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Amazon, FedEx, and UPS Prepare for the Post COVID World

Logistics Technologies | By Chris Cunnane • 05/20/2020

On Monday, my home state of Massachusetts announced the official details regarding the state’s four-phase plan to re-open the economy during the coronavirus pandemic. Phase 1 comes in a two-wave approach, with some business opening immediately and others opening on May 25. One group that found the approach disappointing is retailers. Many Massachusetts retailers see this plan as potentially too little too late. According to the new guidelines, nonessential retail stores will be allowed to open for curbside pickup, as well as remote fulfillment, on May 25. However, opening stores to the general public for browsing will be part of phase 2, which does not have a firm date as of now. With this announcement, e-commerce will continue to be vital for retailers looking to remain open. This will put added strain on Amazon, FedEx, and UPS to keep up with customer demands. But, the last two months, combined with the coming months will help each of these companies to succeed in the post COVID world.

E-Commerce and the Post COVID World

E-commerce is certainly booming right now as many brick and mortar retail locations remain shuttered. Nonessential retailers are beginning to open up across the country, but e-commerce is still seeing a surge. Amazon and Walmart have collectively hired nearly 500,000 employees to meet the growing needs of e-commerce fulfillment, notably in the warehouse and on the road. However, with the increase in e-commerce sales comes concerns over capacity constraints. In turn, many customers have seen long delays in order fulfillment.

These delays can also be attributed to supply chain networks being overwhelmed. The demand is outpacing the supply right now for capacity and picking volumes. Plus, for many retailers, there were planned delays for those items that were considered nonessential. However, now that the country has had a few months to adjust to the new normal, nonessential items are making their way back to the forefront of ordering queues. And companies are preparing for the reality of the post COVID world.

Amazon and the Post COVID World

Amazon saw an uptick in business from the beginning of the coronavirus pandemic. One of the biggest surges for Amazon was in online grocery orders. The demand became so extreme that the company was forced to stop accepting new Whole Foods delivery customers as it simply did not have the capacity to meet the demand.

Over the years Amazon has been building out its private logistics network, with a keen eye on moving past a reliance on FedEx and UPS for home deliveries. The coronavirus pandemic has seen the company’s private fleet grow. In fact, it seems that until recently, most of my Amazon orders were delivered by either FedEx or UPS. Now however, every order I get is delivered by an Amazon branded delivery truck, and I see them rolling through my neighborhood all day every day. By comparison, FedEx and UPS trucks have been seen less frequently, at least in my neighborhood that is. One of the concerns with ordering packages has been the social distancing aspect. And for delivery drivers, this is certainly a concern. Rather than collecting a signature or even knocking on my door to give me my package, Amazon drivers have been taking a picture of the item on my doorstep, which is then emailed to me as proof of delivery. For Amazon, and the rest of home deliveries, this seems like it will be a staple of the post COVID world.

One area of concern for Amazon was the long delivery timeframes customers were experiencing for nonessential items. This stemmed from the demand surge at the beginning of the coronavirus outbreak. However, the company has seen the light at the end of the tunnel in terms of delivery timeframes. Amazon has said that customers can expect the usual one and two-day delivery timeframes to return imminently and service levels will get back to normal. This is good news for both consumers and the company, as more and more consumers were beginning to look elsewhere for items they would normally order from Amazon. The company lifted restrictions on the amount of inventory that suppliers can send to its warehouses indicating that it is back to business as usual.

As part of its long-term post COVID world plans, Amazon showed a glimpse of a virus killing robot it is developing that would roll through grocery stores and distribution centers, using banks of ultraviolet light to kill viruses on surfaces. While the company has indicated that this is something they are working on for the future, it is safe to say that the product would be a welcome one for most retailers and manufacturers. And while the technology already exists, it is not surprising that Amazon is working on its own model.

FedEx and the Post COVID World

FedEx is also making plans to succeed in the post COVID world. One way to ensure delivery timeframes is to make sure that the logistics network is not overwhelmed. And sometimes to do this, companies need to pump the brakes. That is exactly what FedEx did recently to make sure it could deliver on customer expectations. As e-commerce demand surged, the company limited the number of items that retailers could ship from certain locations such as stores. These limits were only a temporary order, but they were specifically designed to make sure that the network did not get overwhelmed. It is this type of transparency that can go a long way.

