Logistics at the heart of the retail offer

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As Black Friday looms, retailers and home delivery providers alike are hoping they have got their preparations right and 2015 will be the year of the perfect delivery. Malory Davies looks at how delivery strategies have been evolving.

Nearly four times as many shoppers are planning to place an order online this Black Friday as last year. And yet it is reckoned that the capacity of the delivery companies has risen by about 20 per cent in total.

The article appeared in the November 2015 issue of Logistics Manager.

The article appeared in the November 2015 issue of Logistics Manager.

Black Friday takes place on 27th November this year, and the fact that carriers are not trying to increase capacity further is indicative of the fact that there is a general agreement among retailers and carriers that other solutions must be found.

Dick Stead, executive chairman of Yodel, whose research highlighted the massive rise in buying intentions, point out that the problem for the carriers is potentially more complex that it appears at first.

Carriers have always brought in temporary staff to deal with the Christmas peak, but with Black Friday the pattern of activity is more complex and spread out. There is a massive spike – and then the market goes quiet – and that is followed by another peak.

The problem is that you can only bring in people when the volume is there, he says. The cost can be phenomenal, he says, so it is essential to be able to bring in people when you actually need them. He points out that the retailers have the same problems as the carriers – they need to have the additional capacity to pack and despatch orders.

Because of that, detailed planning has become critical. “We are now going to retailers for forecasts on a daily basis,” he says, pointing out that there have been “intense discussions” between retailers and carriers to come up with solutions.

Dwain McDonald, chief executive officer of DPD, says: “Managing the whole of the peak period comes down to really careful planning with our retail partners to agree volumes and then running an efficient operation. Technology and real time communication with the end customer play a massive part in driving efficiency and ensuring we maintain the highest possible right first time delivery rate. Capacity in our hubs is also vital during peak. This year we’ve got the new Hub4 – the largest in Europe – and that gives us much greater overnight capacity. Last year we became a seven-day a week operation with the launch of Sunday deliveries. The Sunday service made a big difference last year during peak. It gives us extra flexibility to manage spikes in volume more efficiently as parcels are always moving through the network.”

McDonald also highlights the importance of technology to give customers a range of smart options. “We’re able to talk to recipients in real time and give them a range of delivery options in advance, including a one-hour delivery window or options to divert to a DPD Pickup parcel shop or a specific neighbour. As a result, we have far fewer parcels going back to the depot for redelivery and our drivers already know if someone isn’t home, therefore they aren’t wasting time attempting to deliver. We have over 2,500 DPD Pickup points around the country including partnerships with stores like Halfords and the train station parcel specialists Doddle. Since launching in June, Pickup has proved hugely popular and I expect millions of customers to choose the ‘deliver to shop’ option this Christmas.”

Strategies to ameliorate the impact are increasingly important. For example, retailers are working on ways to spread the impact of Black Friday, for example by offering deals over a period of a week or even two weeks rather than just a couple of days.

There also seems to be wide agreement that it is not sensible to try and maintain a next day delivery service in these conditions at it seems likely that most retailers will changes their online offer to smooth out the peak traffic flows. This could mean going from next day delivery to three to five day delivery over the Black Friday period.

Stead points out that Yodel’s research shows that more than three quarters of the shoppers surveyed said that they are happy to wait a little longer for orders placed on Black Friday, as long as they are kept informed about progress. “But if you offer next day and then don’t deliver, you have a problem,” he says.

Hermes is offering a money-back delivery guarantee this Christmas – the third year that it has done so – and it has been investing heavily to ensure that it can meet the commitment. CEO Carole Woodhead highlighted the investment that Hermes has been making to meet the growing demand for home deliveries, when she unveiled the “2105 Hermes International Parcel Deliveries Usage and Attitudes Survey” in London last month.

It has just doubled capacity at its Warrington hub to sort one million parcels a day. It has also been adding sub-depots to its network and is recruiting 3,000 additional couriers. Hermes has also launched myHermes International, an international delivery service targeting SMEs. Carole Woodhead said: “The world is becoming an increasingly smaller place and therefore delivery standards and price play a key part in enabling overseas customers to purchase from domestic retailers. The demand for UK products, especially fashion items, is high and continues to grow so we wanted to develop a service that provides smaller businesses with seamless access to as many countries as possible.”

The Hermes survey looked at customer experiences of Black Friday last year. About one third of the shoppers had experience problems. Typical problems included access to web sites, goods sold out and technical problems preventing the order going through. Only 11 per cent said they had not had a problem, while 23 per cent had avoided shopping on Black Friday.

There has been a huge increase the level of research into the home delivery market as retailers and carriers seek to understand what drives consumer behaviour.

In fact, Dick Stead says that Yodel has changed its whole approach. In the past, it had aimed to meet agreed delivery targets whereas now it’s focus was on satisfying the end consumer.

“If the consumer isn’t happy, then he or she won’t order again,” he says.

It now surveys customers to see how they rate the service. “We have live feeds throughout the day. It means that we get 25,000 to 30,000 responses a week giving us a picture of what consumers are saying.”

Initially, the data goes to a third party which distributes the results to the retailers as well as to Yodel. Stead points out that since Yodel started this process two years ago its Net Promoter Score (NPS) has risen to stand at +40 to +50 – a rating that many retailers would find enviable.

This focus on consumer research highlights the way in which home delivery is diverging from B2B parcels deliveries.

The delivery is a key part of retailers’ online offers – something that is rare in the B2B market. And of course, B2B deliveries nearly always take place during office hours whereas in B2C, out of hours deliveries are increasingly common as are a range of alternative delivery options suck as click and collect.

