Accenture adding-value-to-parcel-delivery
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The document provides an analysis of the courier, express, and parcel (CEP) industry, highlighting trends in both B2B and B2C segments, as well as domestic and international shipping. It emphasizes the shift of power towards consumers and the impact of digital transformation on delivery expectations, including the rise of various last-mile delivery models. The growing demand for parcel delivery, driven by e-commerce, necessitates significant investments and strategic adaptations from delivery companies to meet evolving market needs.
Accenture adding-value-to-parcel-delivery
- 1. Adding Value to Parcel Delivery September 29, 2015
- 2. Copyright © 2015 Accenture. All Rights Reserved. 2 Research Approach A comprehensive analysis of CEP (Courier, Express & Parcel) industry Includes B2B and B2C segments, domestic versus international shipping as well as overnight and non-day, and time definite products segments under 150 pounds or 70 kilograms Assesses historic performance, identifies future trends and determines shareholder value drivers Examines current and new players in this market, including global integrators, postal organizations, regional players, shared economy and crowdsourcing actors, as well as retailers moving downstream Sources include: public information, paid and proprietary primary and secondary research, internal and external subject matter expert interviews and extensive market and financial analysis
- 3. Copyright © 2015 Accenture. All Rights Reserved. 3 Definition of CEP (Courier, Express and Parcel) Market Definition Time sensitivity: Usually consignments delivered by a specified day and even by a specified time Size of consignment: Maximum weight usually considered to be about 31.5kg (70lbs); Few exceptions. Mostly Door to Door Space represented by pure express players such as UPS, FedEx and TNT Express; as well as express and parcel arms of postal companies such as Geo Post (La Poste) and Purolator (Canada Post)Scope of Market = Courier, Express and Parcels Source: TNT, Accenture Research Same day & in-night Time certain Next day Day certain Day uncertain Document Parcel Freight LTL, FTL >1kg 31.5kg 1000kg Postal Air/Road express Priority Express Deferred and Other Express Air charter Freight Forwarder Groupage LTL FTL Express freight
- 4. 4Copyright © 2015 Accenture. All Rights Reserved. Power shifting to the consumer Internet driving growth, transforming the supply chain Growing demand and increased volatility Product mix means lower yields per package Investments to grow capacity, yet declining ROIC Sharing economy set to disrupt the last mile further Parcel Delivery B2C outgrowing and cannibalizing B2B Parcel Delivery—Key Findings Summary Most delivery organization know what to do, but need to do it better, faster, cheaper The world is flat: rise of the micro multi-national New technology will change the game Home delivery becomes the new premium Last mile is where the battle is taking place Costs are rising faster than revenue High fixed cost means less flexibility when it is key
- 5. Copyright © 2015 Accenture. All Rights Reserved. 5 Rise of the digital consumer Digitally enabled consumers driving most of the eCommerce demand see bargaining power shifting toward them Source: Accenture analysis We have crossed barriers in choice, transparency, and service expectations Advent of: Devices Data Social networks Greater choice Low switching costs Faster reviews So they seek: Retailers and Deliverers with: More competition Easier aggregation of services Better visibility in supply chain So they provide: Consumers with: Empowers: Presents: Buying Paying Receiving Returning Lower prices Greater convenience Seamless experience in
