With an unprecedented number of customers buying online, many logistics providers ought to expect their revenue to rise. Yet despite a higher volume of goods, profit margins aren’t necessarily increasing at the same rate.
New entrants are disrupting the logistics industry. In the US, Amazon invested in its own air fleet to save costs and reduce its reliance on other delivery services. In the UK, Tesco announced its partnership with tech start-up TakeOff to expand its e-commerce and reduce last-mile costs through automation. Customer behaviour change continues to put pressure on logistic operators who look for new ways how to satisfy clients with more choice, flexibility and low-cost deliveries. Customers now expect same day delivery; next-day delivery is now the new normal.
How can logistics providers become more agile? The five steps below explain how to reduce costs, add more value to your end-users and invest in new technologies and sustainability measures.
Focus on your customer
Centring on customers is about paying attention to what your customers are saying, listening and applying their feedback, ultimately bringing them into the innovation process. This is essential as today’s customers are more empowered than at any time in the past. They can determine what their delivery options will be based on several factors such as price, speed or tracking. For instance, DPD's "Design Space" initiative allows customers to shape their preferred delivery experience thanks to DPD’s one-hour delivery slot service with live tracking and an app.
Providing good customer experience means responding and anticipating the area where your impact would be greatest. For example, Lumi, a US-based firm, has removed the number of customer touchpoints for complaints to drive a more seamless response for its clients rather than passing them from one department to another.
Speed up time to value
Speeding up time to value means mobilising quickly in response to competition. Incumbents must think big, start small and scale fast to match the speed offered by new entrants who quickly launch minimum viable products and then use performance and customer feedback to drive the next iteration of their offering.
Investing in the appropriate resources and leadership can turn an initial idea into a new product or service quickly. UPS introduced an electric delivery fleet in London in 2018 where it created a smart grid to spread electricity between vehicles more effectively. It also partnered with UK Power Networks and Cross River Partnership, to make the charging process smarter and cleaner. This is a good example of how to compete against rivals by scaling up a new sustainable technology.
Design for simplicity
Designing for simplicity requires building teams around products and services rather than skills, then empowering people and creating a flat structure. Simplicity allows for greater flexibility and scalability which is essential when responding to any change or adversity.
These principles can present challenges for large, established logistics providers as they try to overcome legacy issues. To overcome this, the key is integrating people into cross-functional teams that deliver better and faster value to the customer and the organisation.
At around Christmas in 2018, Hermes UK recorded its busiest-ever day with over 1.9 million parcels being processed. To address this additional demand, it hired 8,000 people across its hub, depot and courier network. Training this large intake meant introducing simple processes and operating models.
Build to evolve
Being able to evolve is about accepting change. Technology gives access to real-time information and firms should use this to improve their services. Most logistics providers have a large quantity of underutilised client data which could be leveraged to build customer insights.
A good example is Clipper Logistics that uses data to develop predictive analytics that builds more sustainable returns solutions. This is turning the ‘unknowns’ into ‘data-led knowns’ – an insight which can improve business performance and responsiveness to change.
When building new technology, it’s also critical to integrate the existing legacy systems and workforce. PA’s recent research with the CIPD suggests that advanced technologies will complement rather than replace humans.
Liberate your people
More than 70 per cent of agile organisations say complex structures with too many layers of management are a ‘significant’ or ‘very significant’ threat to acting faster in the market.
Top-performing agile organisations know that it’s vital to treat colleagues like customers and inspire them to connect with the business purpose. Liberating your workforce on the ‘shop floor’ has a huge potential to create more value as often the best ideas come from those who do the job day-in day-out.
Instead of giving people a narrowly-defined job specification, agile leaders provide the autonomy for their teams to deliver the expertise they were recruited for. While AI, robotics and autonomous vehicles begin to disrupt the logistics sector, organisations must provide their employees with an opportunity to advance to higher-level job functions.
While ‘agility’ remains a theoretical concept to many logistics organisations the steps here are achievable in reducing costs and adding value to the end user. In doing so, you’ll be able to provide more personalised services, invest in new technologies and create new commercial opportunities. This is why, in challenging market conditions, it’s time to get agile.
Craig Lynskey is a transport expert at PA Consulting