One of the most difficult and expensive aspects of the supply chain is last mile and home delivery. However, from a customer experience standpoint, it is also the most memorable and possibly important. Home delivery has become an increasingly hot topic as a result, and last week, I spoke on a panel about last mile logistics as part of the Reuters Events Retail Supply Chain Virtual USA conference. You can listen to the recording here.
During the panel discussion we touched upon ways to maximize partnerships to optimize final mile deliveries. We broke this down into three main components:
- The needs of the customer: the nuances and expectations of the customer to build a suitable network footprint for efficient fulfillment;
- Collaborate & tap into unique capabilities: how to create a flexible and agile network of multimodal transport providers within cities to match increasing demands from e-commerce in ways that dated practices can’t. See how data sharing;
- Use data technology to enhance accuracy: how the use of multiple data points throughout the delivery process will improve automation potential in last mile processes for better route optimization and customer experience management.
From my perspective, I looked at last mile in a few ways. First, what is the store’s role in last mile deliveries for e-commerce orders? Second, what kind of interest are retailers expressing for new and emerging last mile technologies? And third, how can retailers that rely on private fleets meet customer expectations for last mile deliveries?
The Store and Last Mile
The store’s role in omni-channel retail has changed significantly over the last few years as more and more brands look to make their stores a bigger part of e-commerce fulfillment. According to my recent omni-channel fulfillment survey, 37 percent of respondents indicated that they fulfill e-commerce orders from the store. For these orders, 78 percent indicate they pick orders from the front of the store and 48 percent pick from the back of the store. This survey was released pre-COVID, so I suspect the number of stores used to fulfill e-commerce orders will increase.
The big question becomes how are e-commerce orders fulfilled from the store? According to survey respondents, the number one method is to pick orders at the store and hold them for customer pick-up (83 percent). COVID has certainly accelerated this capability for many retailers, and the result has been a pivot to contactless, curbside pick-up. Additionally, 71 percent of respondents are picking orders at the store and shipping them to the customer. This is a capability that likely has seen an uptick during the COVID pandemic as store were turned into warehouses during the initial re-opening phases.
There are varying circumstances for when retailers turn to their stores for e-commerce fulfillment. In my survey, I asked what the key criteria were for deciding to use a store rather than a distribution center. The most important factor, identified by 44 percent of respondents, was the item quantity on hand at the DC versus the store. Essentially, as stores have excess inventory, they are using the store to fulfill orders to reduce inventory overhead. Forty percent of respondents identified delivery distance to the customer as a key criterion, which is especially true for rush orders.
Emerging Technologies for Home Delivery
When it comes to last mile, 83 percent of respondents are using parcel companies such as UPS and FedEx for last mile deliveries. These services were built to deliver small packages to your doorstep in a short timeframe. They are also affordable for small businesses to use, as well as retail behemoths. The two other highly used delivery methods are drop shipments from partners and 3PL delivery partners (51 percent each).
But what about emerging technologies for home delivery? Adoption rates are very low, but interest is growing in a few areas. One of the more interesting technologies is the autonomous mobile robots, such as those developed by Starship Technologies and Alibaba Group. These robots are able to navigate city streets to deliver an item to a consumer. So how much interest is there right now in robots? According to survey respondents, 15 percent are actively pursuing the technology for last mile deliveries.
As autonomous technology continues to improve, there is increased interest in drones and autonomous vehicles. The reality is that there are still regulatory hurdles to clear and more testing needs to be done. About 11 percent of respondents are investigating the use of drones for last mile deliveries. Autonomous vehicles have also been tested for home delivery. In this situation, an autonomous vehicle brings a package to a customer’s house, whereupon the customer enters a code and retrieves the package from a cargo hold. About 13 percent of survey respondents have indicated plans to adopt this technology at some point in the future.
