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Home My Blog Business Priority: Logistics or Product – A Case Study

Priority: Logistics or Product – A Case Study

Author: Larry Chester, President

There are many elements involved in developing and manufacturing products for a customer. In fact, most of a company’s concentrated efforts go to the creation of what they’re going to sell, and with good reason. Because that IS the only purpose of any company – product development, so they have something to sell. But creating a great product is only half of the story. Companies need to be able to deliver it to the consumer, or all of your efforts are wasted.

Bringing Value Through CFO Insights

The issue of delivery can be extremely complex. Some limit their marketing geographically because they can’t deliver everywhere. Some change their source of supply because deliveries of raw materials can’t get to the manufacturing plant. Plus, delivering on time can sometimes become a critical aspect of the sale. Assuring that product arrives JIT (Just In Time) has become a focus of many manufacturing partnerships, smoothing out manufacturing, and reducing inventory expense.

  • Business – Seasonal gift manufacturing
  • Location – North Pole
  • Sales – Charitable institution
  • Ownership – Husband and wife

Initial Contact –

The timely delivery of seasonal gifts has been a problem for generations. Every year, the CEO has been challenged by the same issues: Massive manufacturing of a nearly unlimited variety of items; Deliveries which needed completion within a very specific timeframe at night. We were approached as a result of the continued outcry by the CEO’s wife, who felt that the age-old methods used to amass inventory, control order processing, and deliver to untold destinations in the twinkle of an eye, needed a fresh approach.

Significant Findings and Recommendations

Order Processing

In the past, product requests sent from individual consumers were delivered in huge bags to the order processing center. Not only was a massive number of staff needed to open and categorize each request, but tracking the delivery addresses was a continuing nightmare. Picking orders so they could be placed in the right delivery vehicle created bottlenecks in every part of the warehouse and dock. In addition, misdirected gifts would result in a huge public relations nightmare for the company the following morning. A loss of faith as the result of incomplete deliveries would never be forgotten by customers.

Recommendations

  • Rather than depending on letters, create an online store accessible through the internet. The shopping cart would be limited to only one item selected by each customer to avoid consumers “gaming” the system.
  • Addresses would be stored along with the item selection, in a cloud-based database. New entries will be continually sorted by zip code so that shipments are consolidated at the time items are picked.
  • Pick tickets should be eliminated in favor of scanners. Warehouse workers would first select country of delivery, and eventually zoom in to individual delivery addresses, so that orders could be grouped during picking.
  • Large red bags, able to hold product being delivered to individual neighborhoods, should be used so that they can be easily fit into the vehicles used for delivery.

Logistics

There are two major issues facing the company. First, all deliveries need to be completed within a very specific time window during the night. Since deliveries must be unseen, the unique nature of the delivery vehicles, and deliveryman’s uniform make nighttime deliveries mandatory. Secondly, deliveries are made throughout the world, requiring an understanding of navigation that has surpassed the capabilities of most manual mapping systems.

Recommendations

  • Historically, deliveries have been made by antiquated open carriers pulled by animals. Although the advent of delivery drones is something that could be adopted in the future, an enclosed vehicle with nearly unlimited storage can be used in conjunction with RF tagged, pre-programmed homing devices on each delivery.
  • Rather than focusing on proximity to home base, beginning deliveries at the international date line, and moving west from there will provide the greatest time window for delivery. In effect, the deliveries would be chasing the sun.
  • With the advent of world-wide cloud-based accessibility, tracking can be supported no matter where the delivery vehicles are located. Use of traffic routing software like Waze, expanded for an extended number of locations would be automatically updated upon each delivery, guiding the deliveryman to the next several locations in turn, while avoiding unnecessary traffic delays.
  • The requirement for the deliveries to be undetected necessitates an early warning system for the driver to avoid areas where he might be seen. An advanced network, with sensors connected to the network of Fitbits, would identify locations where the residents are fast asleep, facilitating unnoticed drop-offs throughout the route.

The logistical issues surrounding successful delivery of any product are key to customer satisfaction. Most often, the expectations and even requirements of delivery are part of the purchase agreement. But customer satisfaction is always the key to any product delivery. Conventional wisdom often takes the place of legal text in guiding the operations of any business, and the issues faced by this once-a-year delivery system are no different than other companies. It just needs to be done in a shorter time window.

It is the coordination of manufacturing, organization of outbound processing, and the use of modern technology that assures that products get to customers when they are needed. On-time deliveries are expected by the customer and must be guaranteed by the manufacturer for the delivery cycle to be successful. The expectations for this annual flurry of deliveries are no different than for any other supplier. Strategically, plans need to be made to keep current with technology and the often-unrealistic expectations of the consumer. Unlike this case study, your customers have other alternatives. Don’t make their shifting to someone else an option. You may end up losing.

Make Changes Today That Affect Profitability Tomorrow®

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