The biggest news for FedEx for the post COVID world is its announcement of a new partnership with Microsoft. Just a few months ago FedEx canceled its partnership with Amazon, Microsoft’s biggest competitor when it comes to cloud services. Now, FedEx is teaming up with Microsoft on a multi-year partnership that combines FedEx’s logistics network with Microsoft’s cloud. The first service, FedEx Surround, will give real-time analytics into the supply chain and delivery. The offering will be available later this year and will collect data through FedEx’s IoT platform. This data will be analyzed using Microsoft’s technology services to help predict potential delivery disruptions due to weather, congestion, or other issues. This enables companies to re-route items and alert customers of potential delays.

FedEx is also hiring drivers to keep with the growing demand of e-commerce. According to FedEx CEO Frederick W. Smith, the company has been hiring about 4,000 drivers per week for its FedEx Ground unit. Assuming that e-commerce does not see a significant drop as brick and mortar retailers re-open, this is a step towards making sure that delivery timeframes can be met in a post COVID world. The bigger question is whether FedEx will have the warehouse capacity to keep up.

UPS and the POST COVID World

UPS has taken some steps recently that will align well with the post COVID world as well. As the interest and use cases grow for drone deliveries, UPS set up a program to deliver essential items during the pandemic. UPS will use drones to fill prescriptions for residents of The Villages in Florida, one of the country’s biggest retirement communities. The deliveries will come from a CVS store about a half mile away and will mark the first paid residential deliveries by UPS’s drone unit Flight Forward. The drones will drop the prescriptions to a central location, where a Flight Forward employee will ferry them by golf cart to homes. This program could be a model for future drone deliveries of essential items to at risk communities.

During the current pandemic, UPS has also expanded the use of its UPS My Choice program. UPS My Choice allows business and residential users to manage their delivery schedules by rerouting or rescheduling deliveries, get estimated and confirmed delivery windows, tracking and managing multiple packages at once, receiving real-time alerts, following deliveries on a map, leaving instructions for the driver, and routing packages to a UPS Access Point instead of home delivery. This program helps the consumer to get the package when and how they want in the most socially responsible manner possible.

On top of the My Choice program, UPS has also made changes to its signature requirements, which could certainly be the method of the future as well. The company has eased guidelines on the types of packages that need a signature. However, for those deliveries that do still require a signature, UPS is taking a novel approach. Drivers will leave a sticky note on the door before moving back a safe distance. Once the customer has signed the form, the driver will wait for the customer to leave and then retrieve the form. This could certainly be how signatures are handled in the new post COVID world.

Final Thought

The post COVID world will likely look a lot different than what we experienced just a few short months ago. As economies begin to open, restrictions abound and are likely to remain in place until a vaccine is created and administered across the country. In this post COVID world, the supply chain will continue to be a key cog in ensuring that the economy can function, and home deliveries will be the new normal for more and more of our retail needs. To that end, Amazon, FedEx, and UPS have put changes in place to deal with the changing nature of customer demands and interactions. These changes, which include drones, virus killing robots, private fleets, logistics partnerships, and more choices for customers have put each of these companies in a position to continue to thrive in the post COVID world. We will have to wait and see just what that world looks like though.

This Week in Logistics News (March 14 – 20)

logistics news | By Chris Cunnane • 03/20/2020

We all knew this day would come eventually. I just don’t think any of us saw it shaking out quite like this. After 20 years, 18 post-seasons, 14 Pro Bowls, 6 Super Bowl championships, 4 Super Bowl MVP awards, 3 regular season MVP awards, and the most dramatic comeback in Super Bowl history, Tom Brady is no longer a Patriot. My belief, along with most of those in new England, was that Brady would re-sign with the Patriots and end his career in Foxboro. However, this was not meant to be. Earlier this week, Brady sent a farewell message to the fans of New England saying he will be continuing his football journey elsewhere. And apparently that elsewhere is Tampa Bay? It is going to be strange to see him in a Bucs uniform next year, and if he plays another year after that, facing the Pats in what is sure to be a PrimeTime event. I wish Brady all the best and thank him for taking our mind off coronavirus, even if it was just for a minute. And now on to this week’s logistics news.

