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August 2018

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« Part 6 - The Evolution of Beer Wholesaling | Main | Random thoughts on management, the majesty of the common worker, and some nuts-and-bolts operating suggestions »

The Evolution of Beer Wholesaling... continued

More on delivery

Anytime you want to analyze or re-design any system, the first things you should do is to define who you are, what you want to accomplish, and the most likely operating environment(s) you will confront.  Obviously a 70 share exclusive A-B wholesaler versus a 30 share Miller/Coors/multi-brand wholesaler will have very different operating realities which they must address.  But there are some common goals – not to be followed blindly but general goals which should help guide your thinking:

1.                  In delivery you will ultimately face a daily route limitation of either cases or stops.  In high market share houses, the truck could possibly make more stops in a day but there simply isn’t room to put on additional cases.  This is the ideal situation and almost always generates high profitability.  On the other hand, the truck may have additional capacity available but it simply can’t make any more stops in the delivery day.  In these situations you want to take a hard look at frequency of service – reducing the total number of weekly delivery stops will by definition increase the number of cases on each route (and that all important number… average cases – or gross profit – per stop).  With high fuel costs, now is the ideal time to be reviewing service frequencies.  Don’t be foolish here though, there are realities which you face on the street and severely cutting service frequencies will only hurt you – find the balance that is right for your marketplace.  Also beware of wishful thinking… just because you’d like your delivery drivers (or sales reps) to make 30 stops per day doesn’t mean it can be done.

2.                  You want to handle the product as few times as is possible.  This is where bulk and cart routes add route efficiencies.  Yes, I know carts are expensive (and can’t somebody make a lift gate that doesn’t break?), they may or may not be worth the expense.  But handling the product multiple times out in the parking lot doesn’t do anything for anyone.  And yes, bulk and carts impact your warehousing operations but generally warehouse help is much cheaper and easier to find than Class A CDL drivers.  Warehouse help also doesn’t tie up a significant capital investment – a tractor trailer. Warehouse help generally doesn’t have time stops – other than having the trucks loaded before the drivers arrive in the morning.  Don’t let your warehouse drive your delivery operations.  Warehousing is a support function (as is IT, the shop, the office) - they should respond to the needs of the sales and delivery teams, not direct them.

3.                  Side loaders have their place, but loading by the stop rather than by the route can save at least one hour per day on the route – and makes the driver’s job that much easier.  Drivers have tough jobs and are in great demand.  Anything we can to help make their jobs a little easier should be considered. 

4.                  Don’t let the sales department dictate delivery routing.  Delivery has many more restrictions and it should drive sales routing, not the other way around.  Don’t let driver pay or sales rep pay drive your routing.  Build the most efficient routes possible, for both sales and delivery, and make compensation adjustments after the routing is done.  Ignore compensation and employees when building any new system.  Address them after the new system in built, not before.

5.                  Beware of expanding days of service.  IF, and this is a big if, a wholesaler could control service frequency, the ideal scenario would be to run 7 days per week.  It would maximize your fixed asset utilization rate and we could get by with the fewest number of Class A CDL drivers, vehicles, etc.  But I don’t think it is possible to control service frequency, retail power is simply too great – and our illustrious suppliers far too often side with the retailers, not us.  Be careful of providing Saturday delivery service.  Often the number of stops simply goes up and absolutely nothing is gained other than increasing your costs.  And once given, it is generally impossible (without great pain) to take these things back.  Be careful when offering additional services of any kind.  You’re certainly not going to win all the time (i.e. week-end pull-ups in chains), but be careful when trying to compete with your beer competitor with frequency of service.  That is often a sucker’s bet where everybody loses except the retailer.  This is not to say that a 75 share A-B house shouldn’t use their market position to continue to pummel their competitor (you have your foot on their throat, why let it off?)… just be smart about how you do it.

6.                  Dynamic routing works well for UPS and Federal Express… not so good for beer wholesalers.  By dynamic routing I mean situations where there aren’t fixed routes, i.e. some days you might run 25 trucks, some days 16; some days the retailer sees this driver, some days another, the next another.  On paper it sounds great, and a few wholesalers around the country make it work but generally it causes problems.  For it to work you MUST have a well-trained and disciplined delivery force… otherwise retail execution goes to hell.  Proper rotation?  Forget about it.  Also retailers like to have the same driver service them.  It makes senses.  First there is the issue of trust, the driver is wandering around the back of their store and handling product.  Second, the retailer tires of “training” each driver who shows up at their back door… where to put the product, how to check in, etc.  It sounds good (as many of you know), but the reality is generally much different.  If you can make it work, great… but this is an area I would approach with caution.

7.                  Specialization makes sense in the sales area, but not so much in delivery.  Remember that all specialization leads to routing inefficiencies.  Why?  Because generally the ‘special” accounts are spread throughout your territory so each level of specialization demands another complete layer of routing.  In sales, I find separating on and off-premise accounts can have tremendous impact, especially in the on-premise accounts.  In most cases this includes draught – there is no reason a pre-sales rep can’t sell draught.  Give it a shot and watch your draught sales increase.  Sometimes a chain grocery sales force might make sense.  Or even somewhat lower paid c-store “order taker” sales routes.  They all will generally increase your costs (although in the right markets, the order-takers can save some $$) – you have to analyze to determine if the potential increase in sales impact is worth the additional expense.  Specialization in sales should ALWAYS lead to a better sales effort – but it may or may not be worth it.  Go with on- and off-premise first, check out the others slowly.  Throw caution to the wind and investigate every possible option – build it on paper and see which one is best for your territory, your market realities, and your desires.

8.                  Specialization in delivery generally should only be refrigerated (of course it could just be an insulated bay), non-refrigerated and bulk (pallet dock deliveries).  Bulk is of course the most efficient - supplement them with a team of merchandisers and you are ready to roll.  If you run cart routes, ideally you want them to service every account in their route area.  If 10 or 20% of the accounts require the product to come into the store by hand truck, so be it.  There is no reason this product can’t come off the cart truck (assuming it can get into the parking lot).   There’s no reason a couple of over-the-shoulder accounts can’t even come off the bulk route.  Spread throughout your territory are accounts which might be ideal for this or that type of delivery – you don’t want to try to run the “ideal” delivery system to each one.  If you do, you’ll have delivery trucks criss-crossing each other all day long just because of some preconditioned mind-set… or four different delivery trucks servicing different accounts in the same parking lot.  Remember you want to build the best delivery system for your entire company.  This by definition means that each individual delivery route will be less than ideal, but in total it should be ideal for the entire organization.  There is no reason your draught trucks can’t also delivery the package product to those on-premise accounts who carry draught.  Delivery specialization doesn’t help us sell a single additional case of product, use your head and don’t be limited in your thinking. 

In delivery your focus should be on being efficient, not specialized.  Use as few vehicles as is possible to deliver your product.  Use the savings from this to increase driver pay, add merchandisers, increase incentives for the sales department, pay for the increased man-power needs in the warehouse, pay for a specialized sales force, or even drive it to the bottom line!


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