With economic pressure increasing, more businesses will be looking to cut costs. But when it comes to delivery, think very carefully about who cuts which costs. Make sure the right people are deciding which carriers you work with. Preferably not central purchasing. Cheap does not necessarily mean lowest cost. Often the opposite. And think of the whole picture. In the end you want customers to have a positive delivery experience and that’s not necessarily a cut-price experience. Finally, make sure your technical team don’t tie your hands, there is a lot of innovation going on in the market and you don’t want to get left behind.

Delivery cost should be measured in three principle areas, first parcel cost; second delivery success; third customer satisfaction. When each of these is measured properly the parcel cost is placed in appropriate context. Delivery success directly drives real costs like contact centre time; re-delivery; returns and refunds. Customer satisfaction determines less tangible but far more significant revenues from repeat purchase. Therefore, it’s very important to make sure the parcel is going to reach the customer, every time, before the carrier is selected on price.

There are some horror stories about central purchasing getting hold of carrier tenders: for example, “putting all of the volume with one carrier to get the lowest price”; setting up reverse tenders; or driving business to those who give the best volume discounts. All wrong for B2C shippers and likely to create a vicious circle of low “parcel” prices, poor service, high cost to serve and annual re-tenders. Not to mention customer dissatisfaction.

Unless you are Amazon or…Amazon, your volume is not going to change the economics of your parcel carrier. Therefore, giving them more volume will not lower their costs. The carrier may work on a thinner margin for more volume, but in the process they are probably taking certain types of traffic, certain services, certain postcodes that they would prefer not to work with. Much better to understand that the carrier is particularly good at, what business they want and allow them to do what they do best.

There is no one-size-fits-all for parcel delivery, in fact the opposite is true and it’s more of a case of horses-for-courses. That is why all major shippers use a multi-carrier approach. 

Carrier differences are driven by inherent factors such as infrastructure; organisational factors; technology and business strategy. Carriers’ infrastructure determines the size, weight and content of parcels that a carrier can best deliver. For example, automated hubs may have conveyors (no small parcels please), tilt trays (no large parcels please) or automatic boom arms (no long parcels please). Operations that run with cages offer more security, but potentially at a higher cost. The last mile delivery may be made by couriers (weight restriction) or drivers (time restriction). Organisational factors can determine when a re-delivery is made (repeat schedule or to meet customer needs); if or when a collection (returns run) is made; how the driver is paid (per drop or for number of parcels). Technology will drive first time delivery success (routing files) and customer service (timeliness of tracking information) and even delivery options (SMS for alternative delivery days/time).  Finally, business strategy can determine new services, economy versus premium, B2B or B2C, specialisation. 

If you are sending pretty much the same size parcel every day, with one or two services, then a single carrier may well meet your requirements. In most other circumstances, and these apply to most direct operations, you will need more than one carrier. A typical B2C retailer ships a wide range of parcel sizes, light and heavy, wants economy and premium deliveries, proof of delivery, leave safe, fragile and robust. It’s too much to ask one carrier and certainly too much to get best in class in all areas.

It’s at this point you might want to take carrier procurement back from central purchasing.

The second group of people to keep away from carrier selection are the technical people. The retail direct market bears the scars of bespoke carrier integration. Technical teams like their technical projects and the thought of integrating to a few carriers and passing data back and forward can sound quite attractive. However, integrating to carriers is not straightforward. Carriers require compliant labels, data exchange, up-to-date routing files and compliant manifests. And the specifications can change frequently, so even when they are thought to be correct, (having first of all agreed on what is the latest specification), they will change again. By this time the in-house technical team have had enough, but operations or marketing want to introduce a new carrier.

The ability to work with a new carrier in the UK delivery market is important. Historically there have been relatively low barriers to entry. The UK is therefore a relatively busy market that is now throwing up quite a lot of innovation and customer facing initiatives. If the technical team have tied you in to one or two carriers you may lose out.

Customer self-tracking, email and SMS are all evolving at a rapid pace.  The impetus is from retailers, some carriers and software partners. It is quickly becoming a requirement to allow your customer to track their order from the retail website or from an email sent out on despatch. To name but a few, John Lewis and Amazon send out an email with tracking advise (as do many medium-size retailers). John Lewis also send out an email on a carded status to help the customer arrange a successful delivery. Parceline has a very innovative customer SMS system which allows the shopper to confirm or re-arrange delivery and Parcelforce also offer email and SMS services. No doubt other carriers will soon be offering these services and increasingly retailers are providing these services on their own behalf.

There are still a wide range of lock box providers around, such as ebox, Bear Box, Podbox, Bybox, Giraffe Marketing, and Hippo Box. Systems are becoming increasingly sophisticated and a recent entrant to the B2C market, BDPX, offers an innovative, secure system that provides end-to-end tracking. Nonetheless, for the time being the appeal of these systems appears to be limited, driven as it has to be by consumer awareness, household modifications or changes to patterns of behaviour. It is this latter point that also seems to be holding back alternative collection points. Delivery to the workplace is popular, and there appears to be reasonable tolerance but specialist organisations are still not picking up significant traffic and some courier networks will not visit the workplace. Clearly the Post Office network could offer some help in this area, but there is no sign that they will open up their locations to other carriers.

The competitive environment is at last creating pressure on all retailers to improve their delivery standards. The IMRG’s research released in August 2007, shows that more retailers than ever are now offering a wider range of delivery options: they state that “just under two-thirds of companies intend to increase the diversity of their delivery times”. This makes sense from a service point of view and provides a ready made cost case. A range of delivery options provides greater first time delivery success: fewer contact centre calls, fewer returns, lower cost to serve and more satisfied customers. However, to a certain extent delivery is still a victim of direct retailing success. I still hear large shippers saying they will not focus on building customer loyalty when there is so much growth in the market. Remarkable but true. The smarter ones have realised for some years that delivery is a real source of competitive advantage.

Source: Catalog|e-Business

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