- 6. Copyright © 2015 Accenture. All Rights Reserved. 6 Evolution of parcel delivery value chain The parcel delivery value chain has expanded in scope. Roles at each stage have evolved toward a stronger service orientation. Source: Accenture analysis Past—Deliver Present—Digital, Transparent, Fast and Flexible Delivery Need to develop new resources and capabilities to deliver on service expectations at each step of the value chain Pick up Delivery Transportation • Less visibility into demand for services • Limited influence on demand • Low C2C and B2C • Less transparency • Easier timelines • Limited competition • Recipients with low bargaining power • Low service expectations Warehousing
- 7. Copyright © 2015 Accenture. All Rights Reserved. 7 Last mile delivery models The last mile, which holds key to the consumer experience, has witnessed an emergence of multiple delivery models Source: Accenture analysis Consumer convenience and cost reduction have been primary objectives guiding the change D) Lifestyle/ Crowd-shippers Warehouses Retail stores Parcel lockers/ Access points A) Postal mail-run B) Courier delivery 2 C) Courier delivery to lockers Lifestyle/Crowd-shippers’ delivery to homes similar to courier Crowd-shippers delivery to lockers
- 8. Copyright © 2015 Accenture. All Rights Reserved. 8 Courier-Express-Parcel (CEP) market size and growth The challenge of increasing service needs is exacerbated by the growing delivery demand calling for scale up of infrastructure Source: Accenture research, Transport Intelligence USD billion, %, 2008-2020F Global market size USD billion Customer segments Fixed cost heavy model: The growth has significant investment implications to meet demand Domestic International B2B B2C Routes Geographies Slower than B2C with close to GDP growth but significant share and higher margin contribution Close to eCommerce growth rates and growing in significance Faster growth (~5.4%, 2013-2017) than domestic primarily due to growing cross- border eCommerce Continues to be >75% of overall market with ~5.0% growth (2013-2017) APAC N. America Europe Rest Middle East S. America AfricaW. EuropeMarket 30% 5.3% 4.1% 2.5% 1.9%19%38%2020 share 9% 8% 7% 5% 10%5%15%2013-20 CAGR +4% 2020F 343.1 237.9 2008 194.8 +5% 2013 33% 5.7% 3.5% 2.5% 1.5%23%32%2013 share C2C Emerging segment from growth in auction sites and the circular economy
- 9. Copyright © 2015 Accenture. All Rights Reserved. 9 Courier-Express-Parcel (CEP) market size and growth eCommerce is driving growth in domestic and international markets Notes: Size of the bubble represents market size. Previous point—2013, Leading point—2017F. Total market expected to move from US$ 237.9 billion to US$346.0 billion. Source: 1 Transport Intelligence, 2 https://badgeville.com, 3 “World Urbanization Prospects” UN Report, 4,5 www.digitalbuzzblog.com, 6 eMarketer, 7 Ernst & Young USD billion, %, 2010-2013 and 2013-2017F Fixed cost heavy model: The growth has significant investment implications to meet demand 0% 5% 10% 15% 20% 0% 5% 10% 15% 20% 346.0 237.9 109.4 77.4 131.9 75.4 81.6 67.4 Domestic growth (2010-2013 and 2013-2017 CAGR) International(2010-2013&2014-2017CAGR) Global Europe N. America APAC Domestic vs. international growth—Historical and Future1 46% Smartphone penetration in mobile phones by 20174 49% Internet penetration in population by 20175 55% Urban population out of total by 20173 Of worldwide spending by millennials by 20202 70% 27% International eCommerce out of total by 20176 12% Middle class growth rate in APAC 2009-20207 Drivers of growth
- 10. Copyright © 2015 Accenture. All Rights Reserved. 10 CEP market size and growth—B2B vs. B2C B2C will continue to grow in significance across geographies, driving growth and presenting challenges Notes: 1 Size of the bubble represents total market size in 2020. Total market expected to move from US$237.9 billion to US$343.1 billion. Source: Accenture research, Transport Intelligence, Accenture analysis USD billion, %, 2013-2020F B2C focused delivery networks call for different focus areas vs. B2B 0% 5% 10% 15% 0% 5% 10% 15% North America Western Europe Asia Pacific Global B2B (2013-2020 CAGR) B2Cl(2013-2020CAGR) B2B vs. B2C growth1 Challenges: Drivers of growth Volatility Last mile Yields Returns 46% Smartphone penetration in mobile phones by 20174 49% Internet penetration in population by 20175 55% Urban population out of total by 20173 12% Middle class growth rate in APAC 2009-20207
