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HOME DELIVERY

Householders have always required home deliveries, traditionally for parcels, milk or cumbersome furniture. Today, new technology is revolutionising the way people shop and consequently the home delivery market. Maughan reports on a sector of the haulage industry which is growing dramatically. He found that many operators, ranging from the massive to the modest, are reaping the rewards of dropping goods at the nation's door...

y its nature as a service industry, haulage is susceptible to the demands of the consumer—it's all about supply and demand. For example, 40 years ago fleets were kept busy delivering coal. Today the man in the street doesn't require coal, but demand for other home-delivered goods is increasing dramatically, and the potential for new business is immense. According to the Office for National Statistics, there are 23.6 million households in the UK—and Sainsbury's supermarket predicts that 5-10% of them will be using home shopping over the next five to io years.

Technology is the dynamo behind the acceleration in home delivery. The remarkable growth in interne use, and developments such as digital television, mean information is available to the consumer like never before. There has always been a market for home delivery, but traditionally this has been characterised by relatively small-scale specialist operations, such as for furniture. With new technology shoppers can select an item and have it delivered without leaving home.

According to Chris Warburton, chief executive of Lancashire-based Cool it!, a temperature controlled vehicle rental firm, the consumer comes in two types: the "will-nots" and the "cannots". For Warburton, the "willnots" are shoppers who are too lazy to leave the house and venture out to the shops. By contrast, the "cannots" are the elderly and infirm, or perhaps those living in remote locations who cannot easily get to shops.

Development

Whatever the social make-up, the home delivery market is set to grow. Warburton cites the requirements of the "will-nots" and the "cannots", in conjunction with new, easily accessible technology, as the factors behind the development in home delivery.

Cool it! currently has 35o commercial vehicles under 7.5 tonnes available for hire, the majority of which are 3.5-tonne panel vans. Warburton says the boom in home delivery started two-and-a-half years ago. In early 1997 none of the firm's vehicles were used to deliver to homes. But today 75 vans-2I% of the fleet—are used for home delivery. "A lot of consolidation has gone on in home deliver)," says Warburton.

Marks & Spencer and Budgens are two firms which have contract-hire agreements with his company. And 150 vehicles are on order to help cater for the expanding market.

The growth enjoyed by Cool it! is a useful barometer of the larger UK home delivery market, and the potential of the home delivery sector has not been overlooked by the giant fleet operators. Securicor Omega Express has traditionally been involved in business-tobusiness deliveries, using vans to get goods such as computers to their destinations. Home delivery is in much the same vein; it too requires smaller CVs to get goods to households. The firm operates 5,000 vehicles; 3,000 of them are vans.

General manager, home delivery. Simon Croft says: "In terms of the potential cus tomers, home delivery is phenomenal it is one of the buzzwords at the moment." Croft explains that people have busy lives and often don't have the time to shop in person. The key areas we are looking at are brown goods such as hi-fis, computers, televisions and sports equipment," he says. "We will be looking into white goods at another stage."

So how does the SOE home-delivery supply chain work? Croft says it is a three-tiered process between the customer, the retailer, and SOE. The shopper initiates the order, say, for example, to Dixons by telephone or letter. Dixons personnel then phone SOE with details of the order. But at present SOE is developing its use of the internet: when this system is up and running Dixons will be able to plan deliveries with SOE without the hassle of individual phone calls. The company's vehicles do collect goods from high-street Dixons stores, but typically products are picked up from Dixons regional distribution centres.

Technological advances are not restricted to the haulier. As an integral part of the home delivery system, it is crucial that the retailer invests in the right equipment. The electronic point of sale system (EPOS) is a vital piece of kit in the retail warehouse. Here, all goods leaving the warehouse are automatically registered on computer; staff can then take stock and replace the products ready for the next delivery.

Groceries Exel Logistics recently joined forces with Tibbett and Britten to transport food to homes for Marks & Spencer. Under the terms of the MSES deal, Exel and Tibbett and Britten trade under the name of Joint Retail Logistics. Customers go into the store and select their groceries, which are delivered to their homes for a modest charge.

Like Securicor Omega Express, Exel recognises that home delivery is not just about trucks and vans—technology has a big part to play.

Perry Watts, development director for retail Europe at Exel, explains that the firm is currently working on web sites with its customers, as well as a voice recognition system which will

0 enable customers to place orders without having to speak directly to Exel staff. He says: "Home delivery is a major growth area, and it is highly specialised. We are pushing ahead with technology. With growth expected in electronic methods of ordering, the accessibility and choice for the consumer is enormous, and therefore the impact on the physical supply chain provides enormous opportunities for Exel Logistics—hence our heavy investment in this."

But perhaps more importantly, Watts sees the home delivery market as inherently unique in haulage—in a sense it is removed from the industry itself. "It is miles away from being a haulage operator," he says. What does he mean by this? For Watts, there is an element of this business which is equally as important as trucks—and that is corporate identity. And this is not surprising. Any industry is characterised by competition, but when it comes to the retail sector that competition is notoriously severe.

