Last Mile Delivery Landscape
According to the latest research, e-commerce sales have become enormous and they will reflect a drastic increase of approximately 20% by the end of 2016. Leading the retail expansion to untouched markets, the e-commerce sector is focusing on pressurizing the retailers to match customers’ expectations throughout diverse platforms, devices, and locations globally.
Another driving need that the sector is emphasizing on is the expansion of delivery capabilities, while ensuring convenience without inflicting any type of price increase on the customers.
It doesn’t matter whether consumers are evaluating, researching, or buying products online or from land-based stores, their expectations about product availability, payment options, delivery charges, and return policies, will be escalating.
To make matters more complicated, these preferences and needs may vary by demographics, region, and a number of other important factors, which will continue to evolve over time. This e-commerce dilemma showcases supply chain network design, omni-channel distribution challenges, etc.
Even though top e-tailers have succeeded in providing inexpensive and quick delivery options to customers, they are still figuring out effective ways to maintain last-mile solutions and that too in a cost-effective manner.
For retailer-specific last-mile delivery nuances, all companies should determine and identify those supply chain strategies that will make the most financial sense in the race for an effective and efficient last-mile experience.
Social networks have become indispensable for both business and society, bringing the world closer together. Today, abstract concepts, ideas, and data become more and more sensual and seamlessly integrated into the physical world. Similarly, digital natives are beyond being ‘always on’; now they tend to be ‘on’ via several channels in parallel.
All data and information can be perceived with all senses, embedded in the correct context of the situation. And people involved in the operational process can respond with all senses – voice, gesture and even eye movement.
Physical processes and information flows no longer run on parallel tracks but interact with and navigate each other through the entire logistics lifecycle. This makes the world of logistics more flexible, responsive, precise, and efficient.
If your strategy includes last-mile delivery, your success will begin with an extensive review of how your end-to-end supply chain network is designed and how your inventory is deployed, postponed, configured and distributed across channels to meet 21st century customers’ shopping and delivery preferences.
The following can help you in decision-making strategy and offer insight into the actual cost impact of last-mile delivery, so that you can prepare the layout of an efficient last-mile solution and enable your supply chain network to head towards the right direction:
- Optimum transportation to meet last-mile demands – The most uncertainty and opportunity lies in the core of how a product/package’s chain of custody is outsourced and moved across the last mile. This is truly where we see complete dynamics of cost-to-deliver, and innovative approaches that make sense. Entrants like Instacart, Uber, etc. are the ones at the forefront.
- However, as we move away from typical carrier delivery models, there is a need to offer more extensive tracking and package security to match customers’ expectations, consistency, perception, and quality.
- These unsuitable last-mile freight costs will eventually be shared with all supply chain participants with the help of some combination of having them pay directly for the costs, through order consolidation, or package optimization, or via creation of demand density using time-definite deliveries or sweep distribution.
- Until innovation on the product side happens and density can be efficiently factored into the equation, though, having some type of customer incentive will help to offset these transportation costs.
- Returns management – A plethora of firms have aimed at the forward distribution struggles, which are provided by this last-mile equation. In the past, resources spent on returns have been seen as losses that are impossible to recover. But returns management really needs to act as a core part of your last-mile strategy, to not only offer a simple, hassle-free returns experience to your customers, but also to keep your inventory flow smooth and efficient in your network.
- If this sounds overwhelming, that is because it is. Some organizations with forward-thinking are making their way ahead with supply chain strategies that include gaining real-time visibility into inventory throughout different channels, accessing both in-store as well as online inventory assets for fulfillment, and finding alternative last-mile delivery methods.
- In the end, the only way to ensure the returns process efficient, is to minimize the number of touchpoints. Returns efficiency can be addressed by opting for drivers, who are situated near customers and pick-up returns on their return routes, or encourage customers to return the items back to store-fronts or confirmed drop-off points.
- There is a transparent connection between confidence in revenue growth and supply chain proficiency. So, it all boils down to having inventory located at the right place, at right time, in right form; an active flexible network as close to the point of need as possible; and an innovative transportation solution that fulfills the expectations of customers; deliver products and generate revenue in each delivery, along with a simple returns process to keep them coming back for more.
- Sight of what actually matters to the customer – You first need to begin with completely understand the requirements as well as expectations of your customers, and how these needs eventually influence their purchasing behaviors. Strategically integrating marketing data and customer behavior into your supply chain network can develop revenue-generating results.
- In accordance with “Pulse of the Online Shopper” survey, 93% of shoppers have included themselves in some type of action while shopping online in order to get qualified for free shipping. But it is also true that consumers frequently modify their online and in-store preferences and patterns of shopping based on value-added advantages that range from low or free shipping to lenient returns policies to loyalty programs.
- Keeping the customers’ needs and delivery preferences as your first and foremost priority, and offering them flexible shopping options right from certain delivery windows to specific zip codes to convenient in-store pick-up or nearby drop-off and pick-up locations, where delivery items can be kept safely, will prove to be beneficial.
- Return preferences vary dramatically across different geographies as there are 71% of Brazilian consumers, who prefer to return items right to the store, and there are 66% of European consumers, who prefer to ship back the items directly to the retailer.
- Innovative approaches for bundled product shipment – Last-mile delivery introduces a whole new layer of complexity to a product’s sales margins and aggravates the “shipment density dilemma” that has challenged shippers for decades. Until delivery density can be maximized to ensure profitability, managing customer expectations is an excellent interim measure to make last-mile deliveries profitable.
- 58% of customers abandoned their online shopping carts because shipping costs were more than expected, and half abandoned because they didn’t qualify for free shipping. Traditionally, high-margin items like cell phones and laptops can justify traditional small parcel courier costs; but low-margin SKUs cannot easily recover or absorb these costs and still remain profitable.
- The main issue is how to alter customer expectations to make last-mile deliveries profitable. To compensate for customers’ free shipping preferences, retailers may want to consider consumer incentives to bundle products—say a phone with household items or clothing—to raise revenue per order and density per shipment.
- If possible, postponing orders until multiple products can be shipped together to generate enough revenue and density to justify free delivery is an option to offset last-mile transportation cost impacts.
Real-time services provide data in cycles timed to seconds that can be received, analyzed, and integrated into operational activities at any time and in any location. Real-time services enable flexible and efficient adaption to changing conditions and ad-hoc optimization of supply chains by integrating real-time information into intelligent and interactive analytics frameworks. This offers enhanced levels of visibility and transparency throughout the entire supply chain, enables additional business capabilities, increases operational efficiency, and boosts customer intimacy.
- Real-time tracking services – Up-to-date real-time tracking solutions are fully integrated with personal or professional smart mobile devices and apps as well as high-value supply chain steering tools.
- Real-time order management – New generation mobile order management apps allow their users to enter and manage shipment orders in real time when on the move.
- Real-time inventory services – These track the activities and position of trucks, and have the potential to change current routing solutions from preplanned milk runs to flexible pickup and delivery locations.
Benefits for the logistics providers
- Increases efficiency through faster processes and real-time data.
- Enhances customer service, enables value-added services.
- Improves visibility, transparency, capabilities, and security functions (e.g., asset control, theft reduction).
Benefits for the provider’s customers
- Information at any time about the location and delivery status of goods.
- More transparency, flexibility, and rapid configuration of individual solution scenarios (e.g., flexible last-mile delivery options).