As the coronavirus pandemic takes it toll on the economy, Amazon is pushing back. The company is hiring 100,000 for full and part-time roles across the US, Canada, and Europe, as well as increasing wages $2 and hour on current salaries of $15 an hour or more. This all adds up to a $350 million investment from the online retail giant. Amazon senior vice president for worldwide operations Dave Clark wrote on the company’s blog “Amazon and our network of partners are helping communities around the world in a way that very few can—delivering critical supplies directly to the doorsteps of people who need them. Getting a priority item to your doorstep is vital as communities practice social-distancing, particularly for the elderly and others with underlying health issues.”

While it is hiring to try to keep up with the surge of online ordering, the reality is that even Amazon is not immune to product shortages. The company warned customers that it is experiencing delays in its Prime deliveries and running out of stock of popular household items. As a result, delivery timeframes are running longer than normal. Amazon has added a notice to the top of its marketplace this weekend that reads: “Inventory and delivery may be temporarily unavailable due to increased demand. Confirm availability at checkout.”

With the ongoing surge in online ordering to avoid congested stores, UPS and FedEx are easing their signature rules for home deliveries. While signatures have been a way to help protect the customer and reduce package theft, the new order of customer protection is to forgo routine signatures. Both UPS and FedEx have suspended the need for signatures on most deliveries. However, for those deliveries that do still require a signature, UPS is taking a novel approach. Drivers will leave a sticky note on the door before moving back a safe distance. Once the customer has signed the form, the driver will wait for the customer to leave and then retrieve the form. I imagine this will be the new norm for quite some time.

Customer signature capture is not the only thing changing for the delivery business. Many US delivery companies are putting a halt to “white glove” delivery services. This means that drivers will no longer deliver and set up TVs, furniture, exercise equipment, or other items inside a customer’s home. This is critically important to help protect drivers as well as the public in general. One example is Chicago-based SEKO, which has halted “over the threshold” service in Seattle, Spokane, Portland, and San Francisco. The company is calling every in-home delivery customer and giving them the option to delay, reschedule, or have items left on porches or in garages.

US highway-safety regulators are suspending rules that limit the amount of time that truck drivers can be on the road each day if they are carrying emergency supplies. This holds true for shipments of medical equipment, hand sanitizer, and food in response to the coronavirus outbreak. The move comes as hospitals report shortages of medical supplies and as retailers and manufacturers are straining under surging demand for essential items. The Federal Motor Carrier Safety Administration (FMCSA) announced the nationwide exemption late Friday, following President Trump’s declaration of a national emergency over the pandemic. According to the FMCSA, “the move will help America’s commercial drivers get these critical goods to impacted areas faster and more efficiently.”

In Northern California, multiple counties have been ordered to shelter in place. One of those counties is Alameda County, home to Oakland’s port and international airport. However, even with the shelter in place order in effect, The Port of Oakland and Oakland International Airport will keep operating. The port and airport have been deemed as a necessary gateway for global trade and transportation. The port authority said it would adopt a resilience plan to staff its operations while minimizing employee exposure to coronavirus. Officials are meeting with the International Longshore and Warehouse Union to determine what staffing levels are needed on the docks since there has been a slowdown in ocean vessel arrivals after China quarantined major industrial centers, resulting in limited exports in recent weeks.

One of the hardest to find products on the market right now is hand sanitizer. This is due to the massive amounts of hoarding that is happening nationwide. Help is now coming from an unlikely source: distilleries. Many distilleries across the country are using the alcohol in their facilities to create their own alcohol-based solutions. These distilleries are either packaging the sanitizer in small bottles for customers or recommending that customers bring their own bottles to the distillery. Many distilleries are quickly going through their supplies and are taking donations to ensure they can make more.

