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By Jennigay Coetzer – published in Business Day newspaper, 28 January 2011

Some courier services companies use subcontractors or brokers to deliver parcels in areas where their networks do not reach. But these operators do not have a close relationship with the customers, or the technology in place to allow customers to track their parcels in real-time.

There is also a lack of continuity and accountability, says Graeme Lazarus, joint MD of RAM Couriers. He says RAM has done well during the downturn, partly due to its strategy of not using subcontractors.

“We had an exceptionally good year in 2010.” Lazarus says courier services has become a very personalised business, due to factors such as the need to gather certain information from customers before delivering parcels to them.

An example of this is the delivery of new cell phones, which involves locating the customers, collecting proof of their address and delivering it back to the mobile operator or retailer to comply with RICA requirements. He says SA courier companies tend to have more challenges than their overseas counterparts.

“For example, in countries such as London,UK , when couriers deliver to someone’s house and they are not there, they will leave the parcel on the doorstep, but we cannot do that here.” When it comes to risk mitigation, about 60% of customers are prepared to pay for insurance, and the balance are not, says Lazarus.

He says there is a major debate about who should be responsible if parcels get lost or are broken in transit. “We make it part of our sales pitch to ensure customers understand the risks upfront.”

Profit margins in the courier services industry are 7% to 10%, and some courier companies are bearly surviving as it is. As a result, a lot of them cut corners to keep prices low to win the business, which affects service levels.

Certain customers will accept higher cost increases for service excellence, but when bidding for tenders, expected costs are invariably linked to CPI, in terms of the contract. Lazarus says the downturn has had a marked affect on customer behaviour.

For example, instead of sending bulk deliveries they are opting for more frequent, smaller value deliveries that carry a lower risk, and they want their parcels to be delivered faster at a lower cost while still demanding service excellence. With multiple lower value deliveries courier costs are more visible than with higher value deliveries, which leads to more debate about price.

Many customers are also opting to pay over 60 days and pushing for better terms.

On the upside, the economic crunch has made customers re-look at the way they operate and how they package and distribute their products. This has helped courier companies to raise service levels by becoming smarter and wiser they way they manage their supply chain.

For example, RAM has become more automated and is opening up more decentralised hubs to avoid driving long distances and enable them to provide a faster delivery at a lower cost, says Lazarus. “We are decentralising, because traffic jams can kill the business by staff incurring unwarranted overtime, which cannot be recouped.”

He says it is a mistake for newcomers to think they can set up a courier company with a bakkie, because customers want national distribution.

Jennigay Coetzer is a freelance business and technology journalist with 25 years experience, and she writes regularly for Business Day. She also runs media training and writing skills workshops, and is the author of A Perfect Press Release – or Not?, a guide to writing and distributing effective press releases, an electronic version of which can be downloaded free from her website: www.jennigay.co.za.

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