It’s been five years since German parcel company, Hermes, embarked on its digital transformation programme. From visiting startups, to acquiring startups, to setting up its own Digital Lab, Hermes is now at a point where digitalisation has become the standard across the company.
We talked with Tim Rudolph, Division Manager of Operations Development at Hermes about what it has achieved so far with its digital transformation and how digitalisation has changed its operations.
In 2016, Hermes, a private parcel company that handles hundreds of millions of parcels per year, started to implement a digital transformation programme. According to Rudolph, the goals of the programme were to:
In finding the right ideas and opportunities, Hermes realised that its digital efforts should not be an IT project. As Rudolph explains:
“Any transformation programme had to comprise a team from all divisions of the company – customer services, engineering, product management, strategy, IT, consulting, supply chain solutions and colleagues in the field. For us, making our programme an ‘all-hands exercise’ was the very definition of transformation.”
The role of this specially constituted team was to look for and assess opportunities and determine the likelihood of certain proposals succeeding and their cost-effectiveness.
According to Rudolph, the multi-functional team quickly recognised that e-commerce was driven by customer centricity and customer convenience. Hermes needed, therefore, to move away from being parcel-centric and put its customers at the middle of their processes. He says:
“This meant that in digitalising our operation, we needed to look to all of our customer contact points, our customers’ preferences and decide which we could develop to the advantage of both the company and our customers.”
But Hermes knew that sourcing opportunities was one thing; executing them was quite another. For the next step in its transformation programme, it needed to create a whole new team. From 2016 through to 2019, Rudolph says, Hermes operated a Digital Lab. It consisted of designated teams for each of the promising areas that it had identified as an opportunity for digitalisation.
Knowing that it only had a certain window of opportunity in which to move fast and achieve success, the Digital Lab started working on three deliverable units, at small scale, to produce results that actually worked.
It concentrated on solutions for the costly last mile, for example, developing a last mile analytics tool that it rolled out in 2018. As a result, Rudolph explains:
“Our workers in the field can now access important information in a form they can actually use and work with measurable KPIs and variants in a way they never did before. The tool is now at a point where all our workers are using it and it’s relevant to everything the company does.”
But as with many digital transformation programmes, Rudolph continues, Hermes was not so successful initially in taking advantage of the achievements of the Digital Lab and scaling its solutions. Recognising it had some organisational structural problems such as silos and hierarchies, it decided to turn the organisation upside down and move the Digital Lab into the core organisation.
According to Rudolph, designated competence teams were again pulled from different parts of the organisation with mandates to determine the topics they would work on, alongside clear KPIs.
“Integral to this process was having our software developers working with our people in the field to truly understand the problems they were trying to solve through digital technologies.”
In addition to creating capability teams, says Rudolph, Hermes also broke up its strong silos and hierarchical structure. It found that without the support of key executives, it couldn’t achieve any digital transformation.
Through the digitalisation programme, Rudolph says, Hermes has succeeded in improving its performance in all areas:
“Our operational capacity has strengthened; in 2020 we achieved a substantial increase in productivity in the last mile. Our customer perceptions of our services have improved. Customer complaints have fallen significantly from what they were in 2019. And courier satisfaction – a critical factor for us, given it’s the most important customer touchpoint – has increased year upon year.”
For Hermes, its digitalisation efforts have resulted in an increase in overall profits and progress in achieving its KPIs. But the key transformation, Rudolph states, is that digitalisation is now today’s standard in the company:
“Digitalisation is no longer new, limited to a small group of IT people or adopted at small scale. It is now wide-reaching, behind everything we do and used by all our workers.”
Understanding and working with data-driven technologies can transform how distribution centres operate. In a constantly changing sector, Hermes has proven that digitalisation is one of the most cost-effective ways for CEP companies to keep pace.