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Delivering the goods in a competitive market

Delivering the goods in a competitive market

The logistics and parcel sector is in a period of unprecedented disruption. The race is on to identify cost efficiencies.

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The logistics and parcel sector is in a period of unprecedented disruption. Increasing consumer demands and the rise of the gig economy combine to create sustained operational and financial pressures. Logistics and parcel companies are now in a perpetual race to identify cost efficiencies. They also need to ensure that deliveries are dependable and sustainable.

Differentiation is critical

The sector remains as fragmented and as competitive as ever. Legacy operators are being challenged by a number of agile and tech-enabled new entrants. For established providers, it is increasingly unfeasible to offer a broad range of delivery options at multiple price points. This makes operations fiendishly complex, and the overall proposition to consumers becomes muddied.

It has become critically important to develop and artculate a clear proposition. The most effective operators are finding value in streamlining their service offering. They are also positioning their core product with an explicit focus on:

  • Price
  • Service
  • Reliability
  • Another USP.

Such differentiation allows firms to establish strong customer-supplier partnerships. These partnerships align to the retailer’s consumer profile whilst dramatically simplifying their own operations.

Last mile delivery and technology investment fostering collaboration and sector convergence

Making the delivery from the warehouse to the front door remains the most expensive element of the delivery process. This process is also an operationally complex one. Some operators have sought to extract fixed costs by building a flexible and dynamic workforce. However, recent and proposed legislative changes aimed at regulating the ‘gig economy’ might wipe out many of the economic benefits. These legislative changes would also keep the greater operational complexities of the delivery process.

At the same time, operations can be transformed by advances in data analytics, the deployment of process automation and supply chain visualisation. These can all provide invaluable and actionable insights to operators.

Consumers now demand the ability to track the location of their parcel in real-time and get precise delivery times. In urban areas, some online retailers are now demanding same day timed delivery within two hours of ordering. A completely different operating model is required for this, as well as the development of localised distribution networks. An end-to-end view of the network is essential in order to understand the opportunities for improvement in this environment.

These developments are likely to lead to greater collaboration and sector convergence. It is increasingly plausible that rival firms will seek to share last mile delivery networks or back-end technology to reduce operating costs and capital investment. However, such changes will require a step change in leadership mind-set.

Vehicle technology is already revolutionising the industry

KPMG are already examining the long-term future of goods transportation through our Mobility 2030 initiative. Yet whilst autonomous self-driving transport may still seem a little way off, the impact of electric vehicles is already driving a transformative change.

We anticipate that by 2019 the Total Cost of Ownership of an electric Light Commercial Vehicle (factoring in the initial purchase and ongoing running costs) will be on par with diesel equivalents. we also anticipate that the Total Cost of Ownership will continue to fall steadily thereafter. With the tightening of restrictions on diesel use in urban areas, there is a compelling business case for operators to take an environmental lead. Growing client demand for more sustainable delivery methods also adds to the case.

Logistics firms need to urgently consider the investment and operational requirements needed in order to transform their fleets. In addition to the cost of the vehicles, ancillary costs (such as the installation of charging networks and sophisticated routing software) will demand additional outlay. There are inherent implementation risks associated with these costs.

The sector is currently going through a period of unprecedented change. Customer demand is already changing established operating models, whilst the industry shift to more sustainable vehicle technology could further transform how goods are moved from place to place. If you want to talk with us on how any of these issues are affecting your company, please contact us.

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