Driving Out Distribution Costs
July 1, 2012
by Dan Malovany
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Back in the 1970s, Jim Hilton cut his teeth in the baking industry driving a route truck in central Kentucky for Campbell-Taggart, but what ultimately changed his career was the company’s decision to become one of the first in the baking industry to automate its direct-store-delivery (DSD) system with handheld computers in 1983.
“I was lucky back then that I worked for a company that was forward in automating distribution — maybe even before its time,” said Mr. Hilton, senior director, field mobility, industry solutions group, Motorola, Inc., Schaumburg, IL.
As a route driver with one of the initial bulky handheld computers, Mr. Hilton spent a substantial amount of time working with suppliers to debug the software programs and make the systems user-friendly to the baking industry. Eventually, patience paid off. He became the project manager in charge of rolling out the automated DSD system across Campbell-Taggart’s entire route system. The handhelds provided a quick return on investment (ROI) in more ways than one.
“There were the piles of paper that you replaced and all of the clerical work got automated, but the real ROI showed up with more accurate account receivables, improved payments and greater labor savings,” said Mr. Hilton, who was recruited by Motorola in 2004 and works with various industries, including baking companies, on a global level.
Throughout the years, subsequent generations of handhelds became more refined — faster, lighter, better designed, more rugged and easier to operate — but such advancements were gradual, and the ROI to upgrade automated distribution systems became harder to justify. It wasn’t until the early 2000s that the next big breakthrough came with the widespread use of wireless technology. “Wide-area connectivity opened up a whole new set of capabilities that wasn’t possible 10 years ago,” Mr. Hilton said.
Eye on distribution
With today’s wireless automated DSD systems, bakeries and snack producers no longer have to wait until drivers return to the depot to download the information from their handhelds. Rather, data can stream in real time from retail parking lots and other remote locations to the bakery’s central computer.
In many ways, Mr. Hilton said, automated DSD systems help sales managers to see what’s happening on the routes as drivers input orders and the amount of products sold. “Wide-area coverage shows me the data when I need the data,” he said. “I don’t have to chase the data or wait for it.”
An automated DSD system can plan and manage the inventory, schedule and dispatch deliveries, and reconcile the route after the truck returns from its deliveries, noted Chase Hippen, director of software development, Supply Chain Services, Stillwater, MN. “All these capabilities are further automated with mobile computers and printers that allow the immediate and accurate entry of data.” he said. “When information is up-to-the-minute and visible, sales and production planning can be synchronized with consumer demand.”
Because sales managers can better see what’s flying off the shelf and what’s not, they can adjust product inventory and promotional initiatives by individual stores to maximize sales and ensure product freshness. “Tracking the delivery process is at the heart of a solid DSD system,” Mr. Hippen said.
To start the day, drivers download the day’s route, inventory and pricing information. They then validate that the proper inventory is loaded onto the truck before the day’s deliveries begin.
At the customer’s location, the driver counts and unloads the products ordered and keeps track of any damaged products or stales that need to be returned. Handhelds can automatically send this information for tracking and immediately reconciling an account’s delivery with the back office. “The driver then has the ability to confirm the delivery with the customers,” Mr. Hippen said. “Sometimes this means capturing a signature, producing an immediate invoice or collecting payment. The right solution helps automate the steps in the transaction while improving transactional accuracy to speed reconciliation of the route.”
As a result, he added, office accounting staff only needs to focus on those billings where a variance between what was stocked and sold needs to be reconciled.
Eliminating out-of-stocks is often one of the most critical metrics for retailers in the DSD chain, according to Mr. Hippen. “The DSD solution enables companies to dynamically manage inventory levels between the shelf, the truck and the warehouse while also tracking empties and returns,” he observed. “Giving real-time visibility to inventory levels as well as allowing for automatic triggers and alerts when inventory thresholds are reached allows businesses to ensure their ability to fulfill customer demand.”
Seeing is believing
Outfitted with camera and video capabilities, handheld systems can literally become the eyes for the sales department. Drivers can send photos to confirm that a display has been set up correctly inside a supermarket. They also can upload plan-o-grams, then take a photo to confirm that products are properly stocked on the shelves to maximize sales, Mr. Hilton said.
Sales managers no longer need to physically visit stores to check on displays or monitor drivers because of a complaint filed by a store. It can be done remotely with a click of a camera, saving time and labor. “ROI can be assessed on the ability to service a customer more effectively and the opportunity to either spend more time on sales-based activities or picking up new customers or stops to increase revenue,” Mr. Hippen noted.
Likewise, sales managers can download short videos about displays, promotions and new product rollouts directly from corporate headquarters instead of relying on drivers to read information off of a sell sheet. “Imagine dropping down a 2- or 3-minute video into the handheld where the salesperson just needs to find the store manager and say, ‘Do you have a few minutes? Let me show you this video,’ ”
Mr. Hilton observed. “Suddenly, you have a brand-consistent voice speaking to every single customer, which ensures the 7 a.m. customer is getting the same message as the 10 a.m. one.”
In the end, Mr. Hilton added, automating distribution is not about technology itself. “It’s about making sense out of new and emerging technology to gain a competitive edge,” he said. “How does this technology give me a competitive edge? It’s a business question, not a technology-restraint question.”