Speed to Delivery is Key to Profitability

In this omni-channel fulfillment world of “I want it delivered to me now” expectations, the ability to fulfill on customer expectations is more crucial than ever. Driven in part by online retailers like Amazon’s blurring of the line between B2B and B2C activities, companies of all sizes are now being challenged to compete on an equal footing with major corporations with deep pockets. Speed-to-delivery is no longer thought of as a luxury, but rather as a given.

When we talk about speed-of-delivery today, we’re really talking about the speed-of-decision-making. It’s not only figuring out how to make a same-day delivery type move, but also how to be quicker about the decision-making in support of your fulfillment processes, and your SKU analysis, and your distribution network.

In the not-so-distant past, companies used to do their plans on a quarterly, semi-annual or even annual basis, but those days are over. Competing and winning in today’s economy requires daily planning, coupled with the ability to quickly adapt those plans based on ever-changing market conditions. You have to know the cost-to-serve aspects of every single SKU that you support in your supply chain.

With technology greatly accelerating the ease with which customers can order products, companies are also turning to technological solutions to achieve the kind of speed-of-delivery necessary to keep those customers satisfied.

We’re at a point in time where we can not only receive information in real-time, but we can also make objective decisions on that information very quickly. So if something needs to be changed as far as a distribution route or the mode of transportation, it can be done in a real-time basis. You can also compare your actual versus your planned activity not just on a daily basis but even by shift of operation to actually know how well you’re doing against your plan—multiple times during the day.

The central issue behind speed-to-delivery, of course, is: How can a company get closer to its customers? Simply building more distribution facilities isn’t usually a viable strategy, so at some point companies need to consider alternative delivery methods, such as using shared facilities.

Another method of speeding products to market is cross-docking goods using little or no storage time. Inbound shipments are received at a cross-dock, unloaded and sorted for final delivery, and redeployed outbound in 24 hours or less.

Another key to improving speed-to-deliver capabilities is distribution network analysis—the thinking behind where a distribution center is located, how many DCs a company should have, the size of those facilities, the products that flow through any given facility, etc. The ideal situation for a company is to be able to ship from their vendor or their manufacturing point directly to the consumer. But you have to determine where it makes the most cost-effective sense to apply that. That involves analyzing every single channel in the network and figuring out: Is the cost-to-serve for that channel less than what my profit is? And if it is, then maybe it makes sense to support that particular channel based on that cost-to-serve and profitability analysis.

So how does a company balance the tradeoff between the fastest delivery modes and the most economical? A third party logistics provider can help companies identify the cost-to-serve for every individual SKU they might have, and then identify exactly how much the SKU would cost for each of the individual transportation modes that they would like to use, whether it’s LTL or parcel or truckload.

It all comes down to customer service requirements, but the key is empowering companies with the information to know exactly how much it’ll cost to get a product delivered to a customer, with the end goal ultimately being speed-to-profitability.