Optimizing parcel carriers’ margins: how Kardinal and Open Pricer are revolutionizing parcel delivery
- August 21, 2023
- 5 mins
In a recent interview on the Postal Hub podcast, Daniel Rueda, CEO of Open Pricer, and Jonathan Bouaziz, CEO and co-founder of Kardinal, unveiled their new partnership and discussed its significant potential for parcel delivery players. This strategic collaboration between Open Pricer and Kardinal aims to transform parcel pricing and margins optimization for parcel carriers. By leveraging their complementary solutions, the two companies seek to provide superior value and decision aid to their customers.
The partnership comes at a crucial time when the industry is experiencing shifts in focus from revenue to margin. Since the COVID crisis, there has been a noticeable surge in e-commerce volume, prompting parcel delivery players and postal operators to make substantial investments in new infrastructure. This surge in demand led to a significant increase in investments. But then, in 2022, logistics companies faced a significant drop in volumes due to inflation. Faced with volatile activity, postal operators and parcel delivery players seek to ensure long-term profitability. Aware of these challenges, Open Pricer and Kardinal have decided to combine their expertises and solutions to address the emerging needs.
Listen to the episode 313 of the Postal Hub podcast “Combining route optimisation and dynamic parcel pricing” on The Postal Hub podcast website, Spotify, Google Podcasts or Apple Podcasts.
Transport operators struggle to achieve profitability
Profitability poses a critical challenge for parcel delivery companies, as they often grapple with soaring operating costs and slim profit margins, typically ranging from 4% to 10%. The industry is currently facing formidable obstacles such as skyrocketing fuel prices and a scarcity of drivers, which have far-reaching effects and jeopardize long-term profitability. Consequently, these companies find themselves in a constant struggle to ensure their financial viability. To this end, they relentlessly seek avenues for optimizing their supply chain, with a particular focus on the crucial last mile, accounting for more than 50% of overall delivery operating costs.
Presently, both postal operators and parcel delivery companies lack visibility of their operational performance. This visibility is indispensable for timely adjustments and enhancements to underperforming depots and regions, aimed at boosting efficiency and bolstering profitability. The subcontractors associated with these companies face an even more challenging situation. In France, for instance, numerous subcontractors face bankruptcy each month. It is imperative for both parcel delivery companies and their subcontractors to urgently streamline their organizations, as this represents a critical step towards enhancing their collective profitability.
The Kardinal-Open Pricer partnership for improved profitability
Specialized in revenue optimization, Open Pricer works closely with carriers’ sales teams. Its price optimization platform, based on Machine Learning algorithms, calculates the optimal rates for parcels based on different parameters: shipping profile (origin, destination, weight, etc.), price history, customer segmentation attributes and network cost model.
On the other hand, Kardinal focuses on cost and operations optimization for the last mile. Its innovative dispatch intelligence technology allows depot managers to sectorize their territory, optimally allocate resources, and anticipate activity changes.
By collaborating and sharing data between their platforms, the two partners discovered the potential to enhance their respective solutions and deliver even more value to their customers. The main objective of this collaboration is to empower postal and delivery operators with data-driven decision-making, improved pricing accuracy, and better cost modeling.
Kardinal’s data, including capacity utilization, delivery zip codes, and day-of-week variations, allows Open Pricer to enhance its cost modeling and provide more accurate price calculations. Indeed, the costs associated with the last mile are generally based on averages, which may not accurately represent the actual situation on the field. This becomes particularly problematic given the high expenses involved in this delivery stage. This precision will enable carriers to define pricing with sharper accuracy, particularly when dealing with large retailers or rerating for existing customers.
The partnership also opens doors to dynamic pricing strategies, enabling carriers to offer personalized rates based on customer zip codes and delivery dates. By leveraging Kardinal’s data, Open Pricer can offer its customers this type of dynamic pricing to improve the profitability of deliveries (especially those in rural areas) while optimizing volume distribution (for example, by stimulating low-volume periods with more attractive prices).
Significants benefits for both Open Pricer’s and Kardinal’s customers
The data from Open Pricer is also valuable for Kardinal’s customers, as it provides access to net prices and cost allocation for each parcel. This data can be used to calculate a new key performance indicator (KPI) called tour profitability. This KPI will enable operational teams to plan resources, negotiate with subcontractors, and assess the profitability of each tour compared to last-mile costs.
