April 2000

How bullish should third-party contractors be in creating an e-logistics offering? TDG"s David Hindson feels there is no room for hesitancy. Peter Rowlands talks to him

"If I waited until six months from now to launch an e-commerce logistics initiative, by then I"d probably have missed the boat."

That comment from David Hindson, director of IT and marketing for logistics contractor TDG, reflects a view he already held when he joined the group early this year. "It"s an amazingly fast-moving market," he says. "My personal view is that the only way for a third-party contractor to get ahead in it is to invest before even signing up the first customer." Happily for TDG, it has not needed to be quite as daring as that. As Hindson admits, it had already won "two or three" dot-com customers by the time he joined, and had about 18 other serious enquiries in the pipeline.

Nevertheless, the point is well made; and it is particularly telling in the light of Hindson"s contention that many contractors are fundamentally resistant to the kind of commitment called for by the e-commerce revolution. "We"re in an industry that"s basically risk-averse," he says, citing a survey he did when he was with consultancy Appleton Thorn. "One of the biggest grumbles among logistics users was that the third-party operators always want to sign a contract before they"ll spend any money."

In the emerging e-commerce market, that approach simply will not work, he says. "New companies may not know what their logistics requirements will be even in a few months" time, never mind after a few years. And if they can"t anticipate either the demand or the volatility of their own market, what"s the point of expecting them to tie themselves to a conventional long-term distribution contract?"

A shared-user logistics solution is almost certainly going to be the answer, Hindson believes spreading the risk over a number of compatible users. However, the change in model does not stop there. "We"ve got to get used to new kinds of flexibility," he says, and describes the result as "prototyping".
"We might put in a solution, enhance it, remodel it, augment it. The kind of contract we sign may have to be different from what we"re used to. Customers won"t want fixed costs, which they may regard as unjustifiable exposure. They might prefer a price per order, or even per item."

Simply deciding which customers to take on could require a change in mindset, he says. "How do you do a credit check on a new start-up company? You can"t." That is where a degree of judgement will have to come in, he feels; but he adds that contractors can at least draw reassurance from the fact that a shared solution spreads the risk.
"There are also things we have to get right as contractors," he says. "We can"t afford to let these new-generation customers down. TDG has a sound operational record, but the trick is to transfer traditional skills to the new era. For instance, drivers doing domestic deliveries may need to be selected with special care. There may be applications where women drivers would be particularly appropriate."

TDG does in fact have an ace up its sleeve in the sense that it already has an extensive property portfolio spread fairly evenly over the UK. Some of the warehousing is not particularly modern, but may nevertheless be well-located for the development of fulfilment hubs. So the investment Hindson describes could be limited to modifying or improving facilities, rather than starting from scratch with the acquisition of new sites.

On the specifics of the fulfilment offering, David Hindson feels it essential to keep an open mind. "You could spend £50,000 on a project or £3 million. You"ve got to be pragmatic." He says a logical route would be to invest in a modular way. "We might take on product assembly for some customers, and call centre management for others."
He feels that what he terms the e-proposition should include offering "everything in the supply chain", but points out that the resources need not all be provided in-house. "We can subcontract some facilities if we need to. For instance, consignments under 2kg would probably be despatched by mail, while any up to 25kg would be sent by a parcels carrier. We might come in to handle consignments of over 50kg, which we would be more likely to deliver ourselves.
"The really complex task is running the warehouse," he says, "so that"s part of the job that we"d definitely want to keep in-house."

The group is not in fact confining its e-commerce activity to fulfilment. It also has aspirations to become a force in the business-to-business segment of the market. Its recently-announced cooperation deal with consultancy Cap Gemini will give an important boost to this initiative. The thinking seems to be that between them the two organisations will be able to provide customers with supply chain systems expertise and even bespoke software, as well as practical resources. All this would apply over the entire supply chain, not just at the fulfilment end.

"There are many aspects to the kind of contribution we might make," Hindson says. "They range from consultancy and process mapping to systems integration. Putting it simply, we might supply the glue to link the various parts of the supply chain together." He adds: "A lot of the challenge lies in change management, and that"s another area where we might help."

TDG"s first dedicated e-commerce site is expected to be in the Midlands area. Hindson was guarded about the exact location when he spoke to e.logistics Magazine, although it may have been announced by time you read this. The group will be handling nationwide distribution from here for its first live dot-com customer.

Further sites will follow, and may not necessarily be in the UK. Recently-appointed chief executive David Garman is on record as planning to expand the group"s interests on the Continent, and Hindson speculates that locations such as the Netherlands would be ideal for Europe-wide e-fulfilment.