- 11. Copyright © 2015 Accenture. All Rights Reserved. 11 CEP market share—B2B vs. B2C Although B2C is expected to grow in share, B2B will remain a sizeable opportunity Source: Accenture research, Accenture analysis USD billion, %, 2013-2020F Firms need to find optimal balance in portfolios and investment focus in both B2B and B2C Segment Size Growth Density Price sensitivity Product dominance Profitability Scope for differentiation B2C Lower Higher Lower Higher Deferred Lower High B2B Higher Lower Higher Lower Express Higher High
- 12. Copyright © 2015 Accenture. All Rights Reserved. 12 B2C implications—Volatility Although B2C is driving growth; it is also exposing delivery companies to more volatility in demand Source: 1 News reports; 2 Financial reports and News reports; 3 Metapack; 4 Financial Times Agility in value chain would be important to contain costs without compromising service standards 0 5 10 15 20 25 201420132012201120102009 10 15 20 25 30 35 201420132012201120102009 FedEx average and maximum daily shipping volume (million)2 UPS average and maximum daily shipping volume (million)2 UK Cyber Monday—20143 Maximum shipments in a day Average shipments in a day Maximum shipments in a day Average shipments in a day Shipments across ChinaMore parcels than previous Monday39% 166 million 86% More cross-border shipments than previous year China Singles Day—20134 10x Greater than average daily shipping volume Dec 2013: “UPS admits it was unprepared for the late surge in online holiday shopping”1 Dec 2014: “UPS slammed by a different holiday season mess-up …adding too much extra firepower”1
- 13. Copyright © 2015 Accenture. All Rights Reserved. 13 Capital expenditure on parcels Investments are being made by delivery firms and retailers to expand capacity and modernize network in the parcel delivery business Source: News reports, Accenture analysis. 2014 Major investment stories—Parcel delivery Major investment stories—Retailers Firms are scaling up to meet future demand and becoming more fixed cost heavy Australia Post doubling capacity at Sydney and Melbourne parcel facilities as a part of its AUD 2 billion investment in the Australia Post Network (2012) UPS plans to invest US$2 billion over the next five years to develop its international infrastructure in Europe, Asia and the Americas, (4.5% to 5% of annual revenue) …targeting growth markets and improvements in the profitability of eCommerce deliveries. (2014) FedEx Ground investing US$1.2 billion this year in 70 expansion projects in addition to the US$2.5 billion spent over the past five years to add capacity (2014) DHL investing EUR 750 million to modernize and expand its parcel network…building Germany’s largest parcel processing center in Hessen (2013) Aus Post Fedex DHL UPS DPD Ali Baba Ali Baba’s co- Investors Ali Baba is investing US$1.5 bn over three to five years to expand the logistics network in China (2014) Amazon Amazon has spent US$13.9 billion since 2010 on warehousing and fulfilment to support its business including 13 parcel depots in the United Kingdom. Institutional investors are co- investing US$3 billion over the same period along with Ali Baba. DPD has invested £10.2 million in six depots to expand its capacity to handle B2C parcels
