Is it Time to Outsource Your Home Delivery?

Is it Time to Outsource Your Home Delivery?

Posted by Rob Davis

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2/29/16 4:27 PM

Retailer Now recently wrote up a great article discussing a couple of the pro's and cons of outsourcing home delivery. It's a big decision and for many furniture and appliance retailers it's not an easy one to make. The entire article is worth the read but to summarize we've clipped out a few quotes below: 

When HFA member store El Dorado Furniture in Miami opened 50 years ago, “We had our own trucks,” says CEO Pedro Capo. “After a few years, we [sold] the trucks to employees and made them independent contractors, paid the same way we would a salesperson—by volume instead of by stop or by piece. We gave them an incentive to make more deliveries within a certain period of time instead of paying them by the hour. As the business grew, we realized the need to concentrate more on warehousing and not the delivery part of the business.” This led first to hiring a third-party delivery company, then to using outside companies starting with Cory. Two years later, Capo added Diakon Logistics as a second company to accommodate its growth. Both companies specialize in the furniture retail industry.

Capo says there are advantages to hiring an outside service. “We needed more trucks to be available when necessary,” he says. “After investigating our options, we chose (to add) Diakon.” Both companies have asked for all of El Dorado’s business, but, Capo likes the idea of the companies competing with one another. “This makes them both better,” he says. “This gives them a vested interest in making things better. One has more trucks working for us, but both use similar systems, are great companies with a lot to offer.” Drivers with higher completion rates receive greater incentive pay, so “each driver has a great reason to make sure each delivery goes well the first time.”
“There are times during the year when you have highs and lows and need either more or fewer trucks; [These services] provide the flexibility to get more trucks when you need them, like on a weekend,” Capo adds, while, “If you had your own, you’d have to pay their salaries.”

HFA member Lee Goodman also uses a second party, Diakon, to handle all of the deliveries for Jerome’s Furniture in Orange County, California. “It is a better use of resources to focus on our business and allow them to continue the home deliveries,” says Goodman, Jerome’s CEO. Having inherited Diakon when he joined the company 10 years ago, Goodman notes, “If you try to make a change, it is incredibly disruptive.” 

Jerome’s has its drivers and customers phone into a call center after each delivery “to make sure the customer is completely satisfied, that they’ve looked over their product and are happy, that the trash is out and that we’ve done all we can to make the experience what they wanted and expected,” Goodman says. Problems are immediately resolved. “Calling them allows us to ensure that kind of satisfaction.” 

Goodman says, “The use of outside companies provides an economy of scale, by taking care of what needs to be done efficiently and by bringing best practices to the table, and allows for the flexibility of being able to expand or shrink more easily than by using your own people. As long as you can connect your strategy with the customer experience and with the drivers, and give the drivers the tools, training and resources they need, there are few negatives.”

Thinking of Outsourcing?

Here are five questions to ask:

  1. 1-Are drivers experienced with delivering and setting up furniture?
  2. 2-Is delivery a core competency that you are willing to invest the time in to understand regulation, technology, and best practices? 
  3. 3-What are your current costs with HR, recruiting, overtime, workers comp, etc? Compared to the cost of outsourcing will you save money or increase your offerings? 
  4. 4-Do you have enough volume in a concentrated area where a delivery company can provide exclusive service to you and you alone?
  5. 5-Can a 3rd party work around your customer’s schedule and provide additional flexibility you require?

 Read the entire article here

Topics: Retail Industry