Private Fleet and Home Delivery
When it comes to transportation management systems, fleet management solutions for last mile remains relatively small. But, the growth of e-commerce and omni-channel should represent an opportunity for TMS suppliers. Currently, it does for only a few providers of fleet management as last mile routing is different from cross-country routing. Many retailers rely heavily on parcel solutions or a transportation execution solution rather than a multi-modal TMS, and other retailers will examine crowdsourcing solutions rather than a TMS. Coronavirus has changed the outlook for direct-to-consumer commerce, and a TMS is now a critical component of this strategy. There is still room to compete in last mile, but suppliers need to think creatively to capitalize on this opportunity.
Besides speaking on a panel for last mile home delivery, I also attended the Descartes Evolution virtual conference last month. As I mentioned in my article two weeks ago, a session that stuck out to me was Home Delivery Best Practices presented by Chris Jones, Executive Vice President at Descartes.
In the US, May alone eclipsed the entire 2019 holiday shopping season and $82.5 billion was spent online. During his presentation, Mr. Jones pointed out that we are now in a delivery economy and touched upon a few ways that home delivery can drive the customer experience. One of the more interesting aspects of the presentation was the notion of customer delivery personas. These different personas help you to understand who your customer is and allows you to reduce costs and improve service. The delivery personas can be applied as a matrix looking at delivery speed and precision. This way retailers can let customers self-select their delivery service. He pointed out that it does not take a lot of premium customers to make a lot of money.
Within the presentation, Mr. Jones identified four solutions / capabilities that drive the customer experience: dynamic delivery appointment scheduling, same-day optimization, contactless delivery, and omni-channel home delivery.
Dynamic Delivery Appointment Scheduling
Dynamic Delivery Appointment Scheduling generates dynamic appointment options during the sale. Retailers can use DDAS to sell premium delivery timeframes, which generally cost more. This gives the customer more control over the delivery process and allows them to choose whether they want to pay a premium for home delivery in the timeframe they want. The solution helps to create delivery density, as retailers can make sure that they are only offering delivery to certain areas at certain times so drivers can make a large number of deliveries in a short period of time. This eliminates unscheduled or unfeasible deliveries. Retailers can use tiered pricing depending on how and when the customer wants their order delivered.
Same Day Optimization
Same Day Optimization enables time-definite same-day appointment scheduling based on real-time fleet status. Essentially, you can book delivery timeframes on a dispatch schedule. The benefits of same day optimization are three-fold. First, it allows companies to maximize resource utilization. Second, it allows companies to maximize customer service by ensuring realistic timeframes. And third, it provides a premium delivery service to consumers.
Contactless Delivery is more important than ever in a COVID world. This solution provides proof of delivery information using picture capture and GPS coordinates. Contactless delivery helps to keep drivers safe as they no longer need to directly interact with customers for signature capture. It also minimizes disputes over whether an item was delivered or damaged. Drivers can take a picture on their phone of the delivery, whether that is where they left it or the customer taking it, and it is emailed immediately and directly to the customer. Given the COVID pandemic, contactless delivery will likely be the new norm.
Omni-Channel Home Delivery
Omni-Channel Home Delivery is delivery appointment promising across multiple delivery modes. As home delivery becomes increasingly complex, these modes include private fleets, DC/stores, white glove agents, parcel and local couriers, commercial LTLs, the gig economy (crowdsourced deliveries), and click and collect from stores. By combining these modes, and the different selling channels into one platform, companies can utilize specialized options to reduce costs and improve service. Namely, it gives the customer a lot of options of how and when they want their item delivered.
Last Thought on Last Mile
Last mile will always be the most difficult and most expensive part of the retail supply chain. However, if COVID has taught us anything about home delivery, it is that the customer’s expectations for a seamless experience will not change. As a result, retailers are making a pivot in how they use stores, re-thinking technology for home delivery, and putting the customer at the forefront of the decision-making process on delivery timeframes and modes. Contactless delivery options will continue to drive the market and likely will result in new technological advances. It is certainly an area we will continue to monitor.