How the food distribution industry has changed!
Fifteen or twenty years ago, the process of delivering food was a relatively simple one. Now, customer demands are more exacting. There are tighter delivery time windows and customers expect far more frequent communications about what’s being delivered and when. Then there are all the stipulations, such as whether the order is transported on pallets or roll cages, whether it requires temperature monitoring, and the detailed requirements dictated by each delivery location. The complexity of food distribution operations can be mind-boggling.
Worse, the ability to satisfy all these requirements and more is not a nice-to-have. It is a competitive imperative. Already, larger retail customers charge penalties when these demands are not met; others will simply turn to your competitors if you can’t offer a delivery operation the retailer can depend upon.
Fortunately, just as the food distribution business has changed, so too has the technology available to help manage all that complexity. Advanced route optimization software can result in truly excellent, flexible service for your customers, and more efficient, transparent delivery operations for you. At Paragon, we’ve been learning from our food distribution customers for many years, and, many of our support consultants previously worked for food distributors. We know how intricate and complicated things can get, and how to help food distributors respond.
Take the example of a food manufacturer of dairy products tasked with making 5,000 direct-to-store deliveries per week, via 45 contractor-distributor routes, all around a major urban area. Their customers vary from big-box stores to mom and pop restaurants and groceries. As the range of products hit close to 2,000 SKUs, the company – which prefers not to be named – realized that coordinating daily distribution was too complex, and too important, to manage without the aid of advanced logistics software.
Not only do delivery demands constantly fluctuate, including order size, product mix, locations and delivery times. The dairy company also has some unique products that require same-day consumption and therefore need to be on the shelves as early as possible each day in every store. So, for just this one range of perishable products, the company uses a designated fleet of smaller trucks that can be unloaded in 10-15 minute time windows, in contrast to the 45 minutes typically allocated for its other products. The specialty products generate a substantial stream of revenue, making the effort worthwhile. But planning and dispatching the mix of smaller and larger trucks, allocated on the basis of the type of deliveries being made, creates problems the company’s logistics people struggled to resolve on a daily basis.
Now, the company uses the software to analyze complex delivery requirements and, within minutes, generate daily route plans that minimize time and miles while maximizing utilization of drivers and trucks. This is a task that would otherwise take multiple people hours to achieve, with inferior results. After automating route planning, the company saw a 35 percent reduction in miles driven within just a few weeks, with all the attendant cost-reduction that brings. These are continuous savings that go right to the bottom line.
The system does a lot more than just help the dairy company find the most efficient delivery routes. It also gives the company extremely detailed data and the ability to analyze the exact cost to serve customers. For example, it may not make economic sense to deliver only milk to certain remote areas, but if you add lighter, higher-value cheese to that geography, the numbers start to look good. The routing software allows the dairy company to get granular numbers on the cost to serve each customer. This allows them to be much more informed when it comes to adding customers from their network, or even determining whether they should be serving that customer at all.
It also helps with managing third-party delivery service providers. For example, when a shipment combines milk and cheese, the weight-to-volume ratios can be wildly different, depending on the mix of product, meaning contractors cannot simply be paid by weight. With Paragon’s help, the company developed a unit of measure that can be applied, automatically to each individual shipment to calculate the correct rate of compensation, so they can rest assured they’re treating all distributors fairly.
A software tool that really digs into the complexities of your food distribution operations, constantly solving problems and flexing to fit new requirements, can bring spectacular results, saving 10-30 percent in transportation costs right off the bat.
It’s not just about the bottom line, though. Delivery operations are arguably where you and your competitors stand to delight or disappoint customers the most. Without sufficiently advanced and flexible route optimization software, the chances are you will not have anything like the control and visibility you need to stay competitive in this low-margin, cut-throat business. Even if manual route planners are doing a great job, a human brain simply cannot do the work of sophisticated algorithms designed to seamlessly manage ever-increasing complexity.
Let us show you how advanced delivery route optimization software can help you, as a food distributor, take a flexible and proactive approach to solve continuously evolving customer requests and maintain a significant competitive edge.
Read more Paragon customer case studies here.
