The eCommerce revolution has turned the “traditional” supply chain on its head. From speed to delivery, to increased expectations for the delivery experience, this change has in large part been driven by the more empowered consumer of today. However, this change doesn’t come without challenges, many of which manifest in the last mile of delivery.
Today, eCommerce sales now stand at over 10% of total quarterly retail sales in the U.S. Nearly half us U.S. shoppers shop primarily online. For something that only became viable within the last 15 years, that is a huge feat. But this opportunity does not come without complex challenges.
Take Amazon, a company which surfaced frequently in the news this year. In the spring, the eCommerce giant launched one-day delivery for Amazon Prime customers. However, by October 2019, despite rising sales, the company found that an increase in shipping costs led to a decrease in profits.
Amazon is the perfect example of the unique last mile delivery challenges that eCommerce presents:
1. The company recognized that increased competition meant it needed to up its game by offering free, fast delivery.
2. Shipping is Amazon’s #1 expense. FedEx recently cut ties with Amazon, as Amazon decided to handle more of its supply chain on its own. The cost led to an impact in overall profit.
The lesson? It’s clearly not that easy to do it all.
As the shift from brick and mortar to online retail continues, the difficulties of managing last mile delivery grows. New customer expectations regarding time to delivery, overall delivery experience, and open communication have forced online retailers to invest in new technological solutions to manage their delivery operations.
There are many challenges when it comes to last mile delivery for eCommerce, but here are 4 that are most prominent:
Did you know that 28% of the total delivery cost to a business comes from the last-mile? In general, this often gets passed on to the customer. When it doesn’t, it can have a negative impact on the bottom line.
Cost is not a new issue, obviously, but new expectations, particularly regarding same-day/on-demand delivery has put a greater strain on budgets. Additionally, when it comes to online retail, there can be inconsistent demand, such as increasingly higher volumes of purchases during holidays.
As mentioned earlier, Amazon had a real problem with this issue – their largest cost was fulfillment and their biggest challenge was last-mile delivery. For Amazon, owning the entire supply chain turned out to be the solution to handling the challenges of last-mile delivery. For other businesses though, this may not be the best option.
There is no silver bullet for offsetting costs. However, efficiency and planning go a long way to neutralize its affect.
For bigger eCommerce companies such as Amazon, creating efficiencies throughout the supply chain enable lower costs during the last-mile.
Humans have always had the desire to know, understand and anticipate. These desires are felt by consumers as well. As a result, businesses that deliver, and 3PLs in particular, began to generate tracking codes which allowed consumers to get some visibility over where their delivery was.
In the modern on-demand era, tracking codes don’t satisfy consumers anymore – they want to have full, real-time visibility over there deliveries. In particular, they want to see the entirety of the last-mile – that is, they want to be able to see where the driver is and exactly when they will arrive.
Whether the delivery is same-day or not, consumers still want to have more than a 4 hour window when waiting for their package.
Uber changed the game. Though initially for taxis, Uber gives customers the ability to have full visibility over where their driver is. Customers can follow the driver through a real-time map to know exactly when they arrive. Now, consumers are starting to expect this kind of visibility for all services, including deliveries.
As with other new challenges, customers have been the major driving force for increased efficiency. Among other reasons, the requirement for increased efficiency is predicated on the desire for faster deliveries. On-demand has penetrated every industry and business, and online retail is no exception.
Efficiency can be increased throughout the supply chain, but when talking about last mile delivery solutions, especially with regards to same-day/on-demand delivery, technology is the key. Things such as automatically dispatching to the right delivery person, in the right area, at the right time can help increase efficiency and decrease delivery time.
A frictionless delivery experience helps streamline efficiency and cut costs. One of the greatest sources of friction during last mile delivery is dealing with customer inquiries about their delivery and requests about how it should be delivered (“don’t ring the door bell,” for example).
Creating a frictionless delivery process requires technology that enables open communication between the customer and the delivery person, as well as full visibility over their deliveries. By doing so, you lessen the likelihood of a customer calling in and having to deal with a customer service representative, who will then have to go through their system to find information about the delivery.
Want to learn more about tackling last mile delivery challenges? Download our free ebook, Delivery in the Age of Amazon.