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The complex process of selecting the right courier supplier June 2012 Over the last 12 months the UK’s highly competitive Sameday courier industry has fundamentally changed. Leading suppliers have adopted new business models. Multinational transport conglomerates and private equity firms have loaned millions of pounds to prop up ailing cash-flows or fund major mergers. For a number of companies the introduction of new diversified services are now more important and take up more management time than Sameday delivery.

Given the fact that all this is taking place during the most turbulent economic conditions the country has seen for a decade, it is understandable that buyers are starting to take a much closer look at their service partners in this sector. Author: Gregory Hoy What is clear is that both buyers and contract managers need to

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ensure that the information they are receiving remains relevant and

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meaningful. This article suggest new lines of enquiry and new contract management practices, which if applied will not only provide you with a clearer insight into the strengths and weaknesses of your prospective service partners, but also enable you to satisfy yourself that your existing relationships are built on solid and sustainable foundations.


"How big a fish am I?" One question that is always asked in courier tenders is: How many courier vehicles do you have? This is of course a perfectly logical question to ask and on the face of it would appear to provide a

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creditable means of comparing different supplier’s abilities. However, without acquiring additional information ‘fleet size’ is actually a very unreliable indicator of a supplier’s ability to provide your company with a consistently reliable service.

Your business won’t receive a constantly reliable service because a courier company has the largest fleet, but because they have sufficient additional capacity within their fleet to meet your service

selecting the right courier supplier

requirements. Size does not equal service, in fact, an exceptionally large fleet may prompt you to ask some searching questions. Author: Gregory Hoy Let me explain: all buyers recognise the importance of identifying where their company’s expenditure will rank them in relation to their supplier’s other clients, in other words establishing how big a fish they are going to be.

However obtaining this information is not that straightforward. The question that will show you where you actually rank is quite specific, and it’s not: “Please list your top five clients and the amount they spend with you" which is usually the question that is asked. You will establish a clearer picture if you ask the following: “Please list your top five clients, including any Facility Management companies contracts that you service” or “What percentage of your turnover is provided by Facility Management companies”.

If you discover that a substantial part of the supplier’s turnover is based on work they do on behalf of FM companies (and I suggest anything over 25% should be considered substantial), you can be sure of two things. Firstly; you are going to be a much smaller fish in a much bigger pond than you could ever have imagined, as these contracts will require massive logistical support and command the highest service level they can provide

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Secondly; the supplier will have agreed to provide substantial rebates in order to secure this work. This point is particularly significant, as it means between picking up and delivering consignment for your company, the courier will be instructed to pick up and drop off as many consignments as possible for other clients. This way of working is a financial necessity for these companies: because a significant number of their consignments have low profit margins,

The complex process of selecting the

every courier needs to carry as many consignments as possible.

right courier “All couriers are the same, so if I choose the biggest and cheapest, that’s got to work, right?” There are many services where negotiating the lowest price will

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make a negligible difference to the quality you receive. Sameday couriers are not one of these. Author: Gregory Hoy When you consider the incredible amount of information your company sends every day via email and the simplicity and low cost

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of this delivery method, it is clear that when one of your users decides that they need to book a courier to make a delivery, the value to your business of delivering that item is likely to far outweigh the cost of delivering it. If the consignments you send are consistently late, lost, delivered to the wrong address or damaged, the impact on your business will be significant. Sometimes it will be very significant.

"If you pay peanuts you get monkeys?" In my experience, a buyer rarely asks their supplier’s how much they pay their couriers, but it is an important question and the answer will help you in your decision making process;

One of the main reasons a courier supplier will not be able to offer a consistently reliable service is because their fleet consists of a large number of inexperienced couriers who they will be paying just above or even below minimum wage. Inexperienced couriers can’t find addresses, take longer to deliver their consignments, forget to collect PODs, don’t double check their pickup notes, don’t let reception know when they have arrived etc. In short you really don’t want them carrying your consignments but they will be if your supplier is paying low rates to their couriers.

“Because a significant number of their consignments have low profit margins, every courier needs to carry as many consignments as possible.”


"A quick 'pick up' doesn’t mean a quick delivery." A Courier company may try to sell their services based on how long it will take them to pick up your consignment, a guaranteed pick up within 20 minutes sounds great. However, due to the way courier

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companies optimise their fleets, a fast pick up time isn’t the same as a quick delivery time.

selecting the

A ‘delivered within' time is a far more effective way of measuring your

right courier

suppliers effectiveness. It is calculated from the time you made the booking to the time the consignment is delivered. Now, as a buyer it is perfectly understandable that you want your consignments picked up quickly and delivered within agreed timeframes. However, there is

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an operational dynamic at work here which, broadly speaking, means that you can have all your consignments picked up very quickly and receive inconsistent delivery targets, or; your consignments may

Author: Gregory Hoy

hang around in the post room or at reception for a bit longer than you

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would like, but your deadlines will be consistently met.

