious problem which confronts most wholesalers; it is just as real and significant as rising fuel prices, but at least with drivers you have an opportunity to do something about it.

Wholesalers are attempting many different organizational and compensation changes in an attempt to address this problem.  Some of these “solutions” don’t seem to be thought out. 

One idea which seems to be gaining some traction is going to 4 day/week delivery.  One of the desires here is driver quality of life, 4 days of work, 3 days off.  But all other things being equal, either you have to add additional drivers (and vehicles) – since you are taking 20% of your delivery capacity (one day out of five) and giving it away.  And remember these drivers are hard to come by and difficult to retain, so why take an action that actually INCREASES the number of these rare employees which we need?

Or if you don’t add drivers, then each day, each driver has to make 25% more stops and put off 25% more cases.  I don’t think in most situations this additional stop or case capacity is available.  If you have that much flexibility in your delivery operations that you can simply add 25% - every single day on every single route - just by hitting a switch, then I think you have bigger problems than whether you deliver 4 or 5 days per week.

And remember, how many days per week we deliver and how many days per week any employee works are completely separate things.  We can deliver 5 days per week (or 6 or 7) and have all of our drivers (or any one else for that matter) work 4 day weeks.  Do not combine these things – they are separate.

If we look at our entire company as a machine, the most efficient use of that machine is to run it as near capacity as is physically possible – every single day.  High peaks and valleys cause inefficiencies.  You have to over-build your machine to handle the high capacity times.  Obviously the marketplace determines many of these peaks and valleys – but to whatever degree we can, we should attempt to level operations so that each and every day is about the same.  As will become evident, for those wholesalers who just can’t seem to level their delivery operations (or get decent volume on Mondays), the very real costs are enormous.  You may want to fight a little harder to achieve more balanced delivery.

The most efficient machine you could build would be 7 days per week, 3 shifts – all balanced.  Remember that the number of total company weekly delivery stops and how many days per week you deliver are also completely separate issues. 

The problem many wholesalers have had in the past is that they didn’t control service frequency at retail and the number of stops grows and grows with no corresponding growth in volume – just a decrease in average drop size, which is definitely going in the wrong direction.

Let me explain.  Prior to building routes, you first must determine type and frequency of service we are going to offer each and every account.  This gives us the average total number of stops and cases we need to deliver in a week.  This number has absolutely nothing to do with the number of days we deliver (there are of course retailer realities we all face but as long as these can be met by our system, it doesn’t matter if we operate delivery services 4 days per week, 5 days per week, or even 7 days per week).

Here’s an example to illustrate:

Beerbygosh Distributing:

*          Average cases per week = 75,000 (about a 4 million case/year operation)

*          Average stops per week = 2,175 (this has no relation to how many days per week we provide delivery service)

*          5 day/week delivery    -     25 delivery routes with 600 cases and 17 stops per day

*          4 day/week delivery (same work load) - 31.25 delivery routes with 600 cases and 17 stops per day

*          4 day/week delivery (without increasing routes) – 25 delivery routes with 750 cases and 21.25 stops per day

*          5 day/week delivery at higher work load - 20.5 delivery routes with 750 cases and 21.25 stops per day

So if you go to 4 day/week delivery, you either add over 6 delivery routes or you increase the workload (both cases and stops) by 25%.  If we assume the total cost of a Class A CDL delivery route (payroll, taxes, vehicle lease, insurance on both, fuel, etc.) is $100,000, adding 6 routes costs you an additional $600,000 each and every year!  And we increase our delivery driver problem by building a system where we need 6 more of these rare and valuable employees.  Seems to be going in the wrong direction to me.

Or if we are simply going to add to the driver’s work load….

1.                  Is this physically possible?  Can the driver meet all retailer requirements and still get the day done?  Can they make all the stops?   Can they do this day in and day out, every work day of the year?

2.                  What about your seasonality?  If your summer volume is only 20% above average, these routes now have on average 900 cases per day, every single day of the summer.  Is this doable?   Helpers can help move boxes; they do nothing to help with number of stops. What additional costs will we incur in dealing with these peak months?

3.                  If this delivery capacity is available, why aren’t we using it now?  If we kick up the work-loads, and stay at a 5 day/week delivery, we will only need 20.5 delivery routes – a savings of over $400,000 each and every year!