And finally, UPS will start testing the autonomous functionality of Gaussin electric vehicle trailers at its London advanced technology depot later this year. The company has already started testing the trailers or “shifters” with operators to help move semi-trailers and containers but will switch to autonomous testing in the second half of 2020. Gaussin and UPS Engineering teams have been in close collaboration since 2018 to co-develop an electric shifter vehicle.

That’s all for this week. Enjoy the weekend and the song of the week Led Zeppelin’s Ramble On.

This Week in Logistics News (January 11 – 17)

logistics news | By Chris Cunnane • 01/17/2020

One hundred and one years ago Wednesday, a bizarre disaster struck the city of Boston: the Great Molasses Flood. The disaster has also been known as Boston Molasses Disaster, the Great Boston Molasses Flood, or, in a clever play on words, the Boston Molassacre. In the North End, a storage tank filled with 2.3 million gallons of molasses burst, sending a 25 foot tall wave of molasses through the streets at speeds of 35 miles per hour. Pedestrians were hurled through air as debris flew in all directions. The wave of molasses was strong enough to toss a truck into Boston Harbor. In all, 150 people were injured, and 21 were killed. The cleanup efforts took weeks for the immediate downtown area, and months for the rest of the Greater Boston area and its suburbs. Residents claimed that for decades, you could still smell the sweet aroma of molasses on a hit summer day. And now on to this week’s logistics news.

The trade war between the US and China has taken its toll on both countries. Now, the two nations have signed a partial trade agreement as “phase one” of trade negotiations comes to an end. In an agreement signed this week, China agreed to purchase $200 billion worth of additional US goods and services compared to its orders in 2017, when it imported over $185 billion of US goods. Among the products it has promised to buy are soybeans, pork, cotton and wheat. In return, the US has agreed to cut tariffs on $120 billion of Chinese products from 17 percent to 7.5 percent. However, all signs point to a more difficult second round of trade negotiations, with tensions between the two nations continuing to build.

In the past, I have written about how retailers are moving beyond the use of robots in the warehouse and deploying them in the store. In that article I mentioned that Walmart has deployed Bossa Nova robots at more than 350 of its stores nationwide. The company is now doubling down on its efforts and will expand its robotic workforce to over 650 stores nationwide by this summer. The robots are equipped with 15 cameras and roam the store aisles checking for pricing issues, out-of-stocks, and shelf irregularities. The robots then notify a store associate via their handheld device of any issues that need to be resolved. The shelf scanning capabilities free up associates to attend to other tasks and service customers. As NRF 2020 showed, the role of the store associate is rapidly changing, and robots can help to usher in this new era.

Citing poor performance, Amazon temporarily suspended FedEx’s ground delivery for Prime shipments last month. Questions abound as to whether this was really based on performance or if Amazon wanted to use its own logistics arm for the bulk of its holiday deliveries. The decision certainly caught some third-party sellers off-guard, leaving them to scramble to find new carriers. Amazon said that once the performance of FedEx improved, sellers would once again be able to use the company’s ground and home services. Earlier this week Amazon informed third-party sellers that they can resume using FedEx’s ground delivery shipping services. According to FedEx, service levels had been strong during the peak holiday season, with an average transit time of 2.4 days for Ground packages and 18 percent of Ground packages were delivered early. It will be interesting to keep an eye on the Amazon-FedEx relationship moving forward.

Instacart is known as one of the pioneers of the now established crowd-sourced grocery delivery model. However, one thing that many people may not have known is that the company offers a grocery pick-up service at more than 1500 stores across 30 states. The service includes over 50 retailers, including Albertsons, Publix Super Markets, Wegmans Food Markets, Schnucks Market, Price Chopper, Gelson’s Markets, Shop ‘n Save and The Fresh Market. Instacart sees 2020 as the “year for grocery pick-up” and is increasing its click and collect service to reach all 50 states by the end of 2020. The service allows customers to choose a pick-up location that is most convenient for specific days. It also includes location-based notifications to alert the store when the customer is close so the order can be waiting curbside.

