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Optimizing Labor Costs in Delivery Operations

Through online and other channels, your customers have access to more sources of product than ever before. As a result, they can demand more from suppliers. Today, the pressure is on products companies and distributors to maintain competitive prices while providing a differentiated level of service that enables them to remain a customer’s supplier of choice. Often, this will mean finding ways to distinguish service at a customer’s site; for example, by offering extra assistance in offloading and/or stocking products. In the distribution business, however, increased service almost always translates into higher labor costs.

To remain competitive, distributors need to find the right balance between service and cost management. To do so, they must take a critical view of all areas within a delivery operation.

Has your organization done everything possible to optimize delivery costs? If not, you may be losing ground, and ultimately pricing flexibility, to those that are.

Manage costs while meeting service expectations.

When it comes to maximizing the efficiency of your delivery operations, plotting the best route for your drivers is only part of the equation. Equally important is what happens when they arrive at customer sites.

If your organization makes a large number of deliveries, the chances are good that your delivery team encounters a variety of different settings that can affect their efficiency at customer sites—physical factors such as stairs, loading dock procedures, or distances through which they must move products during the course of their routes. Understanding these differences, setting specific time standards for deliveries, and monitoring performance against those standards can produce a variety of benefits, ultimately helping you to:

  • Plan routes more effectively
  • Forecast labor needs accurately
  • Measure driver performance objectively
  • Identify and resolve bottlenecks
  • Establish the right incentives for drivers

Most of all, these steps can help your delivery organization manage costs while offering the level of service that your customers expect.

Five steps toward optimizing labor costs in delivery

Following these five steps can help you optimize labor costs in your delivery operations.

  1. Understand delivery site details. The foundation for managing and optimizing labor costs is to understand your current operations. Companies will need to analyze delivery sites, studying the distances from the truck to the destination and all of the different elements a driver may encounter in moving material, such as use of an overhead dock door, hand truck requirements, paperwork procedures, and stairs or elevators.
  2. Categorize and set standards for delivery locations. Using information collected across various delivery sites, you should be able to classify stops based on complexity of physical factors and the time required on site. Then, you can assign acceptable time limits—or standards—for each category of stop, as well as realistic planned days for your drivers.
  3. Measure driver performance. By combining standard delivery times with information about routes and driving times, you can begin to measure drivers’ actual performance versus calculated planned days.
  4. Identify and resolve trouble spots. By comparing documented planned days with actual performance information, you can identify stops where drivers are taking longer than expected to complete deliveries. By examining these situations, you can determine whether delays are caused by bottlenecks or inefficiency.
  5. Optimize labor costs. Finally, by developing and implementing remediation strategies—such as updating drivers’ plans, or working with customers to increase efficiency, or alleviating bottlenecks on site—you can make sure that your organization is getting the most from its labor costs.

West Monroe Partners works with delivery operations to analyze labor costs, develop effective labor standards, and measure labor productivity. For more information, please contact Sean Adkins: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

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