April 2004 | Case Studies | Casebook

LaserNetworks Banks On Same-Day Delivery

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Why settle for overnight if you can ship a package same day? That's the question delivery companies such as Ensenda are taking to prospective customers.

Next-day delivery has become a staple in today's feverish business environment, meeting the expedited demands of shippers and consignees alike. But why settle for overnight if you can ship or receive a package same day?

The promise of same-day delivery is one way San Francisco, Calif.-based Ensenda is attracting the attention of shippers while also growing its distribution network in North America. But ensuring that product can be reliably delivered within such tight time parameters requires a great deal of collaboration, communication, and an organized distribution channel.

Ensenda's business model is predicated on a matrix of local delivery networks. Simply, the company contracts with small, regionally based couriers to provide blanket coverage in markets where there is enough demand for these services.

"Our system is point-to-point, not hub-and-spoke," says Chris Manella, Ensenda's CEO. "This affords us and the customer the flexibility to go in any direction. It's not just DC to store, but store to store."

The network is tied together by Ensenda's web-based interface, providing customers with one point of contact for all their shipping. To date, the company has a pool of 10,000 professional delivery personnel serving more than 210 million people in 135 different markets across the United States and Canada. Among its bigger customers are Home Depot, BestBuy, Anthropologie, Sony, and Crate & Barrel.

Economies of Scale

Guaranteed faster service at a cheaper price complements the flexibility Ensenda affords customers, making it an attractive outsourcing alternative for companies with JIT demands and business spikes and fluctuations, or for those looking to cut costs and streamline their delivery fleets.

Drill down farther and Ensenda's value proposition is relevant regardless of economics.

For LaserNetworks, an office supplies company based in Toronto, Canada, the decision to partner with Ensenda was born out of its own meteoric growth, rather than fiscal insolvency.

When the company began its operations in 1987, its core business was meeting the outsourced printing demands of businesses in the Toronto area. Over the past two decades, LaserNetworks has extended its footprint throughout Canada and in select markets in the United States, accommodating nearly all printer-related needs, from purchasing, repairing, and remanufacturing toner cartridges to recycling used components.

Given the nature of its business, ensuring that equipment can be delivered and picked up expeditiously and at a reasonable cost to its customers is crucial to growing its business.

Prior to partnering with Ensenda, LaserNetworks relied on its own fleet of delivery vans and drivers to meet the service commitments of its customers. But as the company grew—at a 30-percent annual clip—and expanded into new markets, it became increasingly difficult to efficiently support its delivery operations without making additional investments.

The "trigger point" to outsource accompanied the realization that LaserNetworks was inefficiently utilizing its service technicians to mitigate delivery gaps, acknowledges Graham Wood, co-founder and vice president of operations, LaserNetworks. "In each city where we operated, if we had a shortage of vans to make deliveries, we would have our technicians pick up the slack and deliver the shipments themselves," he says.

Not only was this poor use of highly skilled labor, it also forced LaserNetworks to stray from its primary function—properly servicing its customers' printing needs.

Despite LaserNetwork's own pedigree as an outsourced service provider, handing off the delivery component of its operation to a third party came with some reservations.

"We take calls that come into our central call center and do a triage in terms of what services the customer requires. Then we wirelessly dispatch a technician to the problem. It's an automated, hands-free system," says Wood.

"We did have reservations about outsourcing our delivery services, relinquishing control of that aspect of our business," says Wood. There was also a question of how well Ensenda would be able to integrate with LaserNetworks' IT infrastructure. Those fears, however, were quickly allayed because, as Wood notes, "they spoke the same technology as us."

Even still, there was similar concern about how customers might react to the change. One of the unique aspects of LaserNetworks' business is that shipments are moving both inbound and outbound, supplying customers with product while also picking up used cartridges for remanufacturing.

As a result, information is bi-directional, requiring seamless communication between the customer, Ensenda, and LaserNetworks.

As a test, LaserNetworks chose to first phase in the new arrangement in Toronto. "We did a trial run to work out kinks and see how it would play out. We intentionally didn't make a big deal about it to our customers and the transition was completely transparent," notes Wood.

Roll Out to All Markets

In October 2001, LaserNetworks began rolling out Ensenda's delivery service in all its existing markets. As it is now, orders are processed through LaserNetworks' North American call center, then entered into an order management system that automatically routes shipments to Ensenda.

LaserNetworks and its customers can select from four same-day delivery options—ASAP, Priority, Standard, and Scheduled—as well as Next Day Guaranteed service.

The new arrangement has, in fact, had some transparent benefits for both LaserNetworks and its customers. "Allying with Ensenda has allowed our customers to better match supply with demand, ultimately enhancing the reverse logistics aspect of our business," says Wood.

The company can similarly offer better prices to customers because it has streamlined its assets. Service technicians now focus specifically on their core responsibilities—arguably offering better customer service to clients—and there is less risk for product damage because shipments are moving over shorter distances.

As a result, LaserNetworks has streamlined its assets to one delivery person and vehicle in both Toronto and Vancouver—as a contingency for emergency shipments—and shipping expenses have been significantly cut. "We have saved more than 20 percent in total cost of shipping from where we were with direct delivery," says Wood.

Another important advantage of outsourcing its fleet management is the leverage LaserNetworks has in targeting new markets.

"Once we decide to set up a branch in a new location, we can knock 18 months out of what would typically be a two-year investment because of our partnership with Ensenda," says Wood.

Conversely, LaserNetworks can grow and contract its service areas without risk of market fluctuations. The company has already expanded its operations into South East Ontario, New Brunswick, Newfoundland, and Nova Scotia, and intends to begin aggressively targeting U.S. markets as well.

Ensenda similarly benefits from the growth of its customers. Because of the nature of its business, and the flexibility of its service partners and network, it too can let demand dictate its growth curve.

"There has been a trend among retailers to consolidate and reduce carriers," says Manella. "What is unique about our business is that we are equally as strong in an up economy as down. If a customer has capacity issues, we can complement their existing operations as well as fill overflow during peak seasons. They only pay for delivery services they use so, as a result, there is better asset utilization."

LaserNetworks' service technicians can be grateful for that.

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