Operations Perspective
An analysis of beverage delivery costs
Delivery cost calculations essential to profitable operations
A priority objective in all segments of the beverage arena, as indicated by studies and surveys, is to obtain maximum sales volume in defined geographic locations under variable conditions. Using this premise, a challenging and significant question can be on the agenda: what is the cost per case/unit for delivery to designated terminals?
Again, the supply chain becomes the focal point to address the question because the distribution phase is where delivery activity begins ― costs are incurred, beverages are positioned for sale and should be monitored for analysis and control. Further, research has revealed that bottlers and distributors have varied approaches for tracking delivery costs. From high priority to low concern ― just so there are no “out of stock” situations.
Nevertheless, the approach to delivery cost requires identifying the elements included in a calculated equation. Specifically, in a somewhat generic way, such as driver/salesperson, delivery vehicle used, type of account serviced, number of routes and accounts per route, geographic distances traveled, methods of delivery, destination facility capability and even package mix and delivery equipment are significant elements that are traditionally involved.
Experience and field research suggests that these elements can become difficult to quantify because many variables are involved, operating conditions are volatile and that presents a challenge that could make a tracking effort questionable. However, an analysis will emphasize why beverage delivery cost calculations and monitoring are essential to a profitable operation. Look at each element activity that generates cost.
- Driver/salesperson: Wages can take the form of hourly rate, commission or sales volume incentives and more.
- Vehicle type: Whether multi-bay route trucks or route tractor/trailers are used, investment, depreciation, maintenance, fuel cost and insurance become a cost/mile reality.
- Account configuration: Convenience stores, supermarkets, commissaries and on-premise businesses all have different venues for handling beverage delivery affecting cost.
- Number of routes and number of accounts per route: More routes, more accounts are subtle costs that impact delivery.
- Geographic area and distances: Depending on vehicles used, routes and accounts, the distances and time are real time cost issues.
- Facility capability: This element can have a significant impact on cost because docks, ramps, city streets, drive through buildings and elevators all have costly obstacles to overcome.
- Package mix and delivery equipment: The analysis discovered and concluded that mix (cases, units, bag in box, transfer tanks and material) and equipment (2-wheel pushers, 4-wheel platforms and fork lift trucks) present a time consuming issue that could abate productivity and is definitely part of delivery cost.
In addition to the physical element structure of delivery cost several issues enter the equation. One is the time of delivery to a terminal point. Scheduling at low traffic times is desirable, even “after hours” is used to reduce delivery times and impediments. The other is unloading responsibility, where customers might opt to use house crews and relieve bottler/distributor cost. Two issues are intangible but still cost involved until merchandise is completely delivered.
In summary, beverage delivery cost per case might be obsolete as a management tool, but an umbrella view of beverage delivery might not need unit measurement. However, whatever monitoring method is devised and effectively used to minimize cost can and should be to everyone’s benefit.
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