Peter Menky (Dodo): We try to get as close to 100% utilization of cars and couriers as possible. The challenge is to predict future demand at a specific location and dynamic routing.

"The biggest challenge is predicting future demand, i.e., at what location and address will the order arise and where an unutilized vehicle should be optimally located. Another challenge is dynamic routing, which means you don't close the route before the courier drives the car into the field. However, you can still match the courier with other deliveries while he is still driving," Peter Menky, Dodo Group's Chief Commercial Officer, said in the Adastra podcast.

  • What parameters must last-mile logistics meet?
  • What does zonal logistics mean in practice?
  • What differentiates the last mile carrier from each other from a technological point of view?
  • How should urban transport work in the future in terms of load, emissions, and other parameters?

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Read the podcast as an interview

Ivana Karhanová: In Europe, according to their LinkedIn profile description, they should be the fastest-growing carrier for the last mile with same-day delivery. Last mile logistics, he says, needs to be efficient, elastic, and green. Our guest in the studio is Peter Menky, Chief Commercial Officer of the Dodo Group. Hello.

Peter Menky: Good afternoon.

Ivana Karhanová: By which parameter are you the fastest-growing carrier?

Peter Menky: By revenue growth over the last few years of all the companies that do last mile logistics in Europe and have a similar business model to us.

Ivana Karhanová: How have you been able to respond to rising fuel prices and labor market pressures recently?

Peter Menky: The response, probably like in other segments, is rising prices and market conditions, whether in car prices or fuel prices – of course, we have had to pass that on to our clients. Ultimately, it always has an impact on the customer. And as far as the labor market is concerned, I think that’s been a longer-term problem in recent years. It is related to the war in Ukraine, but unemployment is extremely low and one of the lowest ever in the EU for a long time.

Ivana Karhanová: When I spoke to Ondra Kratky from Liftago, he said there is no shortage of couriers. They are just poorly optimized. Would you agree with him, or do you see it differently?

Peter Menky: It’s hard to say. I think it’s more of a shortage, or there’s always a lot of movement between industries because Covid came in. So many people from the gastro business became couriers because that business was struggling. Then some of them came back, some didn’t come back, and the war in Ukraine came.

It seems to me that there are still a lot of incentives in the market that are reorganizing those professions among themselves. So I think it’s hard to say whether there is a shortage or an abundance, but either way, there is a shortage of quality ones.

Ivana Karhanová: You said there is a shortage of quality couriers. How is a quality courier different from a low-quality one?

Peter Menky: It differs in the service provided to the customer. It means that on the one hand, he is already trained for the roles, he has on-time arrivals, he treats the customer as he should, and he comprehensively provides the service he is supposed to provide, quickly, efficiently, and with a pleasant smile on his face.

Ivana Karhanová: Last mile logistics is challenging to optimize. It’s demanding on the engine that’s driving it all so far. And, when we were talking before the shoot, you said that the ideal is 100% utilization of cars and couriers, not only in last-mile logistics but in logistics in general. And what’s the biggest challenge for Dodo right now, if we look at it from a technology perspective?

Peter Menky: From a technology perspective, it’s reconciling and combining all the parameters or variables, of which there are hundreds. Thanks to some computing power from these parameters, you always give the optimal variant, whether it’s the optimal route or the intermingling of driver shifts, capacities, and rotas. These things require very sophisticated software that considers traffic conditions, weather, commuting parameters, and other things. I think the biggest of the challenges is predicting the future – future demand, where an order will originate, at what address in a given location, and where optimally an available unutilized vehicle should be. Similarly, dynamic routing is a challenge, which means that you don’t close the route, let’s say, half an hour before the courier drives the car out into the field, but you can still arrange other deliveries into that route while he’s driving.

Ivana Karhanová: Other shipments that show up along the way?

Peter Menky: Exactly. That, of course, you’re constantly increasing productivity because it’s in quotes along the way, so he doesn’t have to change his schedule in any major way. You can do this in zone logistics.