- 14. Copyright © 2015 Accenture. All Rights Reserved. 14 Mergers and acquisitions Many firms have pursued the inorganic route to build scale and acquire new capabilities to widen the scope of their business Notes: 1 Firms included are DPDHL, Austrian Post, Canadian Post, La Poste, PostNord, SingPost, Australia Post, UPS, Fedex, Bpost, Swiss Post and Itella. Source: Financial reports, Accenture analysis Number of deals by year1 2009-2014 Number of deals by business (Last five years) 2009-2014 Acquisition strategy would be key in acquiring the right assets and maximizing effectiveness and efficiency Real Estate 6 Mail 6 Financial Services 9 IT Services and Software 14 Marketing and Sales 17 Parcels and Express 38 Logistics and Transportation 89 2014 14 2013 34 2012 42 2011 45 2010 22 2009 20 Trend is continuing in 2015 with the FedEx €4.4bn bid for TNT
- 15. Copyright © 2015 Accenture. All Rights Reserved. 15 Total funding in sharing economy start-ups Sharing economy start-ups are witnessing an upsurge in venture capital interest across industries Source: Sharing Economy Landscape 2015, Tracxn research 60 96 283 357 116 958 2014201120102009 20132012 800 645 273 51 16 11 4 0 Private Spaces Business Equipment Logistics Transport Personal Goods Storage Stay Food Top funded companies Airbnb($776.4M), Wimdu($90.0M) Lyft ($333M), RelayRides($53.2M), Boatbound($5.3M) Chegg ($252M; IPO at $1.1B). Bag Borrow or Steal($20.0M) LiquidSpace($26.2M), PivotDesk($6.7M), Storefront($8.9M) Getable($3.2M), Yard Club($1.6M) EatWith ($9.2M), Suppershare Friendshippr($1.2M), WeDeliver($0.8M) Roost($160k), StowThat($50k) Top investors Sequioa, TPG Growth Trinity Ventures, Shasta Ventures, Google Ventures, August Capital N/A Shasta Ventures, Roth Capital Partners, Lucas Venture Group, Spark Capital N/A GreyLock N/A N/A
- 16. Copyright © 2015 Accenture. All Rights Reserved. 16 List of promising start-ups by business segment New entrants are drawn to a growing but underserved industry and are enabled by technology Source: www.jonathanwichmann.com Creating new challenges and opportunities for legacy companies Transportation Systems Futuristic shipping models Matternet, Google drones, Amazon drones Freight Rates Transparent shipping costs Freightos, Tanspoteca, iContainers, Freight Filter, Xeneta, Shippo, ShipHawk, Containers Container packing innovation Staxxon, Holland Container Innovations Crowd Shipping Flexi-cost last mile shipping PiggyBee, Friendshippr, Roadie Barnacle, Nimber, Zipments For You, Bringrs, UberCARGO End-to-end Shipping Uber of shipping in C2C space Shipster, Shyp, Shipbob, Schlep, MinFragt.dk 3PL and Other Services Enabling shippers Shipwire, Cloud Fulfillment, Scurri, Metapack, 71lbs, Axida Local Delivery Low-cost urban delivery models Swapbox, Boxc, Postmates, DoorDash, Zipments, Deliv, Sidecar, Uber, ParcelBright, Parcel Storage Crowd-sourcing storage space enabling flexi-delivery Lockitron, MakeSpace, Boxbee, Cubbyhole, Parcel Pending, ShareMyStorage, Roost Trucking Tracking and management Cargomatic, TruckTrack, KeepTruckin, Youtruckme.com, Keychain Logistics, uShip Last Mile
- 17. Copyright © 2015 Accenture. All Rights Reserved. 17 Start-ups—Last mile The new entrants in last mile are mostly asset-light and utilize the power of crowdsourcing to achieve outcomes at lower costs Source: www.jonathanwichmann.com, Accenture analysis Operationally flexible models generate cost advantage for new entrants but scalability remains to be evaluated Crowdshipping enabling asset- light, low fixed-cost models to solve the last mile delivery. Potential partners for parcel delivery companies that do not wish to grow investments in last mile. Crowd Shipping Local Deliveries Localized, urban delivery models offering delivery solutions at lower prices than legacy players and enabling offline retailers to add delivery services. They are competitors and potential partners. Storage Storage solutions mostly based on crowdsourcing spaces. Offer temporary storage for later delivery and collection. Present opportunities to manage flexible deliveries while minimizing travel costs.
