What Are You Doing About the CRaP Products in Your Business?

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Editor’s Note: Chris Jones, is EVP of Marketing and Services, Descartes
In a recent story, the Wall Street Journal wrote about Amazon’s efforts to address unprofitable products. The company has a great name for those items that it deems are not profitable: CRaP, or “Can’t Realize a Profit.” Every company has products with low, no or negative margins. They are typically “low dollar density” – that is – they don’t generate enough revenue relative to the cost to deliver them to customers.The article mentions a number of ways to try to address the problem, such as changing packaging and quantity and making it someone else’s problem (read supplier).Every company should have a CRaP identification program. Logistics technology can help address profit margin-challenged products because the cost driver in many cases is the delivery. The key is to use logistics technology that shapes customers’ delivery options to provide superior service but at a lower cost.Here are three delivery-shaping strategies to improve profitability.Your customers aren’t all the same; stratify your delivery options to drive profitability and let them self-select. There is no reason to have every product, especially the unprofitable ones, receive the same service level that your money makers do. It is possible to incentivize customers to take more profitable delivery options and increase your margins. Amazon is already doing this. Some customers will pay for the privilege of fast and precise deliveries, while others want to the cheapest way possible and will take a slower delivery. As long as customers have choices, they will be happy to self-select, and using dynamic booking during the buying process will allow your company to tailor delivery options based upon the customer and the products they are buying.Steer customers to more profitable delivery options in the buying process. It is possible to give customers better delivery options and have them be more profitable for your company. For example, not all next-day, two-hour windows have the same delivery cost. So, why not give the customer the two-hour option with the lowest cost to you? If you already know that you will be in the customer’s area from 2 p.m. to 4 p.m., why not offer the 4 p.m. delivery window instead of the one at 10 a.m. when your trucks won’t be in the same area? Customers are more willing to take the first option you provide as they place a relatively higher value on time-definite deliveries as opposed to speed, so start with the options that make you the most money. Again, dynamic booking provides the ability to score delivery options based upon existing orders and give customers options that drive up delivery density which, in turn, drives down costs.Take an omnichannel approach to delivery and consolidate customer orders across your delivery channels. Unfortunately, too many companies have pre-defined and segmented delivery options based upon product size. They do not consolidate customers’ orders to drive down costs and improve service. For example, if a customer purchased a large item for delivery next Tuesday by a two-person crew and a small item over the weekend that would normally go by parcel, why not consolidate those deliveries? It’s easy to understand that the delivery costs for the small item would essentially be eliminated. By consolidating orders using a single multi-modal solution and evaluating delivery options for new orders based upon existing orders, companies can give customers delivery choices that drive down costs and still provide high-service levels.All companies should take Amazon’s CRaP approach to heart to identify and address products that are profit killers. Logistics and logistics technology can play a prominent role in helping to drive costs down and margins up. Companies that proactively use logistics strategies and technologies that shape customer delivery behavior will be in the best position to eliminate CRaP products from their portfolio.image
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