Rather than going to a 4 day/week delivery system, a better choice might be to keep the 20% capacity you’re giving away, and split the savings with the delivery force.  In our Beerbygosh Distributing example, we could give each and every driver a $10,000 annual increase in compensation and still drive an extra couple hundred thousand dollars to the bottom line!  Talk about win – win.

Of if you do desire a 4 day work week for your delivery personnel, by staying with a 5 day/week delivery service you will need 5 drivers for every 4 routes; a savings of an entire delivery vehicle and all its associated costs.  What is the annual cost of operating a delivery vehicle?  You could split this amount with your five delivery drivers and not cost you a dime.  Let’s see, the driver’s get a 4 day work week AND a substantial raise (all at not cost to you).  Do you think this might help driver retention? 

If you have 25 4 day/week delivery routes, by adding the fifth day you can take FIVE delivery vehicles (and all their associated costs) off the street – and still have your drivers working 4 day weeks.

Remember, when there are cost savings due to system changes, generally you need to share some of these savings with your organization.  If we are going to have fewer, we need better.  Pay more and demand more.  This leads to superior organizations.

Or how about changing from building delivery routes for the day to building routes by the order?  This greatly increases driver productivity – and they are much more expensive than warehouse help.  In some markets, on some routes you can move to smaller delivery vehicles and away from the Class A CDL to a more manageable Class B CDL rating.

Many are finding that by moving to straight trucks with a lift gate and using a cart system they can increase driver productivity by 25% or more (some 40%!) – and make the driver’s work day much less physically demanding.  Again a win – win situation.  Personally I’d say the days of the side loader built for the route are numbered in all but special cases.  For most, the future is a cart system supplemented by bulk delivery.

There are many ways to build new systems - each unique to a territory’s characteristics and owner’s desires – but before you make any changes always make certain you have carefully examined all of the possibilities – there are always more than one way to skin a cat. Perhaps 4 day/week delivery is right for you, perhaps it is not.  Just make certain every possible alternative is reviewed prior to heading down what could be a very expensive road. 

And a final word about compensation and hiring.  The employment market is exactly like an auction.  Each individual comes as a package with various skills, experiences, and traits.  The marketplace (the auction) puts a price on this package. You can always overpay but you cannot consistently underpay.  Just like at an auction you may find the occasional “deal”, but I challenge you to staff your entire company with these deals.  In addition to “just” money, the individual also makes adjustments on their side based on their goals; work week, work hours, advancement opportunities, retirement, benefits, corporate culture, etc. 

In far too many situations a part of the solution to the Class A delivery driver problem is to simply pay the drivers more.  Since 1986 the auction price for this package of skills has increased – in some cases substantially.  Unless demand can change (and in this case it has – it has gone up!), supply shortages of any product push prices up.  Far too many wholesales complain about their driver problems while attempting to pay less than the auction price for these skills.  Then they cry about their inability to retain drivers. 

Would you do that at an auction?  Continually bidding less than the final bid (the market price) but still wanting to take the product home.  Not going to happen.  Also never underestimate the emotional aspect of any position.  Look at how you manage and direct your drivers, and for that matter all employees – would you want to work for your company?  Or for your delivery manager?

Look out!  Here’s my blatant selling message – this example shows why the payback period for my services is generally less than 12 months.  In any re-organization, I can help build a more efficient, stronger system with overall fewer employees.  Just saving one delivery route pays for my services in less than one year – from then on that money flows into your pockets.   How many businesses have you re-organized?  Hopefully I’ve learned something in the last 20 years.

In the above example, my payback period would be 3 months or so!  I challenge you to find ANY investment with this type of payback.  And this of course ignores all the other value of my assistance; clear strategic planning creating a road map for today and tomorrow, creation of a completely integrated, efficient organization, complete policies and procedures, sales training and one-on-one management training which leads to an even stronger organization, today and tomorrow.  I truly do help organizations change for the better.

Even if you are not considering a 4 day/week delivery system, your analysis shouldn’t be “it’s working so why should I change it” – rather it should be on how it can work better.  Fuel costs are devouring lots of dollars that should be on your bottom line – why not do something to get this money back?

If attracting and retaining drivers is a problem, why not look at methods where you can actually save money (driving it to the bottom line), pay your drivers more (making attracting and retaining easier), and have fewer of these hard to come by things called Class A delivery drivers – therefore you have to attract and retain fewer.  Now’s the time… get with it!

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