As costs are increasing carriers are looking for ways to protect and improve their margins. Kardinal and Open Pricer new partnership is empowering carriers to achieve these goals by optimizing both their costs and revenue sides.
On the cost side, Kardinal helps Operations departments to design the right delivery organization and achieve delivery quality at minimum cost. The Open Pricer platform provides a solution on the revenue side: It calculates optimal package prices for sales teams to maximize contribution margin for each deal.
By combining their technology, Kardinal and Open Pricer can provide the most advanced recommendations based on operations and sales data. Thus, carriers will make the best decisions on both revenue and cost sides.
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The following article is based on the aforementioned Episode 313 of the Postal Hub podcast: Interview of Jonathan Bouaziz (CEO at Kardinal) and Daniel Rueda (CEO at Open Pricer) by Ian Kerr.
Why this partnership between Kardinal and Open Pricer and what is it?
Jonathan Bouaziz, CEO at Kardinal: The market of parcel delivery has become extremely volatile since 2020. We have seen a strong growth of e-commerce due to the pandemic. Parcel delivery players, postal operators started to invest drastically in new infrastructure. More recently, we have seen a drop in volumes and so, carriers were focused on having the best revenue possible. On the other hand, costs are increasing. That’s why carriers are looking for ways to protect and improve their margins. This is why the two solutions of Kardinal and Open Pricer are complementary and match perfectly.
On the cost side Kardinal helps Operations departments to design the right delivery organization and achieve delivery quality at minimum cost. The Kardinal Last Mile Costs platform builds optimal delivery territories recommendations based on daily and weekly field data updates (parcels, subcontractors, delivery areas, territorial coverage, etc.) This makes it possible to calculate the number of tours, kilometers traveled, delivery cost and CO2 emissions. But the financial aspects of delivery – i.e. tour profitability – are not taken into account in the platform.
Daniel Rueda, CEO at Open Pricer: The Open Pricer platform provides a solution on the revenue side. It calculates optimal package prices for sales teams to maximize contribution margin for each deal. To do this we use billing data, customer segmentation, but also operations and cost data. However, last mile costs used for pricing are typically averaged per country or delivery depot and do not take into account tour capacity utilization.
By talking together, we have realized that by exchanging data, our two platforms could bring much more value to our clients. That’s the objective of this partnership.
Jonathan: Jonathan: In order to optimize the margin, you need to have this global view. So displaying the real price for the retailer and the cost of the subcontractors will allow a more precise calculation of the margin at the depot level or even at the tour or zip level. This will drastically change the way depot managers interact with their subcontractors.
How can you enhance your respective solutions, thanks to this partnership?
Daniel: Last mile typically accounts for more than 50% of a parcel carrier’s costs. Improving the accuracy of last mile cost models should enable us to provide more accurate price guidance and promote better capacity utilization, while reducing CO2 emissions.
Jonathan: On our side, Open Pricer’s price and margin data at the parcel level will allow Kardinal to develop additional recommendations based on the profitability of each delivery territory.
Daniel, can you provide examples of how Kardinal data will enable Open Pricer to improve price calculation ?
Daniel: Kardinal Last Mile Costs will provide Open Pricer with operations data to refine the calculation of last mile costs at quote time down to the zip code and day of week level, including capacity utilization. We have identified three use cases:
- In the case of a new contract quotation with a large retailer the Open Pricer platform will be able to process a file containing the detailed shipping profile of the customer (including zip-code and delivery date by parcel). Using Kardinal data we will match the cost and capacity utilization of each delivery tour to the shipping profile and get an ultra sharp calculation of the incremental cost generated by the deal.
- A second use case corresponds to the renegotiation of an existing contract for which we can make the same calculations for all the historical shipments of a customer. In this case, the shipping data with all the details of zip code and data for delivery is already in the Open Pricer’s platform. So we can match this data against the data provided by Kardinal and get a very much more precise calculation of cost. Once we have the cost, we can calculate the price.
- In the case of e-commerce platforms, we are currently designing a dynamic pricing offer for delivery options at checkout. Using Kardinal’s data, we will be able to provide incentives for days of the week with lower tour capacity utilization.
And on your side Jonathan: how can Open Pricer data help Kardinal manage delivery operations and relationships with subcontractors?
Jonathan: Open Pricer will provide Kardinal with net prices and costs allocated to each parcel. We have identified two use cases:
- Open Pricer data will allow us to calculate a new KPI: “Tour Profitability” providing Operations teams using Kardinal Last Mile Costs a valuable insight to plan resources and negotiate with subcontractors. Carriers will see how profitable a tour is compared to last mile costs.