Hidden charges: Buyer beware Much has been written and broadcast about pricing ambiguity over the last year and the Office of Fair Training has been kept busy investigating various industries, with particular emphasis, it seems, on the budget airline industry. Well guess what, the same thing is happening in the courier industry.

It starts from buyers becoming transfixed by the single page low cost tariff that courier companies present them with. What these tariffs don’t show you is the truly bewildering ranges of surcharges that are lurking under the surface and will scupper any chance you thought you had of reducing your costs. If you want to find out just how much you are being affected by this ambiguity, ask your supplier the following questions.

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“What these tariffs don’t show you is the truly bewildering ranges of surcharges that are lurking under the surface and will scupper any chance you thought you had of reducing your costs. ”


Please let me know which, of the following surcharges you have applied to my account 1.

A telephone booking surcharge

2.

A surcharge for the motorcycle courier arriving with a top-box

3.

A surcharge for the motorcycle courier arriving with a large top-box

4.

A surcharge for changing an address once the job has been booked

5.

The complex process of selecting the right courier

A surcharge for changing the address after the courier has been dispatched

supplier

6.

A waiting time surcharge

7.

A loading and unloading surcharge

8.

A surcharge for oversized items

Author: Gregory Hoy

9.

A fuel surcharge

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10.

An administration surcharge.

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Also, can you explain the formula by which you calculate the cost of these surcharges and how much you have charged for each one over the past six months?

“It would be wrong of me to say

Can you confirm if there are any other surcharges, not listed above,

that some unscrupulous drivers

that have been or could be applied to my account?

may add on a couple of minutes

Finally, could you please ensure that a fully itemised list of all surcharges is included within my invoice from now on?

waiting time in order to boost their earnings however what I can say with confidence is that if this

If you buy a service based on the low prices on a single page tariff

was happening it would be very

you should really not be surprised when the hidden surcharges wipe

unlikely that you would be able to

away any hope you had of reducing your costs.

tell.�

A 100% guaranteed way of reducing your waiting-time charges You may be interested to know that almost all major courier companies require their drivers to enter the amount of time they spend waiting into their hand held computers themselves, with the client signature being the verification that the amount of waiting time they have entered is accurate. It would be wrong of me to say that some unscrupulous drivers may add on a couple of minutes waiting time in order to boost their earnings, however what I can say with confidence is that if this is happening it would be very unlikely that you would be able to tell.


you may be paying, waiting time is the largest.

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With the best will in the world, you have no way of knowing that the

process of

This is significant because it is very likely that of all the surcharges

person signing for the consignment has really scrutinised the additional charge or, in the case of consignments picked up and delivered to your office from another location, is even aware that their signature was authorising a waiting time surcharge.

If you want to keep waiting time to a minimum randomly pick out four or five dockets which have a large waiting time cost and ask your supplier to provide you with video replays of those particular

selecting the right courier supplier

jobs. You’ll see everything the driver did including what time he arrived, how long he waited and what time he left. If your invoice states there was 25 minutes waiting time and you have paid for 25

Author: Gregory Hoy

minutes waiting, you should see your driver waiting for 25

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minutes. Do this a regular basis and your waiting-time charges will start to come down.

Cracking the Service Level Agreement enigma Almost all courier tenders will ask the suppliers to provide details of the Service Level Agreement they are proposing. Sometimes, clients will look to apply financial penalties against a supplier’s failure to meet the SLA. However as there are no agreed metrics amongst courier companies for measuring Service Levels, one supplier’s proposed 98% service level should not be considered more or less beneficial to your company than the 95% service level offered by their competitor.

Now, it would be irresponsible of me to say that courier companies sometimes favourably adjust their SLA figures before presenting them to clients, however if this were to happen, it is very unlikely that you would know. It is simply not possible or practical for you to check the time of every delivery. Ultimately you are reliant on the information the supplier provides you with as the primary means of judging their performance.

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To keep this critical element of the contract as honest and transparent as possible, when asking prospective suppliers to provide their proposed service levels, consider including the following question. “Will you provide me with direct access to information from your despatch system relating to my consignments pick-up and delivery times?� If the answer is yes, you will, with a couple of formulas in Excel, be able to establish the service level yourself and

The complex process of selecting the

also be sure that the SLA being proposed is an authentic representation of the service you will receive.

right courier

As you can see, given the complexity of selecting the right courier

supplier

supplier you should not be surprised if the supplier with the largest fleet who is offering you the lowest prices and the most attractive Service Level Agreement is not the best service partner for your company.

Author: Gregory Hoy Managing Director Excel Group Services Limited


Selecting the right courier  

Over the last 12 months the UK’s highly competitive Sameday courier industry has fundamentally changed. Leading suppliers ha...

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