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In many companies, a concentrated effort is underway to improve the productivity of distribution networks. Whether companies are leaders in delivery, over the road sales, or service and repair, the hunt for savings is intense, driven by rapid changes in fuel costs and less differentiated product. In the last two years, fuel increases have broken the business models of many companies which deploy fleets. Despite recently retreating commodity prices, fuel costs are still over double the levels of 2006. Companies also are striving to optimize the location and skills of their people, and to consolidate the numbers of dispatchers required to manage fleet response. Further pressures are likely in the coming months as difficult access to capital markets and recession put the squeeze on profitability and capital expenditures. Across the board, companies will slow their purchases of new equipment and attempt to consolidate their work forces while maintaining responsiveness to customers. Fleets may also become subject to more federal regulation by the coming focus on greater energy independence in the U.S.
Information is Power
To address these pressures, leading managers will want to explore information-based initiatives to reduce costs while driving revenue, profit, and customer satisfaction. These include:
- Automating the scheduling and dispatching process to make service operations more transparent and increase responsiveness to service level agreements (SLAs).
- Implementing GPS automatic vehicle location (AVL) and other telematics applications to provide information for monitoring performance, maintenance alerts, and emergencies.
- Analyzing routes and territories to improve density (e.g., sales/mile) and response times
- Analyzing performance data on drivers and technicians, with the goal of establishing priorities for improvement.
- Using fact-based coaching to hold teams accountable for results that drive strategy.
Overcoming Obstacles through Planning
There are challenging obstacles to using information to improve performance. These include:
- Building tech/driver trust. Many drivers like their jobs because of perceived independence and the sense that they were well away from the reach of a manager. Tracking and numerical performance systems often remind them of Big Brother; in one recent case, the first line supervisors had nicknamed an automated dispatch and scheduling system HAL, after the murderous computer control system in 2001: A Space Odyssey. Careful planning on communications prior to a roll-out (e.g., emphasizing the benefits to driver safety or finishing work closer to home) can make a big difference in acceptance
- Increasing supervisor comfort with data and coaching. Many supervisors who have worked up the ranks from jobs as drivers or techs may be uncomfortable with interpreting performance data or coaching subordinates. Simplifying reports to scorecards, identifying specific tactics that will advance the initiatives, and providing supervisors with coaching tips can make a big difference in changing behavior that will drive results.
- Improving business processes. Automation exposes deficiencies in parts management, manpower planning, the skills available to make service calls, and how well selection and retention strategies have molded a high-performance workforce. Creating a road map to service productivity through an operations audit and certification process allows managers to begin working on potential deficiencies before a network is automated.
- Lack of alignment among the senior management team. Automating the service process requires a cross-functional commitment to investment and measurement, and a joint plan describing the cooperation of leaders in allied functions to make sure that tasks like communications, training, and product information support project goals.
Change Management is Critical
Overcoming obstacles will be easier with an explicit, clear change management plan. As you’re refining the strategic changes needed to improve performance and evaluating opportunities to support changes with technology, be sure to consider how the participants at different levels of the organization will be affected, and how to maximize their engagement:
- Assess attitudes of change among the stakeholders (anyone who can derail your plan)
- Clearly describe the “future state” from today – what will be different?
- Design a launch program that incorporates key elements of change management
- Define roles and responsibilities
- What needs to be communicated?
- How and to whom must training be delivered?
- What are the incentives and disincentive to changes in behavior?
- Are there impediments to change in the organization’s structure to be addressed?
- Is there a tactical rollout plan that describes how the change will be piloted, how knowledge will be documented and shared, who will be assigned to the project and how they will be managed, and how you will know when the change is completed so change management investments do not end up as a new layer of bureaucracy?
Improvement in distribution can be achieved by collecting and analyzing performance data and changing the behaviors of the people who sell, deliver and service your products. Despite the challenges, achieving higher distribution productivity may be your best opportunity in the difficult times ahead.