The attraction of outsourcing last-mile delivery to the customer is not difficult to figure out. The last leg of a shipment's journey can be expensive, and customer expectations are high that their merchandise will arrive on time and defect free.
Yet handing off that task to a third party can be something of a risk, particularly when it comes to specialty products that can't just be tossed on the customer's doorstep like a book or article of clothing. For suppliers of specialty items, the final delivery is a key element in the customer service equation—one that can either bolster its reputation or cost it a client's business. That makes it all the more essential they select the right partner.
One such specialty supplier is New York-based Windowrama, the Northeast's largest retailer of windows, doors, and skylights. The majority of its products are delivered straight from its Edgewood, N.Y., distribution center to a home or construction site. These products are generally large, heavy, and made of glass. It's critical that they be properly handled. For this reason, for the first 23 years of the company's existence, Windowrama handled all of its logistics in-house with its own set of employee drivers.
But over the years, managing drivers grew increasingly complex and time-consuming. "It became a lot of work for us between the [Department of Transportation] laws, the drug-testing regulations, and the hiring of drivers," says Al Altieri, Windowrama's director of distribution. "It reached a point where it was very difficult for us to continue to do it. Our focus really needed to be on our business, which is windows, doors, and skylights, and not on running a trucking company." In the end, Windowrama decided to give outsourcing a try.
A rough start
But the transition to outsourcing wasn't easy. The company initially contracted with a third-party logistics service provider (3PL) under an "employee-based" arrangement, whereby the 3PL hired Windowrama's former drivers. That model proved to have its drawbacks. For one thing, it turned out to be very expensive because Windowrama was required to pay for the use of 21 trucks, 21 drivers, and 21 helpers each day—no matter how many it actually needed.
On top of that, Windowrama had no way to ensure it got the level of service it wanted, since it had no leverage with the drivers. "[The drivers] had union protection and they were employees of [the 3PL]," explains Altieri, "so if they broke something or treated a customer disrespectfully, there were no ramifications."
That crucial link between last-mile delivery and customer service was being lost. "There was nothing pushing [the drivers] to be good customer-service people, and in our business, that's key," says Altieri. "Our sales people can do a fantastic job selling the product, and my warehouse and distribution people can do a good job handling and receiving it. But when the driver is the last person to see that customer and he doesn't do the right thing at the job site, you could lose a current customer and you could lose a future customer."
Furthermore, the new setup was proving unpopular with the drivers. "We had a very good relationship with the drivers when they worked for us," says Altieri, "but when they transferred over to [the new employer], there were some bitter people."
Despite several appeals from drivers to take them back, Windowrama was determined to stay the outsourcing course, Altieri says. "Once we had subcontracted out, there was no way we were going back," he says. The company was convinced the outsourcing route made sense, he says; it just needed to find the right model and the right service provider.
If at first you don't succeed ...
The right provider with the right model came in the form of 3PD, a national third-party logistics company that specializes in deliveries to homes and job sites—particularly deliveries of heavy-duty appliances and furniture. In fact, last-mile delivery is all 3PD does, so the provider is very choosy about the delivery teams it uses. 3PD's business model calls for subcontracting with owner-operators to handle the deliveries, but that doesn't mean it's willing to settle for whoever's available. The 3PL takes great pains to find delivery teams with the right skill sets, and then make sure they understand exactly what 3PD and its customers expect of them.
"We look for special individuals who have very strong customer skills and are really customer ambassadors because we're going into some very private parts of individuals' homes," says Will O'Shea, chief sales and marketing officer for 3PD. "There's a big difference between that and bumping a dock at a Target or Walmart and waiting to be unloaded."
And yet, Altieri still had trepidations about handing over delivery responsibilities to 3PD. "When 3PD came on board, we were very nervous about turning the whole thing over to not only a third-party provider but to one that then goes out and gets a subcontractor to work for it," he says.
But it turns out the Windowrama executive had nothing to worry about. "The [subcontractors] take responsibility," says Altieri, noting that he can count on them to load the product correctly, show up on time, and provide prompt, courteous service.
In fact, the difference in service is "night and day" according to Altieri. "Our customers are thrilled," he says. "They get phone calls an hour before the [truck] arrives, and they get uniformed, proper, professional drivers."
Altieri especially likes the survey system 3PD uses to evaluate its delivery teams, noting that it's the first thing he looks at every morning. Following each delivery, the 3PL e-mails the customer asking it to rate the overall delivery experience: Was it on time? Did the drivers call ahead? If you needed another delivery, would you want the same team? According to O'Shea, the survey elicits a 45-percent response rate.
Another big advantage of 3PD's model is its flexibility. In contrast to its previous arrangement, Windowrama is not required to maintain a fleet of 21 trucks; instead, 3PD offers a variable pricing model that allows the client to pay for only those trucks and delivery teams it actually uses. "It really worked well for us when the economy came tumbling down," says Altieri. "We were running 21 to 20 trucks a day; now we're down to 12 to 13 trucks per day. That's a big deal, and adds up to lots of dollars in savings."
And by lots of dollars, Altieri means $2 million. "We expected to save about $1 million by switching to 3PD and taking advantage of its network redesign, routing, and customer service expertise," says Altieri, "And we would have been really, really happy with that. But in the end, the pricing model ended up being an equally significant part of the equation, so we wound up saving $2 million instead."
While outsourcing was clearly the right decision for Windowrama, it's not right for every company. For instance, if a company has fewer than five trucks on the road each day, the financial benefits of outsourcing are questionable, according to Will O'Shea, chief sales and marketing officer for 3PD. Anything over five trucks, however, warrants taking a look at outsourcing.
Say you're interested in going down this route. How do you pick the provider that's right for you? O'Shea suggests you start by asking yourself the following questions: