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BusinessDay www.businessday.co.za Thursday 16 March 2023
INSIGHTS
COURIER SERVICES
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E-commerce spurs growth Firm committed to SA in competitive industry Local courier •companies are
focusing on increasing their efficiencies, writes Lynette Dicey
T
he courier industry — also known as the express logistics industry — specialises in moving shipments within 48 hours from collection to the end of the last mile process. In SA, the formal courier industry consists of about 200 companies, collectively employing about 18,000 people with more than 10,000 vehicles in operation. The express parcel industry has more than doubled in size in the past decade with e-commerce — excluding food and groceries — largely as a result of the boom in e-commerce. Garry Marshall, CEO of the SA Express Parcels Association (Saepa), the industry association representing a number of courier companies including FedEx, DHL, UPS, CourierIT, PostNet, RAM, DSV and Aramex, among others, estimates the industry locally is worth between R25bn and R28bn a year in revenue. Most of the larger courier businesses in SA are part of multinational groups with extensive global networks and capabilities. These larger entities have an advantage over small and medium-sized businesses given their networks, ability to invest in technology and IT systems, vehicles and research. “Key to the success of any express delivery business is a network which provides an extensive delivery footprint coupled with the ability to drive volume,” says Marshall. Globally, many logistics businesses are struggling.
Craig Pitchers … streamlined. Companies such as FedEx and DHL have reported processing fewer packages and reduced operating income. At the same time, their expenses are increasing. Investors tend to regard companies such as FedEx and DHL as barometers for what is happening in the wider economy. That’s certainly the case in SA too, says Marshall. “With the exception of the e-commerce sector, volumes are down and many businesses are in something of a holding pattern.” Data released earlier this month for the fourth quarter of 2022 by Stats SA revealed that GDP declined by 1.3%, a worse contraction than expected. Marshall believes the year ahead will be a tough one for the courier industry. “This is a very competitive industry which is highly service driven. The energy crisis coupled with sociopolitical issues and possible pending legislation means that both the industry and its customers will have to batten down the hatches and navigate their way through significant uncertainty.” Although e-commerce saw significant growth during the Covid-19 pandemic, that growth has levelled out post the pandemic, says Marshall. During the pandemic, general air cargo was very difficult with the result that a lot of this sector
moved to express delivery. As passenger flights have returned, so too has freight moved back to general cargo and away from express delivery. One exception to this trend is on-demand grocery deliveries which, says Marshall, have continued to experience exponential growth. Across the industry both globally and internationally, logistics providers are focusing on driving costs down to match revenues, says Marshall. Graeme Lazarus, MD of RAM, says the most significant industry trends impacting the courier services industry is the rise in e-commerce and quickcommerce (or on-demand delivery) which is heightening customer expectations. Craig Pitchers, chief operating officer of The Courier Guy, says the increased demand through e-commerce has resulted in some significant industry developments. “The number of small and mediumsized businesses and retailers offering goods through apps and an online presence has increased hugely over the past two years.” He says one of the biggest trends affecting the industry is the continued increased demand in the e-commerce business-to-consumer delivery space. Coupled to this is a move to more “on-demand” offerings where a customer purchases something online and receives delivery within 60 minutes — much like what is happening in the grocery space. “We’re also seeing significant demand in the customer-tocustomer space where the general public wants to send a parcel,” he says. The Courier Guy provides this service to the public through its 2,500 drivers, 22 depots, 170-strong Kiosk network and 1,100 pudo lockers. In a difficult operating environment, local courier companies are focusing on increasing their efficiencies. Pitchers says The Courier Guy
has upgraded and bolstered its sorting function by applying high levels of automation, allowing it to process and handle more packages more efficiently and accurately. The company has also implemented the latest technology to provide critical information at each point in the distribution cycle. “Our one-time pin (OTP) has streamlined deliveries as it is completely paperless and also allows a receiver to designate
another recipient should they not be available, reducing the chances of a failed delivery.” The Courier Guy’s model is unique in that drivers operate in a small area. As a result, firsttime delivery success is high and customer deliveries are easily completed. “Add to this a pricing approach simple for e-tailers to use and cutting-edge technology and you have a successful model for doing business,” says Pitchers.