That means you can combine shipments from different clients and just transport them based on some zones. When you have a lot of segments, because each segment has different peaks, it’s the ultimate game that we play to match all these factors as much as possible and therefore make the most of the vehicles where they’re going.

Ivana Karhanová: Now, you introduced a lot of concepts during your answer. What is zonal transport, for example?

Peter Menky: Zonal logistics is thinking about last-mile delivery in a way that you don’t dedicate a vehicle to a specific client, but you dedicate them to a specific zone, which you can have X number and different sizes depending on the density of orders.

In that zone, you’re delivering, let’s say, one vehicle to six clients, and you don’t address whether you have three orders from one and five from another. There are just different combinations. So, in short, it’s advantageous to have it set up that way because you have exactly those clients in that zone.

Ivana Karhanová: When you mentioned the optimization engine behind that and the computing power, where is that limit? The algorithms cannot predict what will happen that well and do dynamic routing based on that. Or is it that you’re – and I’m assuming this is all running in the cloud – essentially not getting enough subscribed services?

Peter Menky: From a technology standpoint, it’s about the fact that we already do both dynamic routing and zone logistics, but the question is always the size of the zone that you can do it in because it’s about some information capacity and numbers because it makes a difference if you’re managing a zone of 1,000 orders a day or a zone of 10,000 orders a day.

It’s about computing power because you have 400 variables and 10 thousand orders, and the system has to calculate all the combinations to get the optimal result. It’s short to do that because the system has to decide how to allocate those routes. Or if it does, to recalculate them.

A lot of times, it’s tenths of a second or units of a second where the system just has to decide.

Ivana Karhanová: That means that the machine learning or artificial intelligence system behind it must be brutal.

Peter Menky: It’s already pretty robust, and that’s why I think even in our last mile transportation segment, there are very few companies in terms of technology companies because it’s a complex problem. It’s true for the whole of Europe.

It is about the system’s modularity because our Gaia system is one system, but it has multiple modules, and each one solves a different part of the problem, and it all has to fit together. In the end, it has to be processed into an optimal result. So from that point of view, it’s a very complex problem, and therefore logically, there are not that many companies that want to solve it.

Ivana Karhanová: What differentiates the last mile carriers from each other is robustness and accuracy, or maybe the ability of the optimization engine to calculate it correctly and quickly?

Peter Menky: Certainly, it’s the technology itself, and secondly, of course, whoever has the technology can be more efficient, faster, and more accurate, unlike traditional carriers. We’re more of a technology company, and the difference between the two, for example, is what their business model is.

Not every company has a model that is CAPEX free, has no cross-docking, and does end-to-end logistics. Some combine it. Some use taxis as a means of transport, so it’s different in concepts, not just in the level of that technology.

Ivana Karhanová: When you said that the ideal is 100% utilization of cars and couriers, what number do you think is realistically achievable? And where are you and Dodo now, for example, and where would you like to get to?

Peter Menky: That’s hard to say, but with clients, it’s probably captured by some metric like Idle Time, which captures how much time couriers are off work while on shift. The other metric is vehicle utilization itself. This means that you can max out a vehicle purely in theory for 24 hours. In practice, it’s usually 12 hours.

Unless there are still some night deliveries, the maximum vehicle utilization is 12 hours daily. And if you had each vehicle utilized 12 hours a day and no less, you’re basically.

Ivana Karhanová: Fifty percent.

Peter Menky: Yes, at fifty percent, but at that optimum, because there’s probably no practical chance that you will use the other 12 hours of each of them on something else.

Ivana Karhanová: So, under the Dodo, ideally, what would be the target state?

Peter Menky: Do you mean a number or describe that state?

Ivana Karhanová: Number.

Peter Menky: We don’t have it designated as a number. We have it designated, so there is a “holy grail” of 100% utilization, and the goal is to get as close to that as possible.

Ivana Karhanová: You also mentioned that the limit is not only on the side of the Dodo or computing power but also on the side of your B2B customers, like e-shops. In how they approach that Same Day Delivery option, what is the limitation for you here now in working with them specifically?

