Delivering the goods | Economist.com
Anthony Townsend
SURVEY: LOGISTICS
Delivering the goods
Jun 15th 2006
From The Economist print edition
A courier company goes online
MANY successful businesses have been started by someone exasperated
by being given poor service. Tom Allason was convinced he could do
better when a courier company failed to deliver tickets for an
important tennis match in time for the recipients to attend it. He
got together with Jay Bregman, an America friend he met at college in
the United States, and in the autumn of 2004 the pair launched
eCourier in London.
eCourier Check out my algorithm
When they took a closer look at the courier industry, they found it
had low barriers to entry and was very fragmented. Most companies
were small and competed solely on price, which resulted in low levels
of service and discouraged investment in new ideas. The way most of
these businesses operated was to take an order over the telephone and
pass it on to a dispatcher, who then sent a radio message to find a
free courier. If a delivery was late, more phone calls and radio
messages would be needed to find out where it had got to—and every
time that happened, costs would go up.
The idea behind eCourier is to put the whole system online. Bookings
are made mostly on the company's website. The customer enters the
collection and delivery addresses and the order is automatically
relayed to the courier best placed to do the job. Customers can then
watch the delivery vehicle's progress on their computer screen as it
collects and delivers the goods. Collections and deliveries are
confirmed by e-mail. The company's couriers use global-positioning-
satellite (GPS) devices and hand-held computers to keep eCourier's
computer system updated.
The key to the service is picking the right courier, says Mr Allason.
The one whom the GPS system shows to be nearest to the job may not
necessarily be the most appropriate. For instance, a courier in
London may be only a few hundred yards away from a collection
address, but if he is on the other side of the Thames it could take
him 15 minutes just to cross the river. Other information, such as
traffic problems and the performance of individual couriers, also
needs to be taken into account.
This is a mathematical problem, and eCourier spent some time hunting
around for someone able to solve it. Eventually it found a team led
by Cynthia Barnhard, a logistics expert at America's Massachusetts
Institute of Technology, which devised an elaborate algorithm that is
now at the heart of eCourier's business, in much the same way that a
mathematical formula drives Google's search engine. What Mr Allason
particularly likes about his internet-based courier system is that it
is easily “scaleable”: more couriers and markets can be added without
having to hire many more dispatchers or people to run a call-centre.
“There is no longer any need to pick up a telephone to find out where
your package is,” says Mr Allason. “Now you can see where it is.”
Some 85% of the company's bookings are made over the internet.
Business is growing quickly: whereas in its first month in September
2004 eCourier delivered only 25 items with four couriers, it is now
delivering around 15,000 items a month with 90 couriers. Needless to
say, Mr Allason now gets all his tickets delivered on time.