Jan/san distributors are constantly faced with the challenges that come along with giving their clients what they demand — a well-rounded plate of choices in cleaning equipment, supplies and solutions.

Lately, customers' requests have extended into how deliveries are made, with pressure being put on distributors to be quicker and cheaper.

To meet this demand, distributors are examining their logistics and, in some cases, using third-party delivery outlets like FedEx, UPS and the United States Postal Service (USPS) to fill some orders. Distributors are also reaching into their enterprise resource planning (ERP) software to help them crunch some of the complicated time and money factors that come with using these third-party shippers.

Tapping Into Third-Parties

Third-party delivery companies are a useful option to fill odd orders such as those that are abnormally small or those that are outside of the range of the distributor's truck delivery routes.

On occasion, Taunton, Mass.-based Perkins Paper Co., will send small orders through a third-party shipping company. This is typically done if there was an error with an order or a special request from a client, says David Donnelly, the company's sanitary supply division manager.

Depending on the circumstance, Perkins Paper may add shipping charges to the order along with a handling fee. Decisions regarding what carrier is used typically is made by Perkins Paper based on the shipment and the customer's needs. Ultimately, the decision to use third-party delivery service is based on keeping the customer satisfied.

"Everything we do, we will have a discussion with the customer," Donnelly says. "When a customer calls and asks us to ship one case of product, we'll get it there."

Like many other distributors, to limit the number of small orders they must handle, Perkins sets a $400 minimum customers must meet. The company will fill orders for less than that, however, on rare occasions or for those customers that can hit the minimum the vast majority of the time or at other locations. These orders, according to Donnelly, may be moved by third-party shippers, which may be cheaper than sending it on the company's own trucks.

"We cannot afford to stop the truck for orders less than $400," Donnelly says. "Let's say we are stopping a truck for a $70 order and we are making 20 percent on it. You can't afford to stop a truck for that much money. The engine runs and you have gas, plus the driver has to go from his last stop to next stop. So that is calculated along with the actual time spent at the location. When you factor that all in, it doesn't make sense."

Reliance on third-party shippers can also help ease the logistical stress that may be created by a distributor's own website, where just about anyone can go and place an order. The Internet has created opportunities, but has also forced distributors to branch out of their local markets. As a result, the need for for shipping alternatives and software to manage those shipping alternatives has increased.

Cost Alternatives

Instead of complete reliance on its own trucks, a distributor can use software to run hypothetical logistical scenarios in which they use a third-party shipping company to deliver orders they otherwise would deliver themselves.

Although many distributors feel clients value deliveries being made on their trucks, the expenses that are associated with doing business in this way continue to put increasingly more pressure on bottom lines. The cost for gas, fleet maintenance, insurance and drivers are forcing distributors to look for outside help for delivery services.

"It's probably a 90-10 rule that customers want their orders on our truck. They want our driver to deliver it and they want it to flow from A to Z," says Chris Nolan, president of H.T. Berry, based in Canton, Mass. "But, when you look at the cost to doing that and use ERP systems to regulate that you can save yourself money using (third-party) shippers."

Shipping software, in the form of modules with ERP systems or standalone applications, allows distributors to enter delivery and package variables, such as weight, size, time and location into a few fields. The software then returns the cost and time for each third-party shipping vendor, guiding the distributor and the client as to their best shipping options for that particular order.

The advantage to using this type of shipping software is how much more efficient the distributor becomes when dealing with special orders. Instead of an employee crunching different variables and numbers or being on the phone with a shipping company, the software does the time-consuming work.

"The reason to use it is to lower our cost to serve and also to address our customers' issues," says Nolan. "Customers have been calling for this starting about five or six years ago."

Distributors are also taking advantage of the time savings associated with third-party delivery software.

Supervision Still Needed

What was once a one-hour task to process an order for delivery through a third-party shipping firm, is now a two-minute job, according to Nolan. He adds, however, that he still enjoys the human oversight that comes into play especially when special delivery or communication instructions arise.

"It's not completely void of the human element, and frankly, we value that because we need our people inside to still monitor that and to still input things correctly the way the customer wants it. You really can't take the people completely out of it, but it's lowered our cost-to-serve immensely," Nolan says.

Nolan explains that the software's functionality is easy to use.

"It requires a little data entry up front, real basic," Nolan says. "Basically, we have fields in our system that we will put in (information) and it will default to FedEx and UPS based on order size or based on the request of the customer. So we have a lot of different scenarios that can happen."

Nolan adds that H.T. Berry's system allows users to set a default to indicate whether delivery to a customer is primarily or partly accomplished with a shipping company rather than on company trucks. The system can also account for whether a customer has its own account with a shipping company.

"It's a big value. Certain customers want it that way, whether it's for their tracking purposes, meaning that some people just love the usage of UPS or FedEx," Nolan says. "It can be a competitive advantage if you go to those levels. Some of them want it by order size, so there is a lot of different areas we can go on."

Shipping modules typically come as part of an ERP software suite that also contains purchasing, order entry, invoicing, warehouse management and financial modules — to name a few. Order and customer data can flow freely from and to the shipping module to those other modules within many ERP systems. This allows for conduciveness in terms of real-time, immediate and accurate data within the ERP system regarding an order or a customer.

Brendan O'Brien is a freelance writer based in Greenfield, Wis.




POSTED ON: 9/20/2010