The company distributes fresh and frozen meats, fish, poultry, fruits and vegetables to restaurants, country clubs, banquet halls, municipal facilities, diners and assisted living centers.
Increase the productivity of the delivery operation to reduce operating costs to acquire new customers and retain existing customers in a highly competitive pricing environment.
- The organization’s pricing of its products was being negatively impacted by its high delivery costs.
- Low driver productivity had resulted in adding additional delivery routes, drivers, delivery vehicles and overtime expense.
- The organization’s management had attempted to measure driver performance, but was unable to develop a set of metrics which accurately assessed productivity.
The initial focus of the project was to develop productivity metrics for the delivery routes. These metrics would give management the ability to measure and improve driver productivity. The productivity metrics developed consisted of four elements. These elements are stem miles per hour, on route miles per hour, a time allowance per stop and time standards for each category of product delivered to customers.
There were two criteria in developing the productivity metrics. The first was to select routes which were in each of the three categories of urban, suburban and rural routes. The second criteria was to choose drivers with a history of high productivity. There were two reasons for selecting these high performing drivers. First, the performance of these drivers would be used in the development of the productivity metrics. Second, the processes used by these drivers in achieving high levels of productivity would be documented and shared with all of the drivers. To insure accuracy, a time study engineer accompanied each driver on the selected routes and recorded performance data necessary for the development of the driver productivity metrics.
Two substantial process improvements were identified by the time study engineer during these ride-alongs. The first was positioning product for the next few deliveries near the door to reduce unloading time at future stops. This positioning of product was done during periods of downtime on the route to maximize productivity. The second was carrying more product on the hand truck to reduce the number of trips to and from the customer’s storage location. This process improvement reduced the average delivery time by six minutes and substantially increased driver productivities.
To increase driver performance, an incentive compensation plan was developed which paid bonuses based on monthly productivity levels. The plan included two elements designed to create highly motivated drivers. These two elements focused on increasing the amount of the first check distributed under the plan. One element increased the first period for the payment of incentive from one month to ten weeks. The second element lowered the productivity level for the payment of incentive in the first ten weeks from 85% to 80%.
To insure a high level of quality, customer satisfaction and safe driving, a penalty provision was included in the incentive plan. This provision reduced incentive compensation by a percentage based on the seriousness of the quality failure.
Within 10 weeks of implementation, the productivity level of the delivery department had increased 15%. This allowed a 20% reduction in the number of delivery vehicles on the road on a daily basis. Additionally, the inclusion of quality and safe driving as elements of the incentive resulted in a continuation of a high level of customer satisfaction and no accidents.