What do books and screws have in common? When it comes to managing logistics subcontractors, they have a lot in common, and flexis is making that more manageable with a new cloud solution.
Distributors that restock inventory for customers share a unique set of challenges that are present across all industries and types of products. Shippers with this business model take shipment delivery beyond the warehouse receiving dock - they put away each SKU into its designated location at the customer’s location. Fulfillment often involves monitoring a customer’s inventory levels and automatic replenishment.
Business growth presents a dilemma for these distributors. Growth requires expanding operations with more warehouse space, equipment, and workers, but affording this requires expansion. In addition to this catch-22, finding route drivers experienced in managing inventory is also problematic. What is the solution?
Logistics subcontractors. These distributors can contract any combination of resources from asset-based logistics providers: experienced drivers, dispatchers, and fleets without assuming the financial risks. However, subcontracting comes with operational risks.
There is a higher level of trust involved when customers provide a distributor with access to their facilities and the responsibility of managing inventory. The need to verify and monitor subcontractor performance is paramount for distributors.
The good news is a distributor can manage subcontractor risks if it uses the right logistics process and flexis developed a solution for this.
The Book Distributor and Fastener Distributor
flexis engaged two distributors in different industries with this business model and proposed a solution that met their requirements for managing subcontracted route drivers.
-
A fastener distributor maintaining screws, bolts, and other hardware for its industrial customers. A restock order is automatically sent as a customer uses inventory. When any SKU reaches its buffer level, the distributor dispatches a driver to the factory to replenish all of the outstanding restock orders.
-
A similar situation exists with another shipper, a book distributor restocking retailer stores. The bookstore’s inventory system places an order for a book title with the distributor for the next day's restocking. A driver with key privileges delivers books overnight, stocking shelves before opening hours, and places books in the appropriate section.
-
From an inbound logistics standpoint, they are fundamentally the same: they need to get the right product to the right place at the right time. It does not matter whether their suppliers use a private transportation fleet, 3PLs, or subcontractors driving their vehicles to make this happen.
-
Both companies shipped restock orders from their warehouse via subcontractors who transported and stocked the final customers’ inventory locations.
The Challenge of Controlling Subcontractors
In theory, both distributors control what their subcontractors do, but the reality is they cannot control execution. They wanted a solution that provides control of the fulfillment process to address concerns about pricing, reliability, and resilience. Here is a summary of the challenges flexis resolved:
1. Price: The cost of subcontracting must be minimized to justify outsourcing logistics services and keeping customer costs competitive. To manage costing, distributors need access to logistics execution data from their warehouse to the customer’s location, including all stops, exceptions, and costs. These performance and cost metrics had to be built into the subcontractor’s workflow and captured for the distributor.2. Reliability: Entrusting the customer interface to a third party requires acceptable performance, and that’s difficult to verify without visibility to execution. Subcontractors ultimately manage the process and use their business systems.
3. Resilience: Vulnerability to subcontractor failures and little ability to mitigate potential damages put distributors at risk. The risk extends from daily performance problems to business continuity. Unreliable delivery performance can result in losing customers, and there were concerns about business continuity:
-
-
-
-
What happens if the subcontractor’s dispatcher has an accident or quits?
-
What if a subcontractor declares bankruptcy? We could lose our customer base.
-
What if a subcontractor doubles the price and threatens to quit servicing
customers if we refuse? We could lose our customer base.
-
-
-
Requirements for Controlling Subcontractors
The only way to control these risks is for the distributor to manage the fulfillment process to its conclusion placing the SKU in the customer’s inventory location.
-
A uniform process that ensures profitability and sustainability goals are achieved when using subcontractors.
-
The process must be easy for subcontractors to use and improve their efficiency.
-
The distribution network can scale rapidly without consuming resources from any parties involved.
-
Optimized delivery routes that ensure customers are provided the most cost-effective, high-quality service.
-
Enables continuous improvement by measuring subcontractor performance and costs at every step.
-
A control tower view for monitoring subcontractor work and collaborating on resolving unexpected disruptions.
The Solution: Collaborative Route Planning
The solution flexis proposed to meet these requirements is ProfiTOUR, a cloud-based SaaS that automates route planning and optimizes delivery.
ProfiTOUR provides a control-tower view of operations, monitoring the price, reliability, and resilience risks. A visibility platform like Project44 can extend control to all modes of transportation beyond the restocking shipments managed by the subcontractors.
Share the Cost
The benefits of a collaborative solution are shared, and in some cases, subcontractors pay for their usage of ProfiTOUR. While each distributor decides how they want to approach this issue, flexis can help identify the value and pricing for subcontractors.
In the end, the customer always pays, and to be competitive, a distributor and its subcontractors want to minimize logistics costs for the customer to ensure their mutual success.
You want more information ?
