Last year, as part of its ongoing and much-needed review of operational performance, Parcelforce concluded that its previous strategy of offering cut-price carriage to customers sending large volumes of goods might just be contributing to its poor profits. Big, in this case, was certainly far from beautiful and streamlining operations has involved a significant reduction in the numbers of distribution depots.
The cuts in capacity have meant that all those large-volume/large-discount contracts are no longer wanted and the result, as many retailers have discovered, has been a polite note from the carrier announcing a significant hike in prices.
One rather suspects that this was a tactic to persuade customers to take their business elsewhere as several of those who, having failed to find an alternative carrier, simply swallowed hard and accepted the price increase, were then told that, actually, Parcelforce didn’t really want their business.
For many retailers, the usual strategy of putting all the eggs in one basket and hoping for cut price carriage by pushing large numbers of deliveries out to a single carrier is thus no longer an option. With a general shortage of carriers, companies are having to use several providers adding another complexity for logistics managers.
Who benefits?
As always with ill-winds, someone benefits and this time it seems to be both the carriers and specialist IT vendors who score. Companies like MetaPack are busily selling standalone ‘multiple carrier management’ packages which will automate juggling shipments between a number of distribution companies. MetaPack originally developed its DACE – delivery and collection execution – system for Wellbeing.com and it has now re-engineered the product as a standalone offering. DACE takes the various attributes associated with the carriers used by a particular retailer – such as companies offering competitive rates for handling unusually-shaped packages or those specialising in rural area distribution -and then matches these with the package being processed. It then interfaces with the various carrier’s system to check availability and produce the necessary package label in the format required by that carrier. The system can then monitor delivery movements for the package to provide on-line track and trace information for customers.
With the system automatically matching parcels to carrier skills, it can also help to improve performance for the distribution company and reduce queries and problem areas in the retail relationship. ‘It gives the carriers the sort of packages they want to focus on,’ says Patrick Wall, co-founder and chief executive officer at MetaPack, ‘and that it turn can help improve efficiency and reduce costs.’
Carrier shortage is not the only driver. Department store chain Allders, for example, has just invested in Yantra’s supply chain tools to enable different fulfilment models depending on the type of goods and delivery needs involved. The system will improve links with third party logistics service providers, as well as provide online order tracking for customers, and will mean that goods ordered from stores can be delivered direct from suppliers or distribution centres using alternative carriers if this is a more efficient model, rather than automatically being despatched on company delivery vehicles.
Typically, department stores use parcel weight as a simple guide to optimum delivery route: under Xkg and it goes (or used to) via Parcelforce, over Xkg and it is shipped in the company van.
With Allders new system other parameters can come into play – such as stock whereabouts, comparable carrier costs, and a customer’s preferred delivery time. Using a multiplicity of carriers may be something that retailers have traditionally shunned, but this idea of matching skills to shipments brings benefits to them too. Some carriers have traditionally charged a premium for oversize of packages as they require additional handling. An alternative shipper who uses manual methods may offer a more competitive rate.
Retailers may subscribe to the view that ‘one carrier is a headache, two a migraine’ but with the sort of systems MetaPack and Yantra are offering, more than two might just turn out to be a winning formula.
