Sept/Oct 2003

Home Direct Delivery System has brought a new slant to managing home deliveries, and its growth so far has exceeded expectation. Peter Rowlands hears what it has to offer

It's a paradox of the UK logistics world that while the home shopping market has grown massively throughout the current decade, the number of companies keen to take on home delivery work has shrunk.

Enter a newcomer, Home Direct Delivery System, which was launched in the spring of this year. The name says it all really, and chairman Mike Brading underlines the message. "We're only interested in business-to-consumer deliveries," he says. "There's enough competition already in the B2B market. We're focusing our attentions where we know there's a demand."

Remarkably, even though it has been operating less than a year, HDDS says that within six months it had already delivered a million parcels - its target for the whole year - and is likely to add another 800,000 to the tally before the year is out. Total throughput is expected to exceed 1.5 million units, and turnover will be around £5 million.

Yet it has done this without having any delivery vehicles to its name; and perhaps more surprising, it has done it not from the middle of the country, as you might expect, but from a base in Kent.

So what's the secret of this apparent conjuring trick? In essence, it lies in working with outside suppliers. HDDS uses existing major parcels carriers to do the deliveries. Brading doesn't want to say which ones - not in public, anyway - but he's given a good idea to us at e.logistics Magazine, and we can confirm that they're big names which you would recognise at once: major carriers that are known for their expertise in this field.

The question is, if they're already established in home delivery, why would these carriers want to work for a third party like HDDS? And why would you as a customer want to use HDDS rather than go to the carrier direct?

They're questions Brading is ready for, and his answer seems compelling. "Not all carriers are good at all kinds of home delivery," he says. "A typical customer is likely to end up using several different companies - perhaps Royal Mail for consignments up to 200 grams, another carrier for parcels of two to three kilograms, and another one again for consignments that need a signature.

"What's missing is a facilitator that can arrange all these options on a one-stop-shop basis."

He says other factors come into play too. "Generally speaking, the parcels networks are not too keen on taking on small customers - partly because of the relatively high collection and trunking costs. We can get past that hurdle. We'd be willing to work for companies moving anything from a hundred items a week upwards."

He admits that B2B carriers might answer some of the home shopping market's requirements. "But they would be likely to do it on a B2B basis, with a three- to five-day turnround. That's not necessarily what the home shopping market wants."

Brading reasoned that if his company could do the consolidation job, and then allocate the business to the carriers best suited to it, the performance and economics would please everyone. "The magic formula," he says, "consists of volume, plus knowledge and good working relationships." Seemingly that proposition is paying off.

An unknown start-up company might have had difficulty gaining the support of major national and international parcels companies - certainly in the short time it has taken HDDS to achieve this. But Mike and his team have a long history in the business, and have some influential friends in the industry from their former roles. In terms of credibility with their supplier base, they seem to have hit the ground running (see panel below).

Although the company doesn't have vehicles at this point, it does have a physical presence in Kent. Having started at Sittingbourne, they then moved to a warehouse at Gravesend. Now the company has expanded by taking on an additional 12,000 sq ft warehouse back at Sittingbourne.

"Kent may not be central, but that's not really a problem," Brading says. The company uses locally-based contractors to collect goods from clients, then breaks bulk and consolidates the consignments for pickup by national carriers. It may also generate documentation and attach labels, although an alternative strategy is to supply labels to clients to apply prior to collection.

HDDS doesn't generally store goods for more than a week at a time, "but we do get product overruns sometimes," Brading says. It has some storage capacity in Kent to cater for this, and should have more once the new warehouse is fully operational.

Brading does however accept that the company might eventually need to add a base in a more central location. "A lot of our customers are in the North West," he says. A midlands base is "a probable possibility," as he puts it.

While there are no specific plans to introduce vehicles across the board, Brading does acknowledge that London is a special case. "We might need to set up our own delivery network there by the end of year two," he says.

HDDS is willing to work with a wide range of customers, Brading says. Again, because these are early days he preferred not to disclose who they are, but typical users would include mail order and home shopping companies, fulfilment specialists, air freight companies, logistics companies - even parcels carriers.

The key, according to director Chris Summers, is to focus on one type of operation. "You've got to separate B2B and B2C business out. If you combine them, one will fail, and it'll be B2C." He adds: "I'm not saying there will never be problems even if you follow that strategy, but it's a good position to start from. And the carriers appreciate our input."

In terms of product types, Mike Brading says the company aims to handle any items that will flow readily through a parcels network. "So we're not talking about home gyms, or even white and brown electrical goods."

Nor is HDDS pitching itself as an all-round solutions provider - not yet, anyway. Mike Brading likes to describe the company as "a facilitator with multiple delivery options," which can work either for fulfilment specialists or direct for end users. But he is keen to emphasise that the company offers an all-round service within its area of specialisation. He is dismissive of online parcels consolidators working on fixed tariffs, maintaining that they can't match the depth of the HDDS proposition.

In the long term, he says the company would also be willing to build complete tailor-made solutions for individual clients. "We'd take the approach of doing a full consultation, and advising on aspects such as packaging. There will be a growing need for this kind of service." In the meantime, he says the company is already allocating client managers to work on major contracts.

Despite its rapid growth during its first year, Brading says he's keen not to hurry things. "We want to sweat our existing assets first." He adds: "We're not playing at this. We want to do it right. If we can't do that, we won't do it at all. We're not afraid to say no."

He takes a philosophical view of the market. "A lot of businesses are built on a hunch," he says, but adds: "You can't create something unless you really believe in it. I'm passionate about this market. My DNA is worldwide parcel movements."

New team, long track record

Mike Brading, chairman of HDDS, has worked in the international parcels and courier market for most of his life, having started in the late 1970s with a company called Onboard Courier Services. "In the early days we were literally delivering urgent parcels internationally by sending a courier with the consignment," he says.

In 1991 he started his own courier business, operating between the UK and the US and the Far East, but then he sold out five years later and joined Parceline. From there he moved to Lynx, ending up as international director.

His original partner in the new enterprise, Mike Morris, also worked for TNT, but they only met during the 1990s when they were both at Parceline. Like Brading, Morris then moved to Lynx, where he became general manager for European road services.

Prior to setting up HDDS, the two created an entirely different independent business, M2 Associates, offering recruitment services for the national and international parcels and courier market. Having extensive experience in training, Mike Morris was able to inject plenty of practical experience to complement Mike Brading's vision. This business launched itself through a Web site at www.m2associates.co.uk, and is still thriving.

However, they weren't content to stop here. Mike Brading had access to private finance, and was keen to get back into the operational mainstream. So they recruited a third director, Chris Summers, who was also an experienced parcels executive. He had worked with Mike Brading at TNT, and had also spent eight years with NCN.

HDDS was on its way.