- On March 18, 2014
- logistics, order, payment, supply chain, trader
Recently my friend, owner of a small restaurant, shared with me that his time is over occupied and he cannot manage his restaurant effectively. Few months ago he has closed his other restaurant, maybe because of the crisis. Telling me about the work process it came out that as owner of the business he goes to cash and carry shops every day to replenish fresh products. Of course this activity eats a lot of his time and he has to work 14-16 hours per day, every day. Apart from that, my fried has no trust in his employees (maybe with reason) and thus he is the only one dealing with the money in the firm. I offered him to rearrange his time and obligations and to restructure the work process. As a start he had to plan the deliveries based on past experience plus a small buffer. Going out of the special situation, actually it might appear that many small trading companies meet the same problems, which impede their growth. As supply chain specialist I think that solving the logistics problems in small companies may release their time and resources for growth. How may this happen?
1. We always start with planning – of time, deliveries, cash flow
The biggest limitation to small traders is the money. So we should plan according them. In order not to block much money, it is better the deliveries to be more frequent, e.g. once per week or once per two weeks. We define a minimum boundary and when we reach it and there is no delivery coming, we have to organize an extraordinary delivery.
2. We may transfer some of our obligation to the suppliers
All distributors and many retail chains offer deliveries to you. If we plan properly, we may benefit from this service which will save us time and money.
The deliveries rhythm is important for process channeling and cash flow balancing. It is difficult in the beginning but the result worth the efforts. If your small shop is in a region visited by distributors once per month, in order not to keep high supplies, we’d better plan additional transport costs for one more delivery during the month. Thus we shall have two deliveries and transport costs should be included in advance in the products cost. If the shop is in a more communicative region we can benefit if we agree with the distributor about weekly deliveries.
All distributors first serve the big retailers and combine the small shops on the route. This is so because the manufacturers pay fees to distributors for the deliveries and require the shelves to be filled in all the time. If the shelf is empty, the retailer surcharges the manufacturer. So the manufacturer loses once from unsold products and second from surcharges. We can benefit if we identify which distributors serve the big shops in our region, what the frequency is and agree with them to serve us also.
5. Order size
Whether we shall replenish in cartons or in pieces makes big difference for the distributor once for vehicle space utilization and second from turnover point of view. If we have small orders this might not be very attractive for the distributor and he may skip some deliveries if the vehicle is full.
The shop location has big impact on distributor too: if the shop is in a main street, if the replenishment is allowed during the whole day, if the street is small and only pickup can reach the shop, etc. Here we’d better show maximum flexibility to support the distributor so that he serves us every time.
Whatever we agree with distributors, we’d better have it on paper too as a contract which to be our guarantee for regular deliveries. Even a small firm, we should put in the contract penalties for delayed or missed delivery.
The fast goods’ receiving is highly appreciated by the distributor. To ease the work of both parties, we may place written orders using our and distributor’s products codes. The product list should be in one and the same sequence every time so that the receivers can easily see what and how much is delivered. Barcode scanners can significantly speed up the process.
The payment duties among companies are like hot potato now. The distributors prefer to serve shops which pay regularly. Thus we should try to pay regularly our purchases if we want regular replenishment.
Every company faces problems. And when a problem arises and it may impact the distributor, we’d better inform him and try to find a solution together. Respectively when the distributor has a problem and warns us we’d better try to help if we can. There is no need to make mountains out of molehills because tomorrow we may need understanding and support.
As we are a small trader it is difficult to achieve the conditions of the big trade chains where replenishment is scheduled per supplier and per hour. But it is in our hands to maximum benefit from distributors’ routes and to utilize their vehicles. And when we are correct in our relationships, we build partnership worth for both parties.