Peter Menky: A lot of times, it’s the state of their e-commerce. For example, they don’t even have an e-store, and these big brands are used to doing pure retail business. That has changed quite fundamentally over the covid, but there are still those players.

Especially in the grocery segment, they don’t even have an e-store, yet they’re a huge retailer. And even if they do have e-commerce, they are not able to both deliver from stores or identify any stock in stores or a central warehouse so that their whole system can communicate somewhere on the backend and just give us the information: Yes, pick up a shipment from this store, there is such and such an order.

Ivana Karhanová: And get it there.

Peter Menky: Exactly, I’ll deliver it somewhere. A lot of times, it’s small things. So some e-shops with Click & Collect, for example, couldn’t filter in the first step where the customer is from and whether it makes sense to offer that service.

They were doing it at the checkout step when it’s not what you want because you don’t want to offer the customer all the services and then at the last step tell them that what they’ve chosen can’t be done, they’re not going to get it that quickly, unfortunately.

So there’s a whole range of those problems, but they’re the types of smaller or bigger problems that require work on the customer side. So even if they wanted the service, they couldn’t implement it effectively.

Ivana Karhanová: Do you, as Dodo, try to help those customers with that, or do you leave it purely up to them and their IT skills or development skills?

Peter Menky: We try to help. Suppose the customer is interested in solving the problem. In that case, even if it’s not our business, we can either recommend a solution or somehow navigate them through how it can be solved and possibly with whom.

But it always comes down to how much of a priority it is for that customer because many customers have many projects, and it always depends on the specific situation. So it’s either about providing some great value-added service to the customer or helping them solve some urgent problems that maybe cost them some additional costs, but unfortunately, they don’t prioritize them.

Ivana Karhanová: Yeah, the business falls a lot more for them than not having the Same Day Delivery.

Peter Menky: Exactly.

Ivana Karhanová: We also hit on sharing shipping capacity when we talked before the shoot. How does Dodo feel about this concept? Can you use the transport capacity of taxis or other free cars and drivers?

Peter Menky: Utilizing the capacity of cars in the field is already happening. For example, Liftago is using this solution. However, in terms of sharing capacity and creating some kind of marketplace, from our perspective, it’s a complex problem with so many variables and actual risks that we believe in a different business model.

Ivana Karhanová: What kind of model?

Peter Menky: We think that we can create the right capacity with us, and by connecting to every interested client, we don’t need our platform, basically some spare capacity from different carriers.

But based on the fact that our business model includes some franchising, which in turn gives us the ability to scale our business relatively quickly abroad, we think we can grow so fast that by connecting to clients, we can create a final product.

Ivana Karhanová: I can well imagine franchising in gastro. I can imagine franchising because you open a store under the same brand. But how can franchising work in the case of last-mile delivery?

Peter Menky: In the case of last-mile delivery, the way franchising works for us is that the franchisee, just like in a traditional franchise, pays a royalty fee and that allows them to use our technology. They can be connected to our service system and our support.

What’s a little bit different than a regular franchise is that Dodo guarantees him clients, and he doesn’t have to go out and get some contracts himself, but he is entrusted with clients and a specific zone by Dodo.

Ivana Karhanová: But he supplies you with cars and drivers?

Peter Menky: In terms of the vehicles, certainly some of them supply the cars there, and some of them have cars sort of from us, but basically, the final franchise model is that it’s all under the franchisee, and he’s responsible – exactly as you described – for the cars, the couriers and the whole operation, which is on his side, but it just runs on our software and to our standards.

Ivana Karhanová: So he’s going to supply the hardware and the human capacity, the hardware in the cars and the whole engine. And Dodo will supply that to him to run it efficiently.

Peter Menky: Yes, exactly.

Ivana Karhanová: When we come to urban or intercity logistics, there’s a lot of talk about emissions. The topic of how the city is basically congested or maybe at some peaks overloaded with courier cars is addressed. How do you see this particular issue’s future in dealing with urban transport?

