Delivery in the Age of Amazon

Lior Sion
First Edition, March 2019. Published by Bringg Delivery Technologies Ltd.
Copyright © 2019 by Bringg Delivery Technologies Ltd.
All rights reserved www.bringg.com
Chapter 1
Introduction

If you think delivery is just about transporting a product to the buyer, think again. Delivery is the fulfillment of the entire customer experience, a journey that begins with brand awareness, continues with the purchase on- or offline, and culminates in the critical moments when customers wait to receive their order. Customer expectations regarding the delivery experience have completely changed over the last few years, challenging the way businesses currently operate and relate to their customers.

Across industries and across the world, businesses are discovering new ways to create long-term customer relationships and leverage the delivery process — new revenue streams; new ways for users to interact with and enjoy the product; new ways to upsell and build relationships; and new data points to better understand and optimize both business operations and customer relationships.

This revolution in the supply chain’s last mile is driven by something consumers always wanted, but which only recently became possible: convenience shopping. Getting what you want, when you want it was once a privilege available to the wealthy elite, but it is now open to all. This new, democratic level of shopping convenience is driven by companies around the world. Though sometimes referred to as “The Amazon Effect,” it is everywhere around us: from on-demand taxis, to ecommerce, to on-demand streaming.

A large part of Amazon’s stunning success is due to the extraordinary experiences it provides its customers, bringing us to the point where it now accounts for one out of every two dollars US consumers spend online. Now, consumers have become accustomed to a new level of fulfillment: convenient delivery options, lower shipping costs, on-demand delivery, and full transparency into the delivery process.

This optimal delivery experience is based on transparency, consistency and convenience, which in turn are made possible by the ecommerce giant’s customer-first approach and how it uses technology to service this strategy. Amazon has succeeded where others have failed by adding a crucial technology layer across all its delivery and fulfillment channels, seamlessly syncing, measuring, optimizing and tracking activities across all related systems and partners. The result? Consumers are now demanding the same optimal experience from each and every brand. For this reason, omnichannel logistics has become one of the greatest business challenges, although it also remains one of the greatest business opportunities.

The delivery disruption presents brands with incredible potential to grow their business, extend their reach and create deeper relationships with their customers. Better deliveries mean that customers enjoy more positive experiences that make them feel valued, experiences which give them new touchpoints for interacting with the brands they love, and which keep them coming back.

Delivery is an essential layer which must be in place within businesses’ operations today if brands want to provide this level of experience to their customers. But in order to grow through excellent order fulfillment, businesses must face the logistical challenge of creating a delivery operation that is streamlined, efficient, transparent and customer-centric.

Achieving better customer experiences through successful delivery operations also relies on complete visibility into the status of the order and the inventory at all times, and, of course, the need for perfect delivery execution, whether through the use of in-house fleets, third party fleets or a mix of the two. Companies that align themselves with this new reality will remain relevant to their customers, while those that don’t will quickly become obsolete. Get it right, and you can enjoy unprecedented profit margins and growth within your competitive market. Get it wrong, and you run huge risks when it comes to the viability of your business.

In short, brands don’t have to be Amazon to build stellar delivery and fulfillment operations that win new business and drive customer loyalty. However, they do have to look deeply and honestly at the way they run their delivery operations today, and then take the next step forward by making the necessary changes.

Revisiting the Challenges of the Offline World

Companies that have previously excelled in their market now find themselves in the new world of omnichannel logistics, and they find themselves in trouble because they have to rapidly learn how to navigate this world. Millions of manufacturers and retailers who know how to manufacture and sell products have already transitioned to the world of ecommerce. Now, a second, sometimes more complex, revolution in logistics is forcing them to optimize their offline world. That world — the offline world of logistics, warehouses, fulfillment centers, SKUs, shipping, fleets and drivers — is old, inefficient and stubbornly resistant to change.

Introducing innovation to offline logistics is doubly hard when you take into account the inherent complexity of delivery: a world of low margins, retention issues and logistical challenges. Enterprises, whether they provide goods or services, need to manage distribution to millions of homes and businesses, as well as hundreds of stores; run multiple fulfillment or distribution centers across many geographies; and control the customer experience from order through delivery. Businesses implementing delivery operations will face often conflicting organization and management constraints, as well as the need to align processes and KPIs across all the internal and external functions that are part of the delivery flow. It’s only natural that businesses shy away from this complexity and try to grow without it. Yet today’s market reality doesn’t work in their favor, and instead necessitates that they tackle these challenges head on.

Mastering the connection between online and offline is the great test for brands in all industries. Online retail and online purchasing have moved forward and digitized as far as they could without requiring similar disruptive changes in the offline world, but if businesses want to compete in the age of Amazon, that has to immediately change.

Solutions for Today

Many businesses have already recognized the need for change, and multiple sectors have followed up by offering solutions to help them adapt to the new delivery environment. On the one hand, however incredibly innovative the technology solutions may be, there’s a fundamental disconnect between most members of the tech world and the world of logistics, delivery and selling. Simply put, tech people don’t