Home Delivery Network Limited – The Interview

The rise of on-line shopping in the UK has put the spotlight on Home Delivery Network Limited (HDNL) as a leading on-line delivery specialist, trusted by top retailers to handle this crucial part of their business. In a nutshell, they deliver ‘the last mile’ of an online purchase. The logistics of home shopping are a specialist field, with on-line fulfilment requiring a more strategic approach, and HDNL specialises in providing this service as part of its home delivery portfolio. The company has been investing in the infrastructure to underpin its operations and has recently appointed a new Chief Executive to lead its drive forward. Brian Gaunt spoke to Warehouse & Logistics News.

Warehouse & Logistics News – When did you take over as Chief Executive of HDNL? What were you doing before? What does your job as Chief Executive (CE) entail?
I joined HDNL just over two months ago from Christian Salvesen Plc, where I was the UK Managing Director for Food and Consumer Goods. In my previous role I managed the provision of logistics services for a number of major UK retailers and was responsible for annual revenues of more than £300 million and 6,000 colleagues spread over 45 sites. Prior to joining Christian Salvesen, I held a number of senior director level logistics and supply chain positions with various retailers, including The Big Food Group plc and ASDA Wal-Mart.

My position as Chief Executive will entail overall responsibility for HDNL’s strategy and performance, at a time when the company has a substantial opportunity to grow in size and profitability. My goal is to continue to deliver a ‘best in class’ service proposition to existing and future clients. Part of my role is to appoint the right people to take the company forward and in-turn build successful teams to achieve a profit.

WLN – What do you see as your most exciting challenge as CE?
The biggest challenge will be to help the third party logistics (3PL) industry meet customer aspirations for home delivery going forward. HDNL has a unique position and as such, can play a significant role in the interface between carrier, customer and client.

WLN – As CE, what do you bring to HDNL? What is your vision for the company?
Currently I feel there is a lot of confusion in the marketplace. Retailers think they know what the customer wants, and 3PL providers know what is possible. My role is to provide a joined-up version of what reality looks like.
I have the benefit of a retail background, which will assist in capitalising on the growth in the online shopping sector. Our recent investment in Track and Trace technology will also help keep HDNL at the forefront of this rapidly expanding industry.

WLN – When was HDNL set up? Who owns HDNL now?
HDNL was formed in May 2005. It is part of The Littlewoods Shop Direct Group, although it is run as a separate company.

WLN – How big is your total home delivery business now, in terms of deliveries per year? How has this grown over the years?
Our business has grown year on year, and last year we delivered over 110 million parcels, going to homes in every postcode every day.

WLN – How would you sum up the HDNL service proposition?
HDNL is the UK’s largest dedicated home delivery and collection service. We offer a standard 48 hour service, which can be attended or non-attended. For example, we can deliver to safe alternative locations such as a neighbour’s house or a back porch, in the event the customer is not at home at the time of delivery. This allows the customer to consider the most convenient delivery option.

We handle items of all shapes and sizes, from wine to bulky home furniture. We have a nationwide team of 3,500 delivery drivers who visit every postcode every working day, delivering over 500,000 parcels a day at peak. Our drivers have developed a unique knowledge of their own local areas and customer bases, which enables suppliers to offer a high quality, flexible and convenient delivery service to their customer. Our recently updated Track and Trace system has provided a solid platform for future developments.

WLN – How have developments in the retail industry, in particular the growth of online retailing, affected HDNL? What opportunities and challenges has this presented?
There have been two significant changes in the retail industry that have revolutionised the role of the carrier in the market. The first is the rise in broadband. With 61% of households now online, Internet shopping has reached new levels. Online shopping has brought convenience, speed and choice to consumers and led to a shift away from the traditional mail order catalogue model. Competitive pricing is now a given in all retail categories, with the UK now representing the largest on-line retail market in Europe. The second factor is the emergence of a ‘virtual High Street’ via the Internet. Most retailers now have a multi-channel offering for their consumers, ensuring brand equity is retained.

The result of these two factors is the emergence of a new type of consumer – one that demands convenience and the same level of customer service they receive on the High Street. The challenge for the carrier is how to meet the expectations of this new breed of consumer.

