Peapod Digital Labs

PDL’s Home Delivery Strategy Pays Off for Its Customers and Bottom Line

Peapod Digital Labs, an online grocery delivery service, wanted to optimize delivery results in a single platform and upgrade its solution. The company worked with ORTEC to create a new cloud-native solution called ORTEC for Home Delivery to improve planning, dispatch, yield management, and more.

A Cutting-Edge Solution to Conquer an Evolving Delivery Scenario

Just like how the pandemic changed how consumers shop for groceries, Peapod Digital Labs is changing how it delivers groceries to customers.

Back in March 2020 when the first lockdowns began in the U.S., there began an upward digital shift in how Americans were shopping with grocery seeing the biggest bump. U.S. consumers were spending more time and money with their grocery shopping online than in the supermarket. In fact, roughly 20 percent of all grocery shopping was digital during the height of the pandemic.

PDL, one of the nation’s largest grocery retail groups and the e-commerce engine of Ahold Delhaize USA, not only recognized this trend but had to adjust how they routed their 85,000 delivery stops a week. That’s because as online grocery store sales soared, so has the demand for next-day and sameday delivery.

The company’s routing, yield management and time-slotting technology needed a facelift to keep up with the new changes in demand. With 950 trucks that drive approximately 415,000 miles weekly to 29 fulfillment centers, it adds up to a lot of routes and deliveries. PDL sought a cutting-edge, cloud-based solution to provide optimal results in one platform.

For an online delivery service that operates Stop & Shop, Food Lion, Giant-Landover and other supermarkets, and delivers from that company’s stores, it was a big yet necessary task.

“We really needed a solution that could not only meet our needs for today, but a partner to grow with as the US consumer continues to adapt in these challenging times,” said ADUSASC’s Director of Last Mile Services Paul Kapellas. “Our ultimate goal is to be able to offer our customers an option to have their groceries in whichever channel that they prefer – in store, pick-up or delivery. Our exhaustive search in the marketplace continued to lead us back to ORTEC and their capabilities that would allow us to both improve our current proposition and challenge us to do even more to meet our customer’s needs and our goals.”

New Challenges Need a New Solution

PDL has been a pioneer company for advancement in the grocery ecommerce space during the past 30 years, including serving as the first grocer to launch digital coupons. In 2020 and 2021, the shift in customer demands and buying habits presented new challenges. Though this also gave PDL a unique opportunity to search for emerging technology to support how it delivers products.

The search for the right solution took an unusual turn when a PDL team member familiar with ORTEC from a prior project at Albert Heijn (the Dutch supermarket chain) reached out to Goos Kant, a managing partner at ORTEC and professor of Logistic Optimization at Tilburg University and JADS. (That PDL team member was a former student of Goos’ so having that connection was a blessing.)

Conversations focused on how ORTEC was using datadriven logistics to help supply chains improve routing and optimization, among other topics related to deliveries. While there was not yet a solution that fit all of PDL’s needs, the expertise and tools were there to develop such technology.

During several months, ORTEC’s Product and Development group in the Netherlands worked with their U.S. colleagues to create technology to support PDL’s goals of a having a solution with world-class dispatch & execution, daily optimization, appointment scheduling, yield management, cost to serve and planned vs. realized analytics. The result was a new cloud native product for ORTEC for Home Delivery (OHD).

Four Pillars of Success

For the solution to be successful, ORTEC broke down what needed to be accomplished into how to improve four key areas: 1) the bottom line, 2) customer loyalty/satisfaction, 3) employee happiness (e.g., drivers), and 4) environmental impact.

Through better routing, planning and execution of how groceries are delivered, all these categories could be addressed with OHD. The solution could also support PDL’s main KPI: Number of orders per hour.

By the summer of 2021, the first grocery home delivery routes were made on time to PDL’s customers. PDL could monitor and act upon any disruptions while the trucks were out for delivery (e.g., replace a truck if it breaks down, call customers if deliveries seem to be late, etc.). Early results showed promise with better orders per route KPI than even before.

Fast-forward to October 2021, and OHD is live at 27 locations. The uncertainty around developing a new product just a few months earlier was in the background thanks to a strong PDL-ORTEC relationship that focused on clear communication, progress and goals.

“We had high hopes of what ORTEC and OHD would be able to provide based on their proven track record with Albert Heijn,” Kapellas said. “The co-development, teamwork and collaboration exceeded our expectations, and this project quickly became the project that everyone wanted to be a part of."

Delivering Great Results

Seven months after PDL completed its first grocery home delivery routes with OHD, the company earned back 200% of the anticipated savings, a savings on average of $1 per order – double the amount originally expected to save per order.

The effectiveness of OHD was measured by KPIs such as orders per hour and miles per order. Both showed significant improvements.

“The results and KPIs that we were able to achieve provided significant savings that our brand partners realized,” Kapellas said.

Another benefit was that drivers went less miles for the same number of orders, which contributed to the environmental impact area. For the drivers and planners, more efficient routes meant they saved time and felt more comfortable with ‘routes that make sense.’

It all added up to a successful new solution with happier customers and employees.

“The partnership between PDL and ORTEC leadership has been fantastic throughout the project,” said Herman Wierenga, COO, ORTEC Americas, and project owner of the PDL project.

“We work together seamlessly to bring as much value as possible to PDL and their customers while also creating a great new product for ORTEC. It is truly incredible to be part of such a great team and initiative.”