As supply chain sustainability gains more steam and companies look at ways to reduce or eliminate emissions, Werner Enterprises is joining the parade of zero-emission battery-powered electric truck testing underway in California. The Omaha, NE-based truckload company will use a Peterbilt 579EV model capable of hauling 80,000 pounds for a year of testing in the Los Angeles area. Not surprisingly, California is seeing a surge in electric truck tests given its strict emissions laws. The state makes testing zero-emission trucks quite affordable as it uses money raised from excessive carbon fines as incentives to reduce the cost of electric trucks. California wants to rid its highways of diesel-powered trucks by 2035.

Speaking of sustainability, Taco Bell announced plans to make all of its packaging recyclable, compostable, or reusable by 2025. This includes everything is customer facing, including the wraps that hold your taco, the bag it comes in, cups, straws, and boxes. The company will install recycling and composting bins in restaurants where local infrastructure permits, and the new packaging materials will also be free of PFAS, phthalates, and BPA. The task will certainly be difficult however; just because items are deemed reusable (such as its mini-skillet bowls that are microwave-safe), does not mean that customers will actually reuse them. The ultimate goal will be to make all packaging recyclable, compostable, or reusable, and get customers on board to discard of it appropriately.

Ford has shown itself to be innovative in the use of technology for last mile deliveries, especially with its partnerships with Walmart and Dominos for autonomous vehicles for home delivery. The company is now taking part in trials for both warehouse and last mile robots. The robots are designed by Agility Robotics, feature arms and legs, and walk upright. The robot can be used within the warehouse to move items between locations and to a pack station. Ford is also testing the robots for the last 50 feet of deliveries. The robot can feed information from its sensors back to the delivery truck to receive additional computing power enabling it to overcome unexpected obstacles. This is certainly an exciting approach to the use of robots.

Transplace has acquired Lanehub, a cloud-based platform and community focused on shipper-carrier collaboration by automatically identifying and connecting companies with complementary freight lanes to save on shipping expenses. According to Transplace, Lanehub’s software is geared towards matching recurring freight lanes on a consistent basis, resulting in reducing transportation cost, increasing fleet revenue, and also improving carrier service and performance. A purchase price was not disclosed.

GlobalTranz has acquired Cerasis, a customer focused, technology driven and data empowered provider of managed transportation and third-party multimodal logistics services. This is the latest move in GlobalTranz’s growth by acquisition strategy, and eleventh in the last three years. According to GlobalTranz, Cerasis will help expand the company’s growing managed transportation, final mile, and reverse logistics capabilities.

That’s all for this week. Enjoy the weekend and the song of the week, Stevie Ray Vaughan’s Texas Flood.

Crowdsourcing for Last Mile Success

Logistics Trends | By Chris Cunnane • 01/10/2018

The Key Last Mile Markets

Last mile deliveries continue to be costly and headache-inducing for retailers. A lot of this is due to consumers constantly evolving and tough to meet demands of fast, reliable, and cheap (or free) service. Many retailers have turned to crowdsourced delivery options to alleviate the stress of last mile deliveries, and in turn, have turned their stores into mini-warehouses.

However, the problems associated with last mile deliveries are not just felt by traditional retailers. Now, as consumers continue to look to the web as their shopping channel of choice, this has changed the way non-traditional online segments within the retail market offer their goods and services. Grocery stores and convenience stores, for example, have had to shift their operations to handle the desire for buy online, pick up in store. But, as home delivery becomes more of the norm, these stores are making the change to offer home delivery via crowdsourced drivers as well.

On top of these two markets for home delivery, restaurants are now a major player. While pizza shops and some other formats have typically offered delivery, the majority of restaurants have not. However, the rise of crowdsourced delivery options now allow restaurants that historically did not want to enter the delivery market to offer home delivery. In fact, it is no longer a differentiator for many restaurants; instead, it is a necessary component of their strategy to remain competitive.

