The Value Chain model of Michael Porter can be used to analyse specific activities through which firms can create value and competitive advantage. 24/7 Overnight Couriers is a small national courier firm that has ten regional depots and one logistics centre across the UK. It is a profitable overnight courier company that uses a simple, low-cost approach in an extremely competitive business.
Primary activities
These include inbound logistics, operations, outbound logistics, marketing and sales and after-sales service at 24/7 Couriers.
Inbound logistics: 24/7 Couriers has ten depots around the country, and each depot has a depot manager. The depot manager, using ten daily consignment reports received the previous day, reviews the day’s packages for delivery and works out, using local knowledge, drivers’ delivery routes for the morning. The method is simple and cost-effective. However, there is a drawback. Requests for picking up packages the same day has a deadline of 1 pm that some clients find irritating. The 1 pm deadline is one that does not add value to the service and hence must be rectified.
Operations: The Company conducts its major transactions at Hendon, where the packages are sorted into the ten regional destinations and then reloaded into each lorry with the packages for that depot. Each lorry returns to its regional depot full of packages for delivery the following working day.
Outbound logistics: The lorry is parked overnight and is unloaded by depot staff the following morning. In the context of outbound logistics, 24/7 services have a value-added element of service. When clients require packages sent to destinations where the company does not have a regional presence, the company has a partnership arrangement in place with one of the leading courier firms that are cost-effective and keeps everyone satisfied.
Marketing and Sales: The basic marketing strategy is low pricing. The company operates on the firm belief that if the packages are delivered reliably, customers will choose the lowest-priced courier service.
After-Sales: In each region, 24/7 has gradually built up a set of known business customers who can be relied upon for regular repeat business. In many cases, the 24/7 driver will drop by the offices every day. Clients are encouraged to take out a 24/7 business account – which gives access to discounts and simplifies the paperwork and invoicing for all concerned. These tactics fall in line with the overall strategy of providing customers with efficient courier service at a low cost.
Support Activities
Credit Handling: Invoice payments are pursued differently by different managers, and sometimes, when it is very aggressive can cause an element of devaluation to the value chain
Technology: The main drawback in the area of support services is the lack of computerization of services. Initially, Sid Bowles was deeply mistrustful of computers in general, but when the Birmingham Depot Manager proved that computerizing client documentation and listing can prove economical, the simplified invoicing procedure was used for all nine depots. Yet, using information systems has been very limited in 24/7 Courier Services. The company operates a very lean senior management structure. The head office and branch offices are simple buildings, strategically located.
HRM: Some of the staff at 24/7 Overnight Couriers is temporary, and this causes problems, as can be seen in the case of the Bristol office. Sensitive documents sent by a prestigious law firm in Bristol did not arrive at their destination in Solihull, and this lead to an altercation between the temporary receptionist and the senior partner in the Bristol law firm, threatening to pull the company into a lawsuit. Further investigation showed that the package was missed due to the careless handling of a temporary driver at Birmingham. Temporary staff is always creating problems for the company. Hence they are an element to be dealt with in order to increase the value of the firm.
Strategy: The value chain analysis shows there are weak links in the support services in the realm of HR and technology, and this affects the primary services of the value chain affecting the overall competitive advantage of the firm. The low-cost strategy is leading to problems in the long run. Computerisation and expansion of offices is the only way to meet the requirements of the new company.
Recommendations
- Between 6 pm and 6.30 pm, the lorries are checked, the driver is given the nine lists and leaves for Hendon. Travel time is about two and a half hours. Again two hours are spent in checking the packages into the ten regional destinations, giving each driver the list from the other ten destinations, and reloading each lorry with the packages for that depot. Because of this time-lapse during loading, reloading, and preparing the lists, the deadline for daily pickup is 1 pm. If the entire process were to be computerized, there would be no lists to be carried. The transactions would be entered over a computer and updated across all ten centers so that the lists would be ready at Hendon for the drivers. This can save many hours and maybe allow an extension of the pickup deadline to 4 or 5 pm, which can add value to the service.
- Professional staff is a must, and only by having full-time trained staff, will there be accountability. Moreover, computerization will make fewer people necessary for the jobs, and problems such as incomplete addresses can be easily rectified, and undelivered parcels may be easily tracked. This will further add value to these services.
- Computerization can permit clients to track the movement of their packages online, giving additional marketing benefits. This again adds value.
- Through emails, feedback from clients may be obtained, and customer relations can be better maintained, thereby adding further value.
All of these measures will give the firm a greater competitive advantage and ensure smooth running.