- 18. Copyright © 2015 Accenture. All Rights Reserved. 18 Parcel Delivery— Conclusions – 9 Value Drivers 3 Underserved & Growing Power shifting to consumers 1 Consumers’ Wishlist 2 4 To deliver on consumers’ wish-list Go Beyond Traditional Brand and Segment Focus on the Recipients Grow International Disaggregate the Value Chain Variablize Costs Increase Efficiency and Productivity Mergers and Acquisitions To build sustainable operating model 6 To succeed in executing market strategies 5 Deploy Strategic Pricing To support market strategies
- 19. Copyright © 2015 Accenture. All Rights Reserved. 19 Brand and segment Grow international Go beyond traditional Focus on the recipient Deploy strategic pricing Executive Takeaway Parcel Value Drivers (1 of 2) Rationale/Why? Description Benefit/Value Description • Segment growth • Rise of delivery options • Expansion of services • Blurring of player lines • Segmentation • Vertical specialization • Brand positioning • Product portfolio management • Greater market share • Lower price sensitivity • Higher revenue • Higher margin • UPS SCS • Austrian Post and Fiebra brands • La Poste • Rise of micro multinational • Lower barriers to X- border • Access to Internet • Growing middle class • Cross-border partnerships • E2E visibility • Customs integration • Global trade tools • Revenue growth • Higher yield per package • Higher margins • Diversification of risk • FedEx (Brazil, Mexico, TNT) • Austrian Post (EEC) • Japan Post / Toll Priority • Transportation a commodity • Growth of eCommerce • Supply chain disruption • Declining yields • Value added services • eLogistics and warehousing • Returns management • Delivery options • Additional revenue • Customer stickiness • Long-term contracts • Diversification of risk • UPS SCS • SingPost • FedEx/Genco • Rise of digital consumer • Mobile lifestyle • Competition for last mile • Auto-replenishment • Relationship w/recipient • Two-way communication • New products/services • Monetize preferences • Better customer experience • Market share retention • Lower cost to serve • Incremental revenue • UPS MyChoice • Australia Post • La Poste • Declining yield per package • Poor pricing practices • Costs to revenue increasing • New products/services • Subscriptions services • Analytics • Competitive pricing • Surge/cost-based pricing • Higher margins • Incremental cost coverage • Greater revenue • Greater market share • Amazon Prime • FedEx and UPS pricing (residential and fuel surcharges • Uber peak pricing • Airline pricing
- 20. Copyright © 2015 Accenture. All Rights Reserved. 20 Mergers and acquisitions • Stagnant B2B growth • Declining package yield • Excess capacity • Need for specialization • Market assessment • Target identification • Post-merger integration • Synergies realization • Revenue growth • Speed to market • New capabilities or geos • Cost synergies • Austrian Post • DHL • FedEx • Sing Post Disaggregate the value chain • Declining asset utilization • Shared economy growth • Last mile competition • Value creation • Capacity expansion • Asset utilization • Build ecosystem • Higher ROA • Faster speed to market • Higher revenue • Higher margin • SingPost Books • GXG @ USPS • Uber Last Mile Variabilize costs • Growing peaks and valleys • Declining asset utilization • High downside if revenue declines • Outsourcing • Lease vs own • Labor strategies • Asset divestment • Lower/avoided CAPEX • Cash generation • Higher margins • Speed to market • Innovapost • Lasership • Deliv Executive Takeaway Parcel Value Drivers (2 of 2) Increase efficiency and productivity Rationale/Why? Description Benefit/Value Description • The firms need to build capabilities to succeed at implementing market strategies • Big data • Analytics • Technology • Leading practices • Higher margin • Greater supply chain agility • Cost avoidance • Greater revenue/share • Purolator • bPost • FedEx Express
- 21. Copyright © 2015 Accenture. All Rights Reserved. 21 Contact Details For more information, please contact: Tim Bateman Global Parcel Lead tim.bateman@accenture.com +44 7774 299 350 Brody Buhler Global Managing Director Post & Parcel Lead robert.b.buhler@accenture.com +1 703 405 1253 Andre Pharand Global Post & Parcel Management Consulting Lead andre.pharand@accenture.com +1 917 755 5551
- 22. 22Copyright © 2015 Accenture. All Rights Reserved.