The partnership between Open Pricer and Kardinal also makes sense in managing cases of delivery outsourcing with variable costs, where dynamic pricing plays a crucial role in avoiding crossing two critical thresholds:
- The first threshold pertains to the risk of losing subcontractors due to insufficient remuneration. If the negotiated prices fall below this threshold, subcontractors are more likely to seek better-paying opportunities elsewhere. Considering the current driver shortage, this would pose a significant challenge for carriers, impacting their service quality. Therefore, dynamic pricing enables Kardinal to maintain competitive remuneration, ensuring subcontractor retention and avoiding potential disruptions in the delivery network.
- As for the second threshold, it involves avoiding excessively high prices that would affect the parcel delivery company’s profitabilty. By using dynamic pricing, Kardinal can effectively manage pricing with subcontractors, striking a balance that benefits both parties and maintains optimal service quality. This partnership ultimately benefits the customers of both Open Pricer and Kardinal, offering a win-win solution that improves profitability and operational efficiency.
By correlating real data on retailer pricing and operational costs, carriers will be able to accurately estimate and optimize their margins. Margins will no longer be calculated solely at the depot or country level, but will extend to more granular levels such as postal codes or neighborhoods. It will be easier to identify areas requiring additional resources and determine where to focus sales efforts. This data will enable to assess the performance of various depots, identifying top-performing ones and areas that need improvement. With new data to rely on, CFOs, operational managers, clients, and subcontractors can interact in a completely different way and make better decisions.
Carriers who are interested will be able to benefit from this collaboration between Open Pricer and Kardinal. In order to preserve data confidentiality, the two companies will not share any customer data with each other without the customer’s explicit consent.
With the official launch of their partnership, Open Pricer and Kardinal are looking forward to presenting their joint offering at upcoming events such as Parcel+Post Expo in Amsterdam. This collaboration is poised to revolutionize the industry by equipping postal and delivery operators with the tools they need to thrive in an ever-changing market.
Daniel Rueda
Daniel Rueda is founder and CEO of Open Pricer. Open Pricer provides a cloud-based pricing platform that empowers businesses to sell smarter and faster, thus improving their financial performance. Daniel has a strong expertise in pricing and revenue management, starting in 1987 as Revenue Management Project Director at Air France. He was responsible for the design and development of its first Revenue Management Software (RMS) and its integration with the Global Distribution Systems (AMADEUS, etc).
In 1991, he founded Optims, a leading provider of RMS for the Hospitality, now part of AmadeusGroup. Daniel has helped domestic and international parcel networks to optimise their prices, including: DHL Express, FedEx, TNT Express, La Poste-Colissimo, Chronopost, DPD, Aramex, Estafeta. He is a graduated Engineer from Ecole Centrale de Paris and holds an MBA in Economics and Finance from Institut d’Etudes Politiques.
Daniel Rueda
Daniel Rueda is founder and CEO of Open Pricer. Open Pricer provides a cloud-based pricing platform that empowers businesses to sell smarter and faster, thus improving their financial performance. Daniel has a strong expertise in pricing and revenue management, starting in 1987 as Revenue Management Project Director at Air France. He was responsible for the design and development of its first Revenue Management Software (RMS) and its integration with the Global Distribution Systems (AMADEUS, etc).
In 1991, he founded Optims, a leading provider of RMS for the Hospitality, now part of AmadeusGroup. Daniel has helped domestic and international parcel networks to optimise their prices, including: DHL Express, FedEx, TNT Express, La Poste-Colissimo, Chronopost, DPD, Aramex, Estafeta. He is a graduated Engineer from Ecole Centrale de Paris and holds an MBA in Economics and Finance from Institut d’Etudes Politiques.
Jonathan Bouaziz
Jonathan is the CEO and co-founder of Kardinal, a tech startup that creates last mile delivery optimization solutions designed to improve operational performance and strategic decisions.
As a logistics expert with a passion for technology, Jonathan has acquired substantial experience in transport issues. He founded Kardinal in 2015 with the ambition to steer tomorrow’s logistics towards profitable, fair and sustainable choices that enable responsible and environmentally friendly economic growth.
Jonathan was an early enthusiast of the use of AI in the supply chain and has developed strong expertise in digital transformation and innovation, working with key players in the courier, express delivery and parcel industry.
Jonathan Bouaziz
Jonathan is the CEO and co-founder of Kardinal, a tech startup that creates last mile delivery optimization solutions designed to improve operational performance and strategic decisions.
As a logistics expert with a passion for technology, Jonathan has acquired substantial experience in transport issues. He founded Kardinal in 2015 with the ambition to steer tomorrow’s logistics towards profitable, fair and sustainable choices that enable responsible and environmentally friendly economic growth.
Jonathan was an early enthusiast of the use of AI in the supply chain and has developed strong expertise in digital transformation and innovation, working with key players in the courier, express delivery and parcel industry.