Last Mile Market Size

So just how big is the crowdsourced delivery market? Steve Banker and I have written about the digital freight matching market quite a bit over the last 18 months. The market essentially has two sides – freight and home delivery. The home delivery market is significantly larger. In fact, the top seven global startups, which include Deliveroo, Instacart, New Dada, Postmates, DoorDash, Fetchr, and Deliv, have raised over $2.5 billion in funding since 2011. Each of these companies has its own unique market opportunity and differentiator, from how they make deliveries to their pricing model. However, the one constant for each of these has been the ability to raise money.

Considering the amount of money pouring into these startups, it is not surprising to see a shift in the crowdsourced delivery market. According to my latest omni-channel research survey, nearly 10 percent of retailers surveyed indicated they are already use the crowdsourced delivery model, and an additional 26 percent plan to use one in the next 12 months. These numbers directly reflect a drop in the number of retailers that continue to use private store fleets or have plans to use these fleets.

For traditional retailers, the need to compete with Amazon has made fast and cost-efficient delivery more important than ever. To that end, Target is buying home-delivery start-up Shipt for $550 million. As part of the deal, Shipt will become a wholly-owned Target subsidiary, but will still solicit business from other retailers. As a result of the acquisition, Target plans to offer same-day delivery at about half of its 1,800 stores by summer. Following the initial roll-out, Target plans to have all stores on board for next year’s holiday season. This also means that Target is phasing out its relationship with Instacart to focus on its internal same-day delivery business.

A great example of how the crowdsourced food delivery market is especially growing is Uber. Uber’s disruptive ride-hailing app was incredibly disruptive to the taxi market in most cities. However, regulatory issues regarding how drivers are classified (along with sexual harassment claims) have slowed down Uber’s growth in this market. But, Uber’s secondary app, UberEats, has been growing by leaps and bounds due to customer demand. As I mentioned in last week’s news round-up, in 19 European cities, including Milan, Madrid, and Grenoble, UberEats is bigger than Uber’s transportation app. Even though it is only three years old, UberEats is poised to generate more than $3 billion in sales by the end of 2018.

The Main Players

Deliveroo has raised nearly $860 million in funding. The core business is restaurant delivery by bike. Customers can pay a fee for individual orders or pay a monthly subscription fee.
Instacart has raised $675 million in funding. The company focuses mainly on grocery delivery, with key partnerships with Whole Foods, Albertsons, Supervalu, and Wegman’s. Instacart also makes deliveries for CVS and PetCo, and customers can pay an individual order fee or a monthly subscription fee.
New Dada has raised $450 million in funding, including a large investment from JD.com and Walmart. The core business is groceries and convenience items delivered throughout China.
Postmates has raised nearly $280 million in funding. The company’s motto is “get anything delivered in minutes.” This includes restaurants, groceries, and alcohol for those consumers above the legal drinking age.
DoorDash has raised over $180 million in funding. The company focuses on the restaurant delivery market, with over 54,000 restaurants in their network.
Fetchr has raised over $50 in funding. The company is an international express, mail delivery and logistics services company, operating an app-based on-demand delivery service model based in Dubai.
Deliv has raised $40m in funding. The company’s offering spans multiple retail segments to connect drivers with consumers to deliver merchandise.
UBerEats is an offshoot of Uber’s ride-hailing app. The company deliveries restaurants meals via car, bike, scooter, or on foot.

Final Word

The crowdsourced last mile delivery market is still in the relatively early stages of development. However, retailers and restaurants have seen the need to expand how they make home deliveries, and start-ups have seized the opportunity. With billions of dollars of funding pouring in, the market is poised to continue to grow. However, as the market continues to mature, there will certainly be continued growing pains, and most likely, a thinning of the heard. For every Uber, Instacart, and Deliveroo out there, there is also a Sidecar (remember them?). It is certainly a market that is worth watching.

Home Delivery Benchmark – A Detailed View

Guest Commentary | By Chris Jones • 04/19/2016

The strategies, tactics and technology of home delivery are evolving quickly and constantly. It’s tough to keep up with the innovation that is happening in home delivery and also sort out the reality from the hype in the press. As Chris Cunnane described in his report Descartes Evolution – Logistics in Motion, we conducted a survey of a number of our customers to get a broader sense of what was actually happening and how retailers are thinking. Besides some of the salient points Chris made, I thought I would share more of the findings to help retailers and logistics services providers better gauge how they should move forward with home delivery.

