Delivery: In House Or Outsource?

The inspiration to write this article came from two phone calls within an hour. The first was from a furniture retailer who was absolutely frustrated with running his own delivery trucks and wanted to know the names of contract delivery companies. The final straw had come the previous Saturday when one of his trucks was pulled over for a serious safety violation and put out of service by the officer. Delivery to a dozen customers was delayed by more than two hours and several more had to be deferred to the following week. As you would expect, a few customers were understanding, but most were upset or irate. This retailer went on to explain that driver turnover, maintenance problems and service costs related to delivery damage had become overwhelming problems that diverted attention from his core competency.... sales. I'll tell you about the second call toward the end of the article.

Many retailers are providing outstanding delivery with their own employees but I see substantial growth in outsourcing delivery services by furniture retailers. The keys to success are professional management, solid procedures, equipment and most of all, thoroughly trained delivery people. Some of the primary truck operations challenges are shown in the box. Those requirements prevail whether you do it yourself or contract with an outside delivery company.

Delivery companies offer a wide range of services based on customer needs. A small designer shop may use a company that delivers for numerous retailers. Their trucks will typically carry either minimal marking or the name of the delivery company. My rule of thumb is that the retailer's sales volume usually has to be over four million dollars to justify dedicated vehicles with corporate advertising images on the trucks.

Delivery companies operate with different business models that are intended to remove hassles and allow retailers to focus on issues they understand best.... merchandising and sales. This article will focus will be on the business model of Advanced Delivery Systems, a company specializing in dedicated delivery service. Their client list includes long term relationships with some of the best known names in the nation; Jordan's Furniture (MA), Benchmark Furniture (KS), Card's Furniture (RI), Wayside Furniture of Milford (CT) and selected locations of national retailers La-Z-Boy, Bassett Furniture Direct and Ethan Allen.

Advanced Delivery Service (ADS) originated their business model about twenty years ago with owner-operators rather than employees. These independent business men and women are required to follow the detailed delivery specifications specified in a contract with retailer clients and are paid accordingly for their delivery performance.

When designing a delivery system for a prospective client, ADS brings their furniture specific experience with home delivery, and technology for equipment specification and routing systems. They work closely with retail management and operating personnel to develop the optimum delivery process for the particular circumstances. This includes inspection prior to loading, warehouse dock responsibilities, customer home procedures, COD or credit card payments, handling returns and paperwork. These requirements are spelled out in detailed checklists and are in turn communicated to the owner operators.

ADS has the responsibility to recruit and develop owner operators and that is another aspect of their business model worth commenting on. Many prospective owner operators lack the credit rating necessary to purchase trucks. Because of their long experience and volume, ADS has arrangements with full service leasing companies around the country where the owner operators can obtain their equipment at attractive rates. Full service leasing also assures the client that equipment will be replaced periodically so company image is maintained. Most are 24-26 foot straight trucks.

Transition from a retailer's own delivery operation to any outside service always has growing pains. At ADS, these are addressed through teamwork with the client. Daily meetings are required at startup. The frequency of these meetings is gradually reduced as daily operations normalize. Performance is reviewed on an ongoing basis with the underlying philosophy of continuous improvement.

There is a cost associated with high quality delivery, and this may appear to be higher than the cost of operating a delivery operation in-house.

Outside reviews of retailers' delivery operations frequently show they are understating true cost because of a failure to include all tangible and intangible expense items (including management time spent handling delivery and related customer service problems). Nevertheless, satisfied clients say they the outside service is worth the investment due to improved customer retention and ability to focus on the front end of the business. Measured by their continued relationship with their clients, ADS obviously has a business model that supports their customers' business strategies.

Now, about the second call that came within the hour. It was from a retailer who was just as upset as the previous caller. Only this time it was a retailer stating he was so disgusted with his contract delivery service that he wanted to do "whatever it takes" to develop the skills to do delivery with his own employees and trucks. It was ironic that the two calls came so close together, but it proves a point. Having your own trucks or having a contract delivery service should be transparent to your customers. Either alternative needs to meet the ultimate customer perceptions of quality service.

The bottom line is that sometimes you have to overhaul or fire your internal delivery operations and sometimes you have to overhaul or fire your contract delivery service to achieve the desired results.