Spatial strategies for service delivery management for an auto-parts retail network

This paper aims to identify areas of economic value and analyse spatial variability of demand and services delivery patterns for an auto-parts retail network. The spatial analysis undertaken was based on transportation and delivery of products out of 'point of sale' stores to customers. Results show that customer demand in terms of revenue tends to be spatially concentrated, however the service delivery pattern reflects relative uniformity. This 'spatial mismatch' indicates inefficiency between revenue generated and trips made, leading to increased costs for delivery relative to revenue. Furthermore, the market areas that have been delineated for each of the stores also shows significant overlap - the area where stores compete with each other for business. Eighty percent of customers can be reached in 15 minutes radius; whist only 20 percent lies outside the market area. We argue that the identification of areas of economic value is a vital business strategy through which customers with the greatest potential can be geo-targeted to reduce cost and increase revenue. The outputs from this research have been used to rationalise the adoption of an area-based delivery strategy that has been implemented to improve the efficiency of the retail network. We recommended that less accessible, unprofitable and non-critical customers could be either charged extra delivery cost or outsourced to 3 PL without the risk of a substantial reduction in revenue or quality of service delivery.