Inside Logistics

Materials handling: Deliver promises with care

What works in the US might not work here


November 28, 2013
by Dave Luton

As e-commerce grows in volume and sophistication, there is continuing pressure to differentiate your offerings from those of your competitors. Inevitably, logistics enters into those business considerations.

I can imagine a business development meeting where the head of marketing makes the following pitch—including the easy-to-talk-about logistics step:

“With everybody having new tablets and mobile phones, we’ll take inventory pictures that look great. We can describe the items perfectly and customers will see exactly what they are ordering.

“We’ll make everything eco-friendly. Get rid of all outside (protective) packaging. Imagine all the money we’ll save. And we’ll deliver right to the customer’s door. Think of their surprise when we get it to their penthouse on the twenty-eighth floor.”

Of course home delivery is nothing new. Older people (like me) remember when we used to have bread and milk delivered right to our doors.

Built into the exterior walls of the house I grew up in was a metal milk box that held four glass milk bottles. It had doors on each side—one was for the milkman to deliver freshly filled bottles and pick up empties, and the other opened into the kitchen. The milk box was insulated to keep the milk cool in summer and to prevent freezing in winter.

“If they could do it back then, why not now?” is the question being asked by businesses and marketing departments. That’s quickly followed by: “How about lowering the delivery cost? Better yet, make it free,” “Let’s speed it up—how about same day delivery?” and “If they can do it in the US why not here?”

These questions lead to a critical issue Canadian logisticians must continue to pound into their marketing counterparts’ heads: unlike the US, we have to service a larger area with a population one-tenth the size. For most e-tail business categories, a smaller population means fewer orders and a bigger delivery area. Add to this greater extremes of weather (we are not called the great white north for nothing) plus higher costs for some key logistics components like fuel, and it is no wonder we have to be careful of the delivery service performance promises we make.

Like all logistics challenges, the key is to find a compromise that solves much of the challenge at an affordable cost.

First, choose your delivery zones with care. Define the same-day and next-day zones carefully. For most things, customers in Moosonee shouldn’t expect the same service as cheaply those in downtown Toronto.

Carefully define what is involved in the physical handling of a delivery. Delivery of a major appliance, like a washing machine, is not the same as delivering a pizza. Some appliances require more than one delivery person. Often, doors have to be removed to get the appliances into the house. (In our last house in Toronto, the freezer went into the basement and never came out. We sold the freezer with the house.)

A pizza typically needs less handling than a refrigerator, although the service response is more challenging. But this is offset by having the business model designed around a tight, efficient delivery system, including a limited radius from the pickup points.

Take a lesson from our ancestors and their retailers of over a century ago. Some retailers, like Sears, started as mail-order catalogue operation in the late 1800s, when delivery logistics operations were very similar to what e-tailers experience today.

Early on they realized that use of intermediate pickup points, where customers could come and pick up their orders and make returns, would give them the best compromise of service and cost. This way they could avoid the problems of delivering to every house in America. It also solves the problem of having to deliver when nobody is home. Remember, very few delivery destinations have the equivalent of the old milk box where merchandise can be held temporarily. There is also a greater risk of theft today than a couple of generations ago.

Pickup points will work in the downtowns of many cities. The problem in many cities is that vertical heights have increased and every storey adds more headaches for delivery.

Keep yours on ground level and let the last 20 or 30 stories be the problem of your customer. For some items that doesn’t work, but that’s one of the challenges if you want to sell flat screen TVs.

Keep in mind there are some smart buyers out there who will take advantage of sales people who do not know logistics. There’s a true story which illustrates that principle perfectly. A purchasing agent bought a shuffleboard table for the games room of his corporation—which happened to be on the 29th floor of an office tower. He negotiated door-to-door delivery and his supplier had to haul it up via the stairs when it did not fit in the elevator.

Dave Luton is a consultant in the greater Toronto area

FROM THE MM&D PRINT EDITION