Departure of a subcontractor: what opportunity for a parcel delivery depot manager?
- December 21, 2022
- 3 mins
In the parcel delivery industry, the vast majority of carriers subcontract the last mile delivery. This final link in the logistics chain is very expensive: it represents up to 53% of the total costs of a delivery!
Working with trusted transport providers is therefore essential for couriers to ensure a quality but also efficient delivery service. The challenge is to maintain a collaboration with efficient subcontractors despite:
- A highly competitive transport subcontracting market where the profitability of its players is being questioned.
- A high turnover and a shortage of drivers.
Whether a subcontractor closes his business or retires, the departure of a service provider is synonymous, for a parcel delivery depot manager, with the reorganization of its activity. This can quickly become a headache in the absence of precise data on which to base the right decisions. Indeed, negotiations between the depot manager and his subcontractors are very often based on intuition because they do not have the tools to access reliable data.
Here is a practical case study where the departure of a subcontractor becomes a real opportunity for the depot manager to reduce his costs while increasing the profitability of his providers.
Context
Scope of Analysis:
- Activity: B2B and B2C parcel delivery
- Departure and return of the vehicles to the same depot in Gonesse in France
- Deliveries within the department of Seine-Saint-Denis in France
- 8 routes per day on average by 8 drivers
- 109 daily delivery points on average
A depot manager of a pacrel delivery company witnesses the retirement of one of his longest serving transport subcontractors. The three drivers of this subcontractor have an excellent knowledge of their assigned sectors, which makes them efficient and therefore valuable deliverers. However, two of these three drivers take advantage of this change to get hired by a competitor.
In a context where the shortage of qualified drivers is high, this change can become a good opportunity for the depot manager to reorganize the distribution of its territory and rechallenge the subcontractors still present. Each one has different characteristics:
Carrier A
• The third driver of the subcontractor who is retiring wants to stay working for the parcel delivery company and offer his services as a freelance.
• This driver is very experienced and efficient in his area.
• The subcontracting sectors have not been rechallenged for years.
Carrier B
• This small delivery company new to the market is very talented.
• The company is open to technology and uses tools to optimize its operations and train its drivers more quickly.
• Two drivers already employed but others are motivated and available.
Carrier C
• The performance of this subcontractor’s three drivers is uneven, with one driver struggling to complete his routes efficiently.
• He may not be the most suitable driver.
Why is this retirement an opportunity for the depot manager?
Voici quelques pistes que le chef d’agence peut mettre en place suite au départ à la retraite de son prestataire :
Keep the scope of the freelance driver (carrier A) who is efficient in his area.
Assign more zones to the carrier B whose drivers are efficient to build loyalty and make its business sustainable.
Find a more efficient driver than carrier C to ensure its deliveries.
Optimize the depot sectorization to lower the cost per parcel negotiated with the subcontractors.
Kardinal’s solution helps depot managers to sectorize their territory and provides precise data that will enable them to better negotiate with their subcontractors. Based on historical data, and taking into account operational constraints, the solution will recommend the optimal organization of the territory for any geographic area.
How to take advantage of this opportunity with Kardinal's solution?
To visualize the current sectorization of the depot on Kardinal’s solution, simply import an Excel/CSV file containing the historical data of the activity.
Analysis of the current sectorization
Step 1: Visualization of the current sectorization of the depot
Thus, the depot manager can visualize the distribution of his territory by subcontractor and have an overall view of costs and performance.
On this sectorization, we observe that 8 routes are currently organized to deliver all the parcels for a daily cost of 2 312 €. The global averages on the different indicators (duration of the route, distance covered, weight and volume to be delivered as well as the number of stops) can certainly be increased and optimized.
Step 2: Data export for each route
Kardinal’s solution allows the depot manager to download his subcontractors’ data in Excel format in order to visualize them in detail and analyze their performance.
Step 3: Data analysis for each route
In this Excel file, the depot manager can consult the different KPIs of each tour by subcontractor and customize the price per negotiated package and the costs per vehicle/km to know their daily profit. This information, generally very little known by the subcontractors themselves, is therefore very valuable for both stakeholders.
In this use case, we can note some observations:
- Different cost structures (cost per vehicle) for each provider
- Carrier C has the worst performance: distance travelled, number of stops, average volumes and weights delivered well below the other subcontactors.
- The prices per parcel negotiated with each subcontractor are different (carrier C has the highest price per parcel while its cost structure is lower and its performance lower).
- The average price per package on the depot is 2,51€.
This sectorization can be optimized in order to make the routes more efficient and thus reduce costs. In a few minutes, the algorithms of Kardinal’s solution can calculate the most optimal sectorization of the territory.
Sectorization optimization with Kardinal’s solution
To discover the results of the optimization provided by Kardinal’s solution, download our case study “Depot managers: how to turn a subcontractor’s departure into an opportunity?”
Thanks to Kardinal’s solution, you can finally have the factual data you need to negotiate with your subcontractors with peace of mind. If you are interested in this subject, contact us to discuss your issues with our team.
