Why is the logistics market still focusing solely on revenue?

The postal logistics and delivery sector is a highly competitive marketplace and the winners are those organisations which best understand their costs and drive their customers to sign up for longer term contracts at profitable levels. So why is this happening in so few organisations?

The simple answer is that it is difficult. It is however achievable when organisations change from having very little focus on data, to being rifle-focused on the use of data to gain insight and drive the business forward.

Once an organisation knows how much a parcel costs to deliver; how much it costs to service a customer and how profitable a particular delivery route is, it is able to make incredibly precise decisions. Having such a level of granular knowledge equips them to have open dialogue with each customer regarding how much the contract is actually costing, rather than having a transactional relationship purely based on revenue.

Whilst a customer could generate £100k a month in revenue, it might actually be costing £103k to move parcels around because they are odd shapes, relatively heavy, or going to remote destinations like Northern Ireland or Scotland so they’re more expensive to deliver. Wouldn’t it be great to have the opportunity to approach the customer with this level of knowledge and honestly say that “working with you is not proving to be profitable for us, however if we were to re-structure your business with us, we can create a business model that works for both of us.”

Or profile prospects against an existing customer, providing an understanding of how profitable this new business will be. Then have the choice to then continue pursuing the sale on equal footings or to walk away and leave it?

With the processing power of next generation analytics platforms, every organisation has the ability to break down costs to actual parcel level. These platforms have been designed not only to manage vast data quantities but also to compress that data into manageable – and affordable – volumes that provide a business with the insight it requires.

Gaining an understanding of your cost base is crucial, and every organisation has the insight at their fingertips, just waiting to be revealed. The answers to the cost / profit equation are there – it’s all about using data in a smarter way.

Laurence Armiger, Director, Zizo

www.zizo.co.uk