WLN – What share of the UK contracted out home delivery market do you have? If you can break the figures out, what share of the contracted out on-line fulfilment market do you have?
Last year Home Delivery Network Limited delivered over 110 million parcels. According to the IMRG (IMRG 2007 Annual Report E-Retail 2007), 540 million parcels were delivered to homes in 2007. There are very few ‘pure play’ on-line retailers, but it is widely recognised among retailers that multi-channel solutions support growth. Whether someone browses in a catalogue and places an order online, whether they shop in store and request home delivery or search on the Internet and order over the phone, the requirement for a 3PL will always be there. Part of my role is to capitalise on this growth sector.

WLN – Size isn’t everything, I know, but where do you rank among third party providers covering home delivery logistics as a whole? What about on-line related home delivery? Why choose HDNL to contract out your on-line fulfilment?
We are the UK’s largest dedicated home delivery service. Regardless of the channel where the order was placed, we are best suited to deliver your parcels to homes because:

• We specialise in delivering to homes, not businesses
• We deliver to every postcode, everyday
• We have an effective structure of delivery routes
• We understand the frustrations and inconvenience of waiting for a delivery and have worked with clients over the years to identify safe alternative delivery locations

Our other strength is that we offer Track and Trace on all deliveries, from our depots onto the van and to the end customer’s home, whether delivered with a signature or to a safe alternative location. With a combined history of over 90 years delivering to customers’ homes throughout the UK, we are not only the largest, but also the most specialised home delivery service.

WLN – Who are your major retail accounts? What do you do for them? Do you have any similar operations outside the UK?
We deliver for over 100 major high street retailers – some of them pure play, some well-known brands and some strong participators in multi-channel retailing. We deliver and collect parcels to retailers’ and customers’ homes across the UK, every postcode, every day.

We are UK-based, with 62 nationwide depots within an hour of 95% of the population. Last year we expanded into Northern Ireland, where we now trade under the name HDN (NI).

WLN – Do you (Brian) have any dealings personally with the major accounts?
I have met with a number of our clients and am looking forward to meeting others over the coming months.

WLN – In the rest of this conversation, I’d like to concentrate on on-line shopping fulfilment. Do you offer total on-line fulfilment services from order processing to delivery? If not, at what point does HDNL’s part of the on-line delivery supply chain start?
With regards to home delivery fulfilment, whether the order was placed online, over the phone or in store, our services start at the point of dispatch. Firstly, the parcel is labelled by the retailer and then either collected by us or delivered to one of two central sortation hubs. Once it has been sorted it is trunked and sent on to one of our 62 depots across the country. It is then loaded the following morning for delivery by our drivers. At every step along the way our online tracking system records the progress of the parcel, which is visible to both clients and customers.

WLN – How long does it take from on-line order placed to proof of delivery being received? When does the delivery become visible on the retailer’s network?
Whatever the source of the remote shopping experience, the time it takes for any order to be processed will be dependent on a number of factors:

• Whether the item is in stock
• What time of day it is (e.g. order before 6 and get it next day)
• Whether it is an ‘order online collect from store’ delivery

What is critical for a good customer experience is that the customer’s expectation is set at the point of order regarding how and when the parcel will be delivered. The carrier then has to meet the delivery promise, resulting in customer satisfaction and repeat purchasing.

WLN – What proportion of your home delivery traffic now is on-line related, as opposed to catalogue shopping and deliveries of orders placed in stores? How have these proportions changed over the years?
There is a perception that mail order shopping is declining, yet many orders are still placed via catalogue. Multi-channel solutions have also been celebrated as clearly successful options, although some other retailers – pure play for example, have been very successful at driving growth. The figures from Christmas 2007 trading speak for themselves – 15% of all purchases were made online (IMRG Capgemini e-Retail Sales Index 2008)

WLN – In your experience, how do the logistics challenges of on-line fulfilment differ from those of conventional home delivery? How are you equipped to meet these challenges?
There is a blurring of boundaries regarding the channels individuals use to order their parcels for home delivery. The concerns surrounding credit card security have subsided in the main, while the increasing penetration of Broadband has introduced a new consumer to the home delivery market, one that has different demands to that of the traditional mail order customers who have understood the home delivery experience for years.