Peter Menky: That’s a tough question that I don’t think is completely resolved. Let’s compare the alternatives that exist, of course, legislatively in the EU. Electromobility is coming to the fore, which already has some clear parameters of when car companies want to stop producing diesel or petrol cars, some targets for specific years when the infrastructure has to be fully operational in some form, and so on.

The way I look at it. But, also, thanks to the information from the car companies, it is very difficult to say today, and probably nobody knows what the actual emission footprint of a particular type of powertrain is from the first part produced on a given car to the recycling.

Ivana Karhanová: The whole car.

Peter Menky: Exactly. Nowadays, according to those car companies in the manufacturing process, the third, fourth, and fifth parties that supply the different components for the different manufacturers, they don’t have such standards so that you can calculate and tell the whole thing: Yes, the production of an electric car, including the battery, the actual use of the average age of that car in transport up to recycling has an emission footprint of X.

By contrast, a typical diesel car is Y, and hydrogen is Z. That limits the determination of the most environmentally friendly. A global project is addressing this, and those car companies want to solve this ultimatum.

Ivana Karhanová: I think part of the way that ESG reporting should help with that is that we’re going to start tracking exactly the fifth-party suppliers as well. However, there was speculation for a while that the city was overloaded at certain peaks. So clearly, on your side, it’s probably a matter of optimizing how to send the fewest cars with the most goods.

But if we look at alternative modes of transportation, how are they doing now? What is Dodo trying to do in that sense at the moment? Or how to adjust that transportation?

Peter Menky: In terms of alternative mobility, we have, of course, tested different means of transport for deployment for a particular zone and its emission production, its cost-effectiveness, and its efficiency. And based on that, we know today which type of alternative vehicle or propulsion has which parameter.

That’s one part, but the other part is which zone to deploy which one. Because it’s not universal that now you say: The most environmentally friendly is this. It’s going to be all over the place because, let’s say, electric bikes won’t get you long distances because they’re long crossings, and a pedestrian has an even shorter maneuvering zone.

With a motorcycle, it’s supposedly a lot better. It doesn’t get stuck in rush hour. With a car, it’s different. So there are many options, and I guess you have to choose the right type of vehicle for each zone. And you’re still wondering what kind of agent, whether it’s going to be electric or hydrogen, that’s being tested.

I’m more of a skeptic of electricity in terms of the fact that it’s not all tracked, and we’re already moving toward electric mobility. But, still, nobody’s addressed the question of where the energy will be produced and what will be done with so many batteries. And if we were to convert all the cars today to electric cars at the snap of a finger.

Ivana Karhanová: Well, we don’t have the transmission system.

Peter Menky: It would be an onslaught. And I think it has a lot to do with, for example, the production of green energy, which is a much bigger problem than the actual issue of whether the car is electric or hydrogen.

Ivana Karhanová: So what are all the types of powertrains that Dodo is combining now?

Peter Menky: If I evaluate it for Dodo, it’s definitely CNG. It’s classic diesel, regular fuel, electric, and partly non-powered, such as a classic bicycle. So it’s probably those four things.

And we’re certainly open to seeing how the hydrogen propulsion issue develops. There’s the infrastructure, so that’s probably where the biggest problem is in figuring out the cost side, building the hydrogen stations, charging, and covering the infrastructure.

Ivana Karhanová: Many Czech corporations with foreign owners are pushing to reduce their carbon footprint, saying that their mothers or investors want them to do that. How are Doda’s investors doing? How do they perceive emission production and transportation?

Peter Menky: I can’t quite comment on any of their official positions, but certainly, one of the core values of Dodo has been a real emphasis on environmentalism. We need to be perceived not only as a technology company but as a company in general that strives for ecology, for example, through optimization.

I think that’s one crucial part of reducing the emissions footprint that is sometimes forgotten. It’s not just about alternative mobility. It’s about efficiency. And it is certainly one of our priorities.

Ivana Karhanová: Says Peter Menky, Chief Commercial Officer of the Dodo Group. Thank you for coming by the studio, and thanks for coming by, and sometimes for listening.

Peter Menky: Thank you very much.