News

Who is Driving Delivery? 

by Patrick Wall
CEO
MetaPack

Is it possible we are unfair to parcel carriers? Accusations are made about poor carrier service, poor attitudes and the wrong ethos. But no one can deny that delivery is at the heart of every carrier’s business. The same cannot be said for many retailers. There is a real need for retailers to provide Board room sponsorship and resource to create a better delivery offering and support carrier innovation.

Smart retailers have already elevated delivery to a key board room topic and have spent the last few years building their delivery proposition to attract new customers and retain them for repeat purchase. Quality and value of delivery play a key role for these retailers. And since good delivery costs less than poor delivery they are doing the right thing for their customers, while at the same time saving money: this has to be a good idea. Unfortunately, these retailers are still in the minority.

For many retailers there is a fault line between delivery management and the rest of the on-line business, with warehousing and stock management sometimes sitting uncomfortably in between the two. Typically, the management board of the online operation is making key decisions about merchandising, search, marketing and so forth, but very often the delivery of product is passed to the logistics or supply chain function of the business where it is treated a) at arms length and b) as a cost centre rather than an investment. Unsurprisingly these retailers then have cheap but poor delivery services, restricted delivery options, little investment on the website to help shoppers understand delivery, short cuts like no address checking and poor labelling, and no help for the customer to track their own orders. Investment is low, customer service is poor and ongoing operational costs are high. In these cases senior management must become more involved and take more ownership for the less sexy, but critical part of the business!

Carriers are innovating to improve home delivery. New services have been offered and are likely to increase in 2007. Carriers have invested to support evening delivery and specific time slots, particularly trying to move the business services of pre 10:00 am and pre 12:00 am (etc) into the B2C market. They are supporting Saturday delivery, express and economy. Over the next year we might see experimentation with Sunday delivery, certainly more Sunday collections and tighter time slots through the day. Partly these innovations will be driven by a valid and real concern over Tesco’s proposed 2 hour time slots for non-food. Further afield, some carriers have been experimenting with SMS alerts and there are a couple of alternative collection and return networks being set up. Most have tried to introduce lock boxes (thought with limited success) and most are continuing to invest in tracking technology to improve the speed and accuracy of status updates. Surprisingly however, many still offer inflexible carding services, e.g. “if we can’t make it to you on a second delivery you can travel 10 miles and come and collect it”. Possibly an opportunity for more interaction with the customer.

Greater co-operation between carriers and retailers could have the greatest impact on customer’s satisfaction with delivery. Here are three areas to consider:
• Differential pricing
• Co-ordination for new services
• Reciprocal investment

A key challenge for carriers is to manage the peaks and troughs of demand, through both the week and the year. Many retailers will ship three times as much at the beginning of the week as at the end and many will ship eigth times as much during their annual peak compared to the quieter periods. Carriers currently accommodate these requirements by holding excess capacity and deploying on-call drivers and vehicles at a premium. That’s additional cost to everyone. An alternative approach is to flatten demand though differential pricing. Orders placed at the weekend might attract a premium on delivery or, more enticing, orders placed mid-week might attract a discount on delivery. Similarly at Christmas, there can be early order discounts and late order premiums. These are workable strategies that require co-operation between the retailers and the carrier. Retailers need to invest in systems that dynamically change pricing at point of order to help carriers and carriers need to pass discounts back to the retailer.

Carriers are constantly asked to introduce new services but they do so at their peril. New services often mean new vehicles and drivers and at least route re-organisation. The carrier is then dependent on the number of retailers who buy the service and the consumer take-up. Often this is lower than anticipated, sometimes because of the premiums that the retailers charge on the new service. There is one very practical way that retailers can help carriers to introduce a new service: that is to commit to the new service together. The carrier’s economics are dependant on how many drops they can make on a driver’s route. The greater the number of retailers that adopt a service the more economic the new service becomes. There is then the opportunity for a) the carrier to make money and b) for the retailer to charge a sensible price to the consumer.

Finally, retailers can make specific investments to help carriers, lower costs and improve service to the consumer. But in turn, carriers should then pass on some of the benefit back to the retailer. An obvious example is postcode and address validation. Investment upfront can avoid mis-delivery, returns and disappointment down-line. Other examples: providing delivery options to improve first time delivery success, special instructions on the face of the parcel label, improved packaging, label and manifest conformance, identifying the right carriers for hazardous and delicate products etc, segregating B2C and B2B addresses and in the fullness of time, when its clear how to manage the service, SMS messaging.

And after all this....well maybe returns will begin to share centre stage!

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