WLN – Can you name your customers specifically for contracted out on-line shopping fulfilment, and tell us about what you do for them? Do you produce case studies?
We have over 100 clients – some pure play, some true multi-channel and some well-known high street retailers, including Tesco Direct, the John Lewis Partnership and Littlewoods Shop Direct.

We deliver parcels under 25kg from the retailer to their customers’ homes – we are the UK’s largest dedicated home delivery business. We are looking forward to producing specific client case studies later this year.

WLN – Can you tell us about the types of goods for which you are handling on-line fulfilment? How has this mix of products changed over the last couple of years?
We are the largest carrier of wine and flowers, just two of the types of product we deliver daily to customers homes. Rising levels of Broadband penetration and growing consumer confidence in ordering products over the Internet have seen a move away from traditional catalogue clothing to other specialist products, including books, electrical appliances, gifts and hampers.

WLN – Are you seeing changes in seasonal peaks for on-line home shopping – is it becoming more consistent all year round? What was Christmas 07 like for on-line shopping? What are you expecting for Christmas 08?
The largest seasonal peak is Christmas, which is becoming sharper and later. Originally, traditional mail order channels resulted in orders being received by the end of November and fulfilled during the first two to three weeks of December. However this has changed considerably in recent years. Last year the busiest on-line shopping day was a week later than the year before, which demonstrates consumers’ growing confidence in the Internet. Retail offers such as ‘order on the 22nd for guaranteed delivery on the 24th have put increasing pressure on finite resources. In terms of deliveries, the busiest day for HDNL last year was 13th December, with over half a million parcels delivered by our drivers.

Last year we implemented forecasting processes to enable us to work with the retailers to ensure we had capacity to deliver their customer promises. We will be working closely with them to improve the accuracy of our forecasts and deliver customer promises for the Christmas 2008 peak.

WLN – What infrastructure do you have in place specifically to handle on-line shopping fulfilment? How much have you invested in infrastructure to strengthen the on-line related home delivery service – people, vehicles, IT?
Again, it is not just on-line shopping but any parcel under 25 kg – about 300,000 a day – which move from the retailer to the customer via a nationwide network of 62 depots, served by two sortation centres. Our 3,500 drivers use liveried vehicles to deliver the product.

This year our investment has been in the hardware and software for new hand held terminals (HHT’s) to improve their reliability and provide a solid foundation for future developments. Track and Trace technology allows customers to track the whereabouts of their parcel at each stage of the supply chain. HDNL is currently rolling out Hand Held Terminals, which will provide ‘near real-time’ Management Information.

In addition, during the Christmas 2007 peak we established a temporary sort centre to support the increasing demand at this time, and look to do so for Christmas 2008.

WLN – I recall talking to Chris Airey, your IT Director, about your IT investment programme last year. Is that complete now?
The rollout of the hand held terminals is now complete. This has provided a hardware platform that Chris is investigating, in order to define the most appropriate developments to add value to the customer experience and client proposition.

WLN – How much has your total service and on-line fulfilment improved as a result of all this investment?
The reliability of the HHT’s has vastly improved, resulting in an enhanced customer experience. The HHT’s are more efficient, which means information is readily available for clients to be able to answer queries more effectively, and has improved our ability to report performance.

WLN – Have you won any awards for achieving excellence in this way?
This year we are proud to have won the ITM award of B2C Carrier of the Year 2008 and an IMRG Online Green Award for our contribution to reducing carbon emissions as a consolidated network.

WLN – What do you see as the biggest external factors affecting home delivery and on-line fulfilment?
The most critical element is the arrival of home delivery as the normal retail experience and multi-channel retailing as a part of everyday life. Anticipated growth for the total remote retail sector is 10% per annum, accelerating over time.
The other major factor is the growing penetration of broadband and the developing communications process, enabling consumers to press buttons on their mobile, their TV or computer and goods arrive.
The changing demands of consumer expectation in particular, the lack of understanding about how the process works, irrespective of how the parcel was ordered, are all issues which need to be addressed in order to make the supply chain more efficient.

WLN – Finally, where do you see HDNL going from here?
I think HDNL will go from strength to strength in understanding the needs of customers and clients. Developments in the 3PL and retail sector can only mean growth for HDNL as the market leader in home delivery and service provision. We will continue to invest in technology and customer service to enhance our position.

Home Delivery Network Limited
Tel: 0844 556 7000
www.hdnl.co.uk