Dressing

Most haulage firms delivering, say, concrete to a building site do not have to concern themselves with dressing the driver immaculately. A T-shirt and jeans will do the job.

But when your driver is delivering a stateof-the-art stereo to Mr tones in Acacia Avenue, it is crucial that the correct image is projected. A leading hi-fl store wants its customer to buy its goods again. And, in turn, the haulier delivering the goods wants to hold on to the contract.

Watts says: "Potentially, customers can be a problem. We employ retail customer service individuals—we want people who enjoy working with the customers."

It might sound something of a glorified job title, but Watts explains that many drivers involved in home delivery may have worked with the public before; in a shop, for example. In this sense the emphasis is actually on the business of shopping, rather than simply getting the goods to the customer's door.

Exel makes a point of liasing closely with its dients: "We do a lot of work with our customers with image—this is important," comments Watts. He reports that Exel and Marks & Spencer even held their own fashion show so a range of uniforms for home delivery could be viewed.

For the fleet operators, technology and corporate image are the key factors driving home delivery on its course. But what about the smaller haulier? CM spoke to David Hogg, warehouse manager at Newcastlebased Murray Hogg.

This is a large family business with a fleet of CVs, including artics and rigids; but the firm also operates nine Mercedes 814 vans— the ideal tool for home delivery. Hogg explains that the firm's artics pick up the products from the manufacturer; they are stored in the warehouse awaiting delivery.

Importantly, economies of scale are the name of the game. Hogg explains: "Home delivery has to be multi-load—we cannot afford single drops. Rates are lower than other types of haulage."

And overheads are effectively doubled in terms of wages. Transporting white goods necessitates a two-man team and, like the big fleet operators, it is important that drivers are kitted out in uniforms. Does the home delivery market fluctuate? According to Hogg, it is "quite steady". After all, customers more often than not require home delivery for white goods. "It is definitely worthwhile," he adds.

Owner-drivers are often associated with home delivery—the local man with the van has traditionally been on hand to shift a settee or perhaps an old cooker. Glen Boniface, owner of Darlington-based GB Transport, runs a Ford Transit with a Luton body. lust 12 months ago, home delivery accounted for 50% of his work; the remainder was business-to-business delivery. But the situation has altered since then. Boniface says: "Today 75% of my work is in home delivery."

He transports goods for Great Mills, the DIY store. "I carry everything from a tin of paint to slabs," he reports. His typical operating radius is zo miles, with some runs up to 40 miles. "The pricing structure is based on multi-drops," he says. 'This could mean up to zo separate deliveries in one day."

Boniface explains that Great Mills distributes a flyer to households every month. Customers either select a product from the flyer or from the showroom. Like the large and medium-sized hauliers, corporate image is important. Boniface employs a driver and a mate, who both wear a smart grey polo shirt complete with the firm's name. "Great Mills doesn't want us to turn up in raggy clothes," he remarks.

Home delivery is about customer power. And like any market, it is liable to have good and had spells. For example, demand for steel might rocket during a construction boom, but it can drop just as quickly. With home delivery peaks are not that dramatic. Owing to the sheer diversity of consumable goods, some products may be in demand while others are in decline. Haulage firms which exclusively carry, say, steel, have gone out of business after investing in highly specialised trailers. No steel, no work.

Diversification

But home delivery, in which the staple piece of kit is a van, allows scope for diversification: you can deliver just about everything to a household.

According to Glen Boniface, home delivery is "quite predictable". Spring and summer are busy as householders indulge themselves in gardening and home improvements, and the run-up to Christmas is always frantic. There are lulls, of course ("especially from September to November"), but Boniface as says: "It is never dead."

With fleet operators, large family firms and owner-drivers reaping the benefits of home delivery, would hauliers who are not involved in the market consider getting in on the act? CM spoke to Gerry Field, co-director of Dudley-based II Field.

The firm is involved in general haulage; two thirds of its business is derived from the car industry. its Midlands location means the company is surrounded by the automotive industry—it is a staple diet for 1) Field, and, crucially, it is tried and tested market. Field sees home delivery differently: "It is unpredictable—it is one of those situations where you are in one minute and out the next. We wouldn't look at it."

That view is shared by Arthur Nicholls, owner of Gateshead-based Nicholls Transport. His Firm transports steel, pulp and engineering equipment. "If you go through quiet spots, with few deliveries, you are not even covering your running costs," says Nicholls. Like Field, he considers the home delivery market to be unpredictable.

Whatever individual hauliers believe, the fact remains that home delivery is fast becoming big business. Perry Watts of Exel Logistics believes the market is all about customer loyalty—once the consumer is content, the haulier will be in work. "Once the customer is locked in," he says, "the customer is secured."