A look at delivery in the'9Os

By Wally Lynch Paid Associates

EING ten years older is the tough part of seeing a new decade ushered in. The fun part is reading and making all the prognostications for the future. Here are a few you can look for in the 1990s.

HOURS WILL CHANGE. The marketing approach toall services will be adopted. The customer will be served. There are major retailers in our industry providing delivery seven days a week. Many dealers run a night shift to load and stage the next day's operations. When you think about it, the contractor works on site froni 7 a.m. to 3:30 p.m. Many work all seven days of the week in season. The consumer is free to shop nights and weekends. As more and more dealers position themselves to serve their customers. the traditional service hours won't compete.

Story at a Glance

Expanded service hours, moro contract delivery, computer programs, fewer drivers, less equipment, better asset management. a self-test with answers to help you evaluate your position in the new decade.

MORE CONTRACT DELIVERY AND SERVICES. Every major retailer in this country makes use of contract trucking in one form or another. They do it because it's cheaper and better and equipment maintenance is handled by the contractor. For the dealer there is substantially less capitaliied up. It is paid for as the service is utilized from realized gross margins. This makes real cost identification accurate and virtually indisputable. It also readily separates delivery costs from delivery services such as the custom placement at the site of deliveries of millwork, shingles, wallboard, brick and block.

Computer Programs

WILL BE AVAILABLE. Currently delivery modules are available as part of several micro software packages. They basically capture truck and auto expenses and very little else in the delivery expense area. You can look for much improved programing in both micro and P.C. formats during the 1990s. Here are a few things that will be available in software packages.

Profit scrutiny before the truck is released. Measurement of driver and equipment effectiveness.

Monitoring of profitability of delivered sales daily.

Identification of profitable trading area dimensions.

. Measurement of market penetration within your trading area by municipality.

FEWER DRIVERS. LESS EQUIPMENT, BETTER SERVICE. Delivery will be more closely defined. Other services, such as C.O.D.

collections, return pick-ups and on site placements, will be segregated as separate cost centers. Matrix pricing will be expanded to support this repositioning of expense. More dealers will make direct charges for such services. There will be expanded shift use of equipment during seasonal months. A 6 a.m. first out, with daylight until 9 p.m., means a 15 hour use of equipment. Virtually two shifts. Drivers will only drive. When drivers pick and load, the equipment stands idle. Nominally a truck and driver cost $50 per working hour to sustain. When one or the other is idle, the effect and expense is obvious. To benefit, plan to stage and pre-load so that trucks turn around in your yard in 20 minutes on average. Why will these things happen? Because in an industry where 2o/o pre-tax is the norm, every operating dollar saved is comparable to $50 in sales. Saving $10,000 in expense is comparable to making $500,000 in sales.

MORE OUT OF PEOPLE AND ASSETS.

There are dealers currently averaging $2,000,000 in delivered sales per vehicle operated yearly. There are individual drivers handling up to $4,000,000 annually as well. Such operators have two things in common. As drivers they have only that one duty to perform and all rest and meal breaks are taken from and to the yard. This means that knowledge of building materials will stay in the yard all day while the ability to drive and off-load goes out and back more often. Both people and assets are more effectively used. More pressures will be brought to bear on the traditional dealer who historically had depended on the front end, or consumer sales, to offset the higher cost of contract business. When these two businesses are accounted for separately, most will be shocked to discover that they lose money on delivered sales and most likely are not competitive in the consumer sales area. Receivables, delivery and volume discounts raise the basic costs of doing business with the contractor by 100/o to 150/o over customers not afforded such benefits. The retail outlet glut and competitors without such millstones will force management to scrutinize the use of people and assets more closely. They're making more people all the time, but making them more effective will be the profit path in the 1990s.

If you would like to evaluate your delivery operation, take the Questionnaire printed with this article. It asks l0 questions, explains the meaning of your answers and provides insights into what changes you need to make and what benefits can be realized through change.