To give a little context, let me describe the participants. They come from all over the world, would mostly be considered to be nation-wide, leaders in the markets they serve and deliver a wide array of products – food, alcoholic beverages, home furnishings, DIY and electronics. They execute 100,000s to 1,000,000s of home deliveries every year and use a combination of private and dedicated fleets to do it by sourcing deliveries from DCs and stores. We did not cover parcel-based home deliveries as part of this benchmark.

Below are some of the key findings:

Home Delivery is part of the retailer’s omni-channel strategy. All of the survey respondents cited that they were using advanced home-delivery technology as part of the online, in store, mobile, etc. selling strategy. Rather than thinking that home delivery is confined to non-store sales, retailers are trying to use it as broadly as possible to better serve consumers.
Delivery speed was more driven by business model, strategy and competition as opposed to product sold. There was an even split between those retailers offering next-day and same-day service. This split did not change among retailers, even where they were selling similar products that were competitively varied and different product sizes. Instead, many respondents are focused on consumer choice as opposed to immediacy. Clearly, there are products like a dishwasher that you want now when the one you have is broken. However, you don’t want that dishwasher now when it is part of an overall remodeling of your kitchen to have it take up a lot of space in your garage for weeks.
Consumer and supply chain metrics are used to measure delivery performance. It was good to see that retailers were combining “complete and on-time” with “experience-oriented” metrics like “Net Promoter Score”. Some retailers even tracked revenue performance (e.g. average order size and sell through) to more accurately represent the value of home delivery. These retailers have definitely moved past “get it done”.
Tighter time windows did not necessarily mean a significant drop in home delivery performance for best-in-class retailers. “All day” delivery window performance for top performers was 99%+. However, top performing retailers offering 2 and 4 hour windows were only 1 – 2 percentage points behind. To get this kind of performance these retailers were using a combination of windows (e.g. 2 hour, 4 hour and all day) and using the all day window to help minimize the impact of the tighter windows.
Time window options provide an opportunity for premium pricing. Approximately 1/4 of the respondents offer premium pricing and use the multiple time window strategy mentioned in #4 as part of that strategy. Almost 20% of the consumers selected premium windows for those retailers. Given the home delivery volume of the retailers that participated in the study, it is fair to say that they are generating millions in incremental revenue.
There is still opportunity to do more. There are still areas where retailers have not yet embarked to offer more value and get more revenue. The first is customer stratification. Not all customers or orders are created equal so why not offer home delivery options that way too? For instance, your “type A” customers get more delivery options than your “type C” customer. The second is the use of dynamic pricing. Some times of the day or days are more valuable than others. In addition, the cost to deliver can vary greatly based upon the customer’s location, order and all of the other deliveries that need to be made. Uber with its surge pricing has already done some of this, why not retailers?

As Chris mentioned in his report, the benchmark study showed that more advanced retailers are not just focused on doing a good job at home delivery, they are using it to transform their consumer’s experience and make more money. The findings above point to the home delivery opportunities that exist and potential value to be gained for retailers. To get there, retailers need to make sure they have an expanded view of home delivery and the right technology to enable that vision.

As Executive Vice President, Marketing and Services, Chris Jones is primarily responsible for Descartes marketing activities and implementation of Descartes’ solutions. Chris has over 30 years of experience in the supply chain market, including the last 10 years as a part of the Descartes leadership team. Prior to Descartes, he has held a variety of senior management positions in other organizations including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group and Associate Director Operations & Technology for Kraft Foods.

Creating the Customer-Facing Supply Chain in Home Delivery

Guest Commentary | By Chris Jones • 06/09/2015

Last October, I wrote a post introducing the concept of the Customer Facing Supply Chain and how it expands the value of the supply chain in the enterprise. There has been a lot of interest in understanding how to create a customer-facing supply chain. The following is such an example for retailers and their home delivery operations.