- In the case of delivery outsourcing at variable costs (per parcel or per stop), dynamic pricing can play a major role in avoiding to go beyond two thresholds:
- the threshold below which the carrier risks losing its subcontractor due to a low remuneration, and we know how driver shortage is a strong pain point in the world today;
- the threshold above which prices are too high and must be re-negotiated or a quality issue may arise due to capacity overflow.
By using their networks more efficiently thanks to dynamic pricing, carriers can better manage capacity, reduce operating costs, increase eco-performance, retain their partners and achieve the best possible quality of service for their customers.
What will be the main benefits for your customers?
Jonathan: First of all, we would like to highlight that Open Pricer and Kardinal will not share, export, transfer data from their customers without their specific permission.
By combining our expertise and sharing our data, we can provide the most advanced recommendations. Thus, our clients will benefit from reinforced tools to help them make the best decisions on both pricing and delivery operations. We’ll be able to display the pricing per parcel. By having the profitability, it will allow stock managers, CFOs defining where they need to put more resources, where they need to increase the sales activity, to display more information such as where are the top depot, the worst depot, and to have more data-driven discussions with their management.
This will allow carriers to see us more as partners in the transformation of their organizations than suppliers. Thus, we can develop a real and lasting relationship of trust.
Daniel: Jonathan mentioned the accuracy of pricing and delivery operations recommendations which are linked to the availability and granularity of data.
I will add another benefit: the ability to easily update the models, which is essential in ever-changing market environments. All our data and related recommendations are automatically refreshed in case of change of delivery organization or change of customers’ shipping profiles.
If you are unable to quickly assess the impact of a variation in your costs or a change of shipping profile you may quote the wrong price. The risk then is of not being competitive if your prices are too high, or of not being profitable if the prices are lower than they should be.
Are you going to present your new offer and features together or separately?
Daniel: Our combined approach addresses not just price and delivery cost optimization but also additional challenges such as maximizing network capacity utilization, reducing CO2 emissions and quality of service. Consequently it may be of interest not just to sales and operations but also to other stakeholders including finance, ESG and finally general management.
Each company will present its offer separately because we are selling two different systems. But now when we get to a customer we will talk about this option to enlarge, to upgrade our offer with the other partner. That’s what we have already done with several carriers. So we now introduce Kardinal and we explain the benefits of working together. And I think for you Jonathan, it would be perhaps the same approach?
Jonathan: Exactly the same. I think that today carriers are focusing on the EBITDA. Before they focused on reducing the cost, improving the revenue and had this completely different approach, they had a dedicated team and it was all about defining the EBITDA afterwards. I think that the combination of the two solutions will allow customers to have more data-driven decisions and have this global view of the activity with a more fine-tuned approach depending on the geographical areas.
So, Kardinal and Open Pricer will continue proposing their offer separately with the option to involve the partner. We must clarify that the idea is to propose an interconnection of our solutions to our clients, not to impose it. Our customers must explicitly authorize the exchange of data.
Is there an environmental angle on this partnership?
Daniel: I think that definitively yes, because when we’ve talked between us, we’ve realized that Kardinal was able to provide the capacity utilization of a delivery tour. Which means that given this information we can really push traffic to the days of week, to the tours that have low capacity utilization. At the end it means improving capacity utilization, improving the effectiveness of the network and being able to reduce emissions.
The key point is that you need to measure capacity utilization and this is what the Kardinal platform will help Open Pricer to do. Without these signals (capacity utilization on each day of the week or zip code) efficient dynamic pricing strategies that are efficient for the last mile cannot be implemented.
Jonathan: Kardinal is working on a lot of sustainability topics and the customers are using it to make some assumptions regarding what will be their carbon impact and to have this like A/B testing or some hypothesis. For example, if they want to move the whole fleet on the electric side, what would be the impact on the cost? So by providing simulations in order to understand what will be the impact on the cost and so on the pricing and if it’s really sustainable. So it’s something that we are already doing with multiple actors by defining what would be the impact of moving the fleet from thermic to electric cargo bikes on specific areas. So I think you would be able to leverage it in the pricing if customers want to make some assumptions in the next 1-2 years.
How can customers interested in your offer get in touch with you?
Daniel: You can contact us and we will get back to you as soon as possible. I just wanted to remind that Open Pricer is providing a platform that helps sales teams to optimize prices and to sell at the best possible conditions in order to improve conversion and get the maximum possible profitability from each deal.
Jonathan: You can visit our website Kardinal.ai and contact us in order to have more information on our offer.
We will be sharing a booth at Parcel+Post Expo from 24 to 26 October in Amsterdam.
Learn more on the partnership here.
Are you working from a carrier company and willing to optimize costs and revenue? Contact us to learn more on how you can achieve pricing excellence: