Autumn 2006

Shippers and carriers home in on common goals

Shippers and carriers meeting at Triangle's Express Delivery conference in the summer seemed to recognise that working together could improve home delivery performance

'Teach your parents well'

Amtrak's Jonathan Smith dipped into everyday life to show what home delivery had to contend with

The audience watched the screen for the next Powerpoint graphic, but instead, up came a slide of an elderly couple sitting on a sofa. "These are my parents," said Jonathan Smith, managing director of express parcels carrier Amtrak, "and we can learn a lot from them."

In a bravura performance, he told delegates: "My dad has learned to use a computer." Smiling assent from the audience. "Worse, he's learned to use the internet." Ripple of laughter. "They're coherent in the way they use it, but they have selective memories. They order something online, then they forget about it." Winces across the auditorium. "That's the basic sequence: order, forget, go out."

"What's more," Smith added, "they love complaining. They love grassing people up." A glance at the screen, then back to the audience. "They think standards are falling in the delivery business, yet they hold the driver back by making him a cup of tea."

Universal hilarity; but his point was well made. Speaking for the carrier industry as a whole, he said: "We have only recently started to understand the behaviour of recipients, but we won't succeed unless we do."

The answer, he thought, was to increase IT development, update sortation facilities, and update the calibre of management in the carrier market. "Ultimately the receiver pays our wages. We've lost sight of this, and we need to re-focus."

Smith felt the industry had a lot to answer for. "We've been slow to respond. We could do a lot better." But he also felt it was undervalued. "We're a soft target."

He felt Royal Mail had set a high level of expectation through its historic pricing policy, while the grocery home delivery market had raised expectations even higher by offering delivery time windows as short as thirty minutes. "People naturally ask us 'Why can't you do that?'

"The world has responded to people putting a value on their own time," Smith believed. "They'll pay up to 30 per cent more for peeled carrots than ordinary ones. Yet the delivery element of home shopping has been largely devalued in the past three or four years."

So what was to be done? Smith had a series of remedies, of which the first was "understand the receiver." He told his audience: "We've built up a database, showing where people stay in and so on. We share this with some customers. Between us and our customers, we know a lot."

His next precept was "establish the correct value for everything". He explained: "Delivery is not an obstacle to the sale, but an added value. We should educate retailers to see this. We've been incredibly bad at this."

In pursuit of this objective, he said, carriers and customers "should commit to ideas together." As an example of how this could work, he cited the evening delivery service offered by Amtrak for the past three years. "It costs a few pounds," he accepted, "but it's a good trade-off for a successful delivery rate. Yet the vast majority of retailers wouldn't even contemplate it.

However, two of Amtrak's retail customers offered it, he reported, and were now using it for 70 per cent of all their deliveries.

He also put in a plea for longer business relationships. How long? He said three years might seem a reasonable term. "It should be brilliant, but it's not always." Nevertheless, he said that in his own experience customers were usually happier with contracted services.

Finally, Smith advised the industry to invest in "the right things", which he feared was not happening at the moment. "Currently the largest investment is in sales teams, yet companies should actually be spending on IT."

"The B2C market is growing at 30 per cent a year," said David Burtenshaw, formerly of Lynx and now with MetaPack, adding: "It will be exceed B2B in size by 2010-11."

He said carriers had to respond to the demands of that marketplace. "Thirty per cent of deliveries can end up as returns. That has to be tackled. And deliveries must be made in an agreed time frame. There's a growing demand for named-day deliveries, time-slot deliveries, same-day deliveries. Carriers need to find creative ways to respond."

He pointed out: "Internet deliveries inevitably attract cash-rich, time-poor customers, so they're going to need more delivery options."

Tony Smith, head of operations at RS Components, described how his organisation dealt with 30,000 suppliers, and delivered 350,000 products worldwide, including 60,000 orders ex stock to UK customers daily. E-commerce sales had been showing 45 per cent year on year growth, he said, and would account for 40 to 45 per cent of business within a year or two.

DHL was the primary carrier, while TNT was used for "big heavy nasties", and the company was achieving a 99.95 per cent next-day delivery success rate, with 82 per cent delivered by 1pm.

Smith said the company evaluated its success in terms of customer experience on a monthly basis, and aimed to apply a continuous improvement policy. This had given it a clear idea of what customers wanted, and he had a list for delegates:

* Ordering up to 9pm for next-day delivery

* Orders delivered on time

* "Free" delivery as standard

* If there are mistakes, customers want information (Where is it? When will it arrive?)

* In the event of delivery failure, immediate information

* Delivery information online

For the future, Smith saw even greater demands from customers. "Customers want more detail. They want more same-day deliveries. They want later cut-off times." (He said the company was looking at 9pm or 10pm cut-offs.)

"The customer is your customer's customer," he said. "The need will grow for greater integration."

Demand would remain for specialist services to meet specialist requirements, said Andrew Bernard, chief executive of carrier CitySprint, in which he included services such as medical operations.

Nevertheless, key demands placed by customers had a familiar ring to them. Alongside specialist knowledge and experience, he cited flexible pricing, reliability, trust and confidence, responsiveness, real-time transparency, billing accuracy, environmental awareness and customer service.

He said carrier business models for London and other parts of the country differed in some respects. "Outside London, we expect to see more demand for a one-stop shop approach, and more multi-drop distribution, using self-employed couriers."

"Information technology used to be regarded as a cost centre in the carrier market," said Morten Kriek, a Dutch-based independent consultant. "Customer implants didn't actually make life easier for shippers."

More recently, however, the internet had proved to be an IT enabler, and had transformed efficiency. As an example, he cited the Stratagene, a US-based biomedical business. It was making 200 time-critical shipments a day to Europe, using dry ice packaging to preserve sensitive products. But there had been no Dutch-US integration, he said - "only swivel-chair carrier integration."

To resolve the situation, the company had started using the NetDespatch online order management system. "Now they only need to input the order number, which is handled by means of an XML request. Stratagene labels are automatically printed out for the delivering courier."

Jo Ritchie, transport manager of Screwfix Direct, described the measures her company had take to sharpen up its delivery performance - including the apparently surprising measure of ending long-term carrier contracts. "Four years ago we had contracts, then we started actively managing our carriers instead," she said.

As a result, she said, delivery success rate had risen from 94.14 per cent in 2002 to 98.83 per cent now. "That equates to six thousand more customers receiving their orders in full."

Apart from the change in contractual arrangements, Screwfix had also introduced a range of other measures. Among these were improvements to packaging. "Some products were insufficiently packaged," she said. This had resulted in a 150 per cent improvement in damage levels. On-site despatch managers had also brought improvements.

Now the company was trialling the IMIN SMS text-based delivery pre-advice system with its Parcelforce-based deliveries, or "pre-text", as she called it. "Currently we send emails to advise of deliveries."

She argued that shipper, carrier and customer played an equal part in achieving a first-time delivery. "We are all responsible," she said, adding: "Both shipper and carrier want a first-time delivery, so we should work together to see where it is not happening."

Despite the termination of previous contracts, she said the desire was for "long-term strategic partnerships that work for both sides". She said this approach could work better than a written contract that didn't satisfy any party's needs.

The ultimate aspiration was now be to set up a contract that reflected this kind of cooperative approach.

It was important to teach customers how to use carrier tracking effectively, argued Nick Parkes, carrier manager of fulfilment house iForce. "You need to manage expectations, and give customers a direct feedback route."

Parkes felt that historically, shippers and retailers hadn't understood properly what carriers offered, or supplied their goods in the most suitable way. He said accurate pick, pack and despatch were pre-requisites of successful delivery.

"Clear addressing is also very very important," he said, urging delegates to use PAF (Post Office File) checking on all addresses. "This can bring a massive benefit in first-time delivery rates."

He also urged shippers to provide well-presented cargo manifests, and to mark goods with clear despatch service identification. "Use flashes," he said. There should also be a clear route for "carrier escalations", he said.

Another key to successful delivery was exceptions management, which Parkes described as "the best way to manage shippers". He added: "Most carriers can submit event data. The challenge is to make use of it."