Enhance the Entire Shipping Experience
Let’s start with the customer-facing supply chain fundamentals for home delivery. The most important concept is that Customer-Facing Supply Chains enhance the entire shopping experience. Check out the commercial from Australian retail giant, Woolworths, to get a good idea of the kind of shopping vision that can be empowered by a supply chain.

For this kind of vision to become reality, the supply chain needs to become a valued part of the “front office” by directly engaging the customer. Figure 1, below, covers the important tenets of the Customer-Facing Supply Chain.

Figure 1: Customer Facing Tenets

Impact your Organization’s Performance
Customer-Facing Supply Chains go beyond cost management and meeting customer service targets to have a greater impact on the overall organization’s performance. Impacting revenue growth by increasing sales of products and value-added services are an important part of the Customer-Facing Supply Chain. In addition, Customer-Facing Supply Chains increase customer engagement, provide differentiated services and even the brand proposition. Cost reduction is an important part of Customer-Facing Supply Chains, but that impact happens beyond the supply chain organization in areas like call center operations.

To understand the potential business value of Customer-Facing Supply Chains in home delivery, the potential impact across the customer order life cycle must be examined. Rather than seeing home delivery as the “get it done” part of the selling process, Customer-Facing Supply Chains engage the customer and the retailer’s other organizations at multiple points. Equally, the associated business value comes in a number of areas that go beyond the supply chain organization. Figure 2 shows the stages of the customer order lifecycle on the left and the associated business value on the right.

Figure 2: Home Delivery Customer Facing Supply Chain Business Value

Leverage Available Technology Solutions
Enabling technology is an important part of Customer Facing Supply Chains. Figure 3 maps the key customer order lifecycle steps for home delivery to the type of technology that benefits them. Dynamic Booking provides customers with greater delivery choices and retailers with the ability to sell value added services cost effectively. Delivery Orchestration optimizes and coordinates the customer order to meet services commitments for the lowest cost and enable fast delivery. Dispatch & Tracking helps ensure successful delivery and manage exceptions as well as closing the loop on the commercial agreement with the customer. Mobile applications enable the delivery agent to be more productive and offer the customer greater service. Notifications leverages supply chain information and processes to better engage the customer for delivery success and better overall experience.

Figure 3: Home Delivery Enabling Technologies

Gather and Improve Key Performance Metrics
Retailers that implement Customer-Facing Supply Chains think differently about home delivery metrics. They evaluate home delivery’s impact on revenue generation, including increased sales of products, value-added services and premium delivery windows, as well as reduced buyer shopping cart abandonment. Supplier participation in home delivery programs is a key metric as leading retailers see their most advanced suppliers move marketing funds from adds to subsidized delivery programs. Customer service and brand perception are important metrics, going beyond delivery performance to include Net Promoter Score, buying experience, returns process and social ratings. Cost metrics are still important, but better aligned with value creation such as cost per minute as opposed to cost per mile or cost per delivery. In addition, cost impacts in other organizations are tracked and include call center productivity, fraud and loss prevention, failed delivery reduction, dispute/returns processing and days-sales-outstanding.

The most asked question I receive is “How do I get the Customer Facing Supply Chain transformation started?” There are 4 key points for success:

Enlist the commercial organization. They own the customer and revenue. Nothing significant will happen without their support.
Move the supply chain value discussion from “get it done” to “get more”. Supply chain executives need to become part of the revenue, differentiated service and brand enhancement discussions. At a minimum, the supply chain needs to be portrayed as adding value across the end-to-end shopping experience.
Link home delivery to a broader and more relevant set of business metrics. Customer Facing Supply Chains drive revenue and competitive differentiation, so track them. Metrics like cost need to be tied to business value drivers.
Engage the customer. They know best how your supply chain is impacting them and will tell you if they bought because of how your supply engaged them during the buying process. Remember, the last mile is the last word and what customers remember last about your brand.

How is your supply chain making the transition to customer facing? Let me know.

Chris Jones is Vice President, Marketing and Services at Descartes. As Executive Vice President, Marketing and Services, Chris Jones is primarily responsible for Descartes marketing activities and professional services for Descartes’ solutions. With over 30 years of experience in the supply chain market, Chris has held a variety of senior management positions including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group.

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