As retailers around the world improve their delivery logistics capabilities, they face major strategic challenges when deciding how to manage their delivery operations. Build an in-house fleet or outsource it? Need delivery partners, such as 3PLs, to scale? Which regions or cities are the best ones to get started in? What’s the right time to roll out after a pilot? And the list goes on.
Customer experience will always be the top priority for any retailer – but while that experience used to be mostly about the product or service being bought, now the buying and delivery methods are key parts of the experience. So companies need to deliver and can’t afford to ignore customer demand.
The fundamental shift we’re seeing in the industry is that while customers will remain loyal to their favorite retailers and brands, it’s not always necessary for retailers to ‘own’ every piece of the supply chain. Deliveries, which used to be in the hands of a few big players or fleet owners, are now accessible to virtually every business through different channels.
Similar to the way in which companies like Lyft or Uber democratized rides by enabling any driver to become a part of their ‘fleet’, retailers will have to find solutions that provide them with the flexibility to manage their delivery operations through a network of smaller partners so they are able to reach each and every customer. The global third party logistics market is estimated to grow at a 4.4% annual rate over the next 5 years, and expected to reach annual revenues of $1,029 billion by 2022.
This new landscape, in which deliveries are in the process of being democratized, is opening up huge opportunities for every retailer – from leading chains to small businesses – enabling them to grow their commerce with an unprecedented level of freedom, flexibility and scalability.
Walled Garden vs Open Business Model
There are upsides to owning the infrastructure for your entire supply chain. Owning a fleet, or even contracting a delivery partner which works for you exclusively, can be an enticing prospect since it provides you with tighter control over the entire delivery experience, your fleet’s availability, and a clear chain of custody.
However, the reality for most retailers is that this model also comes with serious limitations that can jeopardize business growth – and ultimately customer experience. For example, if a company prioritizes delivery services in areas with more clientele, the ‘unlucky’ customers who don’t live near those areas will experience the product differently.
Another limitation for companies that only rely on their in-house fleet is the ability for them to recruit and grow their workforce as fast as the business demands it. Even for a business that assigns all deliveries to a single third party, there’s a risk of becoming over-dependenton a supplier.
Creating a brand new fleet and delivery workforce is probably the hardest – but the level of service, attention and know how are also priceless. Some of our clients, like Panera Bread, prove it is not only possible but can also be highly profitable. Other companies, such as Coca-Cola, decided to use existing networks and delivery resources to create an innovative model to re-stock small businesses in key Asian markets faster than ever before.
Many of the perceived hurdles about opening up your delivery operations can be solved with technology that helps partner companies, partner fleets and partner drivers operate successfully in an open and transparent environment.
Speed and scale
Scaling up takes time and effort. There are no two ways about it. However, when it comes to delivery logistics, we’re at a point in time when companies can scale at unprecedented speed if they play their cards right. Just like with the internet or social media, companies can quickly grow by tapping into existing infrastructure and networks. In a world that is more open and connected than ever before, a better way to handle logistics has become an absolute necessity for retailers. Most will have no choice but to choose local partners to help them evolve their delivery operations.
For example, a remote location with low customer density for a retailer might not merit establishing a fleet, but a small delivery company in the region could be a key partner that enables the retailer to reach customers in that area without having to invest in a local fleet. That small delivery company will benefit from additional business and bring the workforce and regional knowledge to help the retail chain broaden their horizon and give their customers an exceptional delivery service – wherever they may be. While 54% of the world’s population lives in urban areas, every customer deserves the best experience, and companies must work hard to bring a service that is excellent and consistent across the board.
Opening up to expand your network
Deliveries are now a crucial part of the purchasing experience. With the unstoppable growth of online retail and mobile ordering, it’s increasingly important for companies to invest in delighting customers at a critical touchpoint which is highly correlated to customer loyalty and therefore lifetime value.
In order to build and maintain global brand experiences through the delivery process, companies need to think local. Customers might be lured in through promotions, advertising, and other marketing activities. However, if a business cannot fulfill their brand promise where their customers live and at the time they need it, all efforts become futile.
At Bringg, we’re seeing retail chains developing new partnerships with local delivery companies, which might become essential players helping retailers successfully grow their delivery logistics capabilities. If managed correctly, it can be a win-win situation. On the one hand, retailers have the flexibility to tactically scale their business needs and use multiple resources that fit demand across multiple locations. On the other hand, local 3PLs can get new business partners and help them scale while running their business as usual – with the flexibility to take on new business without sacrificing their companies or jobs due to exclusivity agreements.
Simple, helpful and transparent
The theory is simple and straightforward. And the only way to make this model work is to build an ecosystem with technology that makes execution simple too – which isn’t a small feat. Our focus at Bringg is to help retailers successfully create and manage this ecosystem.
We know that when a company uses a 3rd party delivery partner to carry out a job, that driver becomes an extension of the retailer’s brand. In the consumer’s eyes, the driver is part of the overall brand experience. That’s why, for example, we put extra emphasis on developing technology that will help retailers not only convey their brand values, but also easily equip delivery partners with intuitive tools so they can be up and running with minimal training.
Finally, the piece that glues all the parts together is visibility and transparency. Without it, none of it will be possible. Flawless communication and visibility from all angles of the supply chain is a must to make this happen. Retailers can now know in real-time the status of every order and every partner driver, so they can quickly solve any issue as soon as it arises.
What can retailers do?
In a nutshell, be open. The new retail landscape will require new models, new technologies, new partnerships. Companies will have to embrace and try different models, and there is no silver-bullet strategy that works for everyone. In most cases, it will be a combination of internal fleets, external fleets, partner companies, and even crowd-sourced resources that should be aligned to reach your customers in the best and fastest way possible.
And of course, in the midst of designing and orchestrating a more efficient supply chain, don’t forget to put the customers at the heart of the entire logistics operation – all the optimizations, efficiencies and visibility throughout the supply chain are ultimately ways to remove barriers and bring you closer to them.