Digitalisation and artificial intelligence are changing the game in the express delivery industry globally and locally and those businesses that have invested in state-of-the-art technologies are reaping the benefits, says Jed Michaletos, MD at DHL Express South Africa. Consumers, he says, are demanding ever faster delivery and certainty on the price they are paying for that service. Though price is a consideration, what customers using express delivery services want most is reliability and transparency. Globally, DHL is a frontrunner when it comes to sustainability, including moving to cleaner energy and fuel. Locally, the company has had electric scooters in operation for the past five years and is currently piloting fully electric delivery vans with a view to converting a large portion of its fleet to electric vehicles. This is in line with the group’s commitment to convert 60% of its last mile delivery fleet globally to electric by 2030. Michaletos says DHL Express, which is primarily focused on international deliveries, has seen significant growth in the e-commerce
Jed Michaletos … investment. space globally. The uptake of this in SA and Africa has been slower but has significant growth potential as intraAfrican trading grows. “Currently, 15 of the top 20 fastest growing cities globally are in Africa and it’s estimated that, by 2027, all 20 will be found on the continent. When you combine that with population growth, there is opportunity for e-commerce on the continent and, in turn, for the further growth of the express delivery industry.” He also predicts that the green economy will provide a new vertical market for logistics
providers, particularly in SA where the energy crisis is inhibiting economic growth. The company remains committed to SA and is making a significant investment in a new facility based at Waterfall in Gauteng. This facility, which includes a R100m investment in new equipment, will increase the company’s operational efficiencies, allowing it to process shipments more quickly while at the same reducing manual processes. This building has been designed to be fully carbon neutral, which is a first of its kind for DHL Express on the continent. DHL’s investment into the new facility over the next 15 years is about R500m, says Michaletos. “We see SA as a prime destination to help businesses trade in Africa and beyond. We have a specific focus to help SMEs connect and trade on a global level. An example is a South African-based customer of ours, a textile business, which has ramped up its international deliveries from five shipments a month to more than 500 a month. That ability to open up international markets for small and medium-sized business is a huge motivator.”
Counting the last mile costs One of the biggest challenges in the express delivery industry is the last mile of same-day delivery. Defined as the last stage of the delivery journey, the last mile is often the most expensive and time-consuming part of the supply chain journey despite being the shortest part of the delivery process. It’s also, however, the key to customer satisfaction. Last mile delivery is particularly challenging in rural areas where delivery points along a particular route can be several kilometres apart. In SA, challenges such as loadshedding and potholed roads make the last mile delivery in cities just as challenging, negating the gains in proximity. Increasing the costs of the last mile delivery are failed deliveries, returns and replacements. Incorrect address details, unforeseen delivery incidents, traffic congestion and unpredictable weather all increase operational costs and impact the ability of logistics providers to make a profit. Keeping up with rising consumer expectations is becoming increasingly challenging. While customers want fast delivery of their online purchases, they’re less enthusiastic about paying for that delivery with many likely to abandon their online shopping cart if they’re faced with additional expenses they didn’t
expect at checkout. As a result, many online retailers choose to absorb the cost of delivery. Customers also want realtime visibility of their packages which requires that logistics providers invest in real-time tracking technology to provide customers with transparency. The challenge for express logistics providers is that the cost of the last mile part of the supply chain process accounts for more than half of the total shipping cost. Optimising routes and implementing best-in-breed technologies are regarded as some of the most effective ways to cut down on operating costs for last mile delivery. David Lazarus, RAM’s executive chairman, reveals that the business has invested in a logistics IT solution specialising in courier and express parcel distribution and which includes a last mile delivery solution. The fully integrated and transparent platform provides customers
with real-time information and visibility of their supply chain. The company has also implemented other solutions to address the last mile challenge, including 42 hubs across southern Africa and a sophisticated address capturing tool to ensure every shipment has a valid delivery address. Fully integrated handheld mobile devices allow for proactive decision-making by providing real-time, accurate and reliable information while a self-service digital solution called RAM Smart Track allows the receiver to engage seamlessly with RAM throughout the delivery process. In addition, the company has implemented state-of-the-art track and trace technology while a workflow solution ensures the timeous resolution of issues and requests. “Ultimately, increased volume has provided for denser delivery routes and better efficiencies,” says Lazarus.
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