Stead points out that Yodel has developed a ranged of delivery options to minimise the likelihood that a package will have to go back to the depot – leaving goods with neighbours or “leave safe” where the customer can specify a safe place for the package to be left. “This drives delivery success and takes cost out of serving the customer.”



Free delivery: Here to stay?


Free delivery is a controversial concept for logistics professionals – there is clearly a cost to the delivery, and arguably consumers need to understand that. Speaking at the Omni-Channel Conference earlier this year, Mark Millar, author of “Supply Chain Ecosystems”, challenged the use of free delivery. Last mile delivery is really hurting – either the retailer or logistics provider or both, Millar told delegates.

Free delivery did not make economic sense and that needed to change, he said, pointing out that the last mile delivery is the only direct contact with the customer.

But that is not necessarily how retailers or consumers view the situation. Yodel’s Dick Stead points out that Yodel’s research shows that at least 50 per cent of the population see “free delivery” as an essential part of online shopping and will walk away from the checkout if it is not available.

And the 2105 Hermes International Parcel Deliveries Usage and Attitudes Survey found that more than 40 per cent of consumers expected free delivery for a £75 item. More than 70 per cent expected a free click and collect service. Perhaps surprisingly, 74 per cent said that for delivery of a £75 item they would choose a two to three-day service costing £2.99. Only eight per cent said they would pay £6.99 for next day delivery.

In such a price-conscious market, it seems unlikely that free delivery will disappear soon.



Black Friday: Preparations start early


Preparations for Black Friday started immediately after Christmas as carriers moved to ensure that there would be no repeat of the of the problems seen last year.

This was highlighted by Martijn de Lange, COO at Hermes, who said: “Our preparation for Peak 2015 began as soon as Peak 2014 drew to a close. We are working alongside our clients to finalise our plans by analysing forecasted volumes and confirming collection schedules.”

Yodel has brought Mark Horrobin to take on the newly created role of peak programme director to strengthen and oversee the planning and execution for this year’s Christmas peak.

And the past few weeks have seen the launch of massive recruitment campaigns to meet the peak demands.

Royal Mail is recruiting a total of 19,000 temporary workers. Around 14,000 people are needed to work in mail, distribution centres and data centres across England, 1,340 in Scotland, 560 in Wales and 550 in Northern Ireland. Parcelforce Worldwide, is also recruiting around 2,600 extra drivers and sorting staff throughout the UK.

Amazon UK is hiring19,000 people at its fulfilment and customer service centres over the Christmas period. “We are 100 per cent focused on providing an exceptional customer experience and to ensure that we maintain this high level of service during the Christmas period, thousands of seasonal associates will join our teams across the UK,” said John Tagawa, Amazon’s vice president of UK operations.

Yodel is recruiting 7,000 part-time and full-time staff across the UK. It will recruit more than 800 directly employed drivers who will be provided with Yodel branded uniforms and a liveried van. It is also looking for around 3,000 owner drivers, who will be required to provide their own vans. A further 3,000 self-employed couriers, will also be joining the company.

Hermes has doubled its sortation capacity at its Warrington hub enabling it to sort one million parcels day. It has also added 125 sub depots to our network and increased the number of scanners and handheld terminals across the business. During the peak season it will have 200 additional advisors across 19 client sites to deal with enquiries. It is also recruiting 3,000 more couriers.

Argos is recruiting about 1,000 drivers for the its new Fast Track service before Christmas and expects to have 3,300 drivers jobs in total.

Ocado has launched a recruitment drive to bring in 1,798 permanent staff before December. The majority of the vacancies are for Customer Service Team Members.


Product launch: Argos ups competition with same-day service

Argos is leveraging its store network to offer a same day delivery service for some 20,000 products. Customers can see Fast Track items online, purchase them, and chose to either collect them from a local store or schedule a same-day or next-day delivery slot.

Goods ordered by 6pm will be delivered by 10pm the same day. The delivery fee is £3.95. Argos is offering four home delivery slots: 7am-10am, 10am-1pm, 2pm-6pm and 7pm-10pm, seven days a week including Sunday. Fast Track Collection is free.

The new service builds on the development of the Argos hub and spoke distribution network which was completed earlier this year. Larger stores act as hubs supplying stock to the smaller “spoke” stores to improve availability of 20,000 key products.

The move to hub and spoke was part of the “Argos Transformation Plan” which Home Retail Group chief John Walden said “will continue to be the group’s principal source of shareholder value over the medium term”. The plan was launched in October 2012 after several years of eroding performance at Argos, and is designed to enable it to take advantage of the move to online shopping.



Legislation: Minister rejects City Link proposals

The demise of City Link at Christmas last year sparked a major House of Commons inquiry into the market and looks like leading to prosecutions for three of the company’s directors under the section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992.

However, the government has rejected the proposal that employees should be given preference in the order of payments of an insolvent business.

The recommendation was made by Parliament’s Scottish Affairs and Business, Innovation and Skills Committees following the insolvency of City Link last Christmas.

A joint report published by Parliament’s Scottish Affairs and Business, Innovation and Skills Committees published in March said the processes for company insolvency did not offer sufficient protection to workers, suppliers and contractors and the balance should be shifted.

In particular, it recommended that the government update the order of payments in the Insolvency Act 1986 to give preference to all of a company’s workers, regardless of whether or not they are directly employed and that consideration is given as to how best to deal with employees and small sub-contractors and suppliers.

However, in the government’s response, Sajid Javid, secretary of state for business, innovation & skills, said: “The government does not consider a sufficient case has been made for changing the long-established order of priority in this respect.”

The committees also called on the government to bring forward proposals to tackle “bogus self-employment”. In response, Javid argued that many individuals in so called ‘bogus self-employment’ will have employment protections regardless of what their contracts say.

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