Location, order size and order frequency are all things you take into account when deciding whether to add, or no longer service, a customer. It seems like it should be pretty straightforward. And in a static routing environment — with very little daily variance — it usually is.
Things can get more complicated in a dynamic routing environment where the routes are constantly changing and rarely stay the same day-to-day or week-to-week. The changes come in the form of customer order variances, frequency of orders, seasonal volume peaks and valleys and order priorities that are influenced by outside factors such as your sales department.
While each factor can be a significant contributor to route and financial instability, it is important to weigh all the factors to ensure you have a complete picture before making your decision.
Factors that you should consider include:
- Order history — How often does the customer place an order? When is the order placed and how much lead time is available before the order is scheduled to be delivered? What is the average order size? How much space does the order take up in the truck?
- Sales history — What is the average revenue per order? What is the average order size? How much revenue is there compared to the expenses generated by the order? For multiple delivery point orders, how much revenue does each location generate individually and how much revenue is generated collectively by all locations? How long have you been working with the customer?
- Route history — What vehicle do you typically use to service the customer? Are there delivery constraints such as a lift gate or side door? Are there location constraints such as delivery windows, alleyways, low overhangs, parking lot issues or noise curfews? Is the customer reasonably near other regularly serviced locations?
- Customer service — What is your ability to service this customer based on your company standards, as well as the customer’s expectations? Is the customer regularly serviced on time? Have there been any driver, vehicle or product damage incidents or complaints?
- Mode of delivery — How is this customer delivered (dedicated, one way, LTL, parcel)? Is this method consistent or does it vary with any predictable frequency or trigger?
- Other factors — Is this delivery point part of a membership or consortium in which you serve? Are there any corporate or executive relationships that are being maintained? Are any agreements in place that outline how a specific delivery point is currently serviced or how it needs to be serviced in the future?
When you start to analyze all this data, you will get a portrait of the account with some “colors” becoming vibrant and clear and others lighting the way to unforeseen opportunities.
The least desirable conclusion would be to stop servicing a client. And if you’re not developing new, unique and creative solutions that might be exactly what you need to do.
When the available data paints an unfavorable picture, here are some questions to ask yourself:
- Can we alter the frequency in which this client is serviced?
- Can we consolidate their orders into a singular larger order?
- Can we alter the delivery window?
- Can we alter the order lead vs. scheduled delivery date?
- Is this customer open to change, with the promise of increased customer service levels in exchange?
- Due to the order size or frequency, can we alter the method of delivery? For example, can we move from dedicated to LTL?
Once you have the answers to all these questions, you can begin to build a business case for this client. In many instances, customers are open to modifying their delivery method or frequency especially if it results in enhanced service or cost savings. When that happens, it is likely that by making modifications you will be able to continue to service the customer profitably.
One final thought: once a decision has been reached, don’t let it become the “set it and forget it” final word. Even the best plan needs to be evaluated on a regularly scheduled basis. Customer buying habits change, the addition of new customers and newly developed back haul opportunities can all effect routing. This review should occur on at least an annual basis, but a bi-annual review (or even quarterly if you feel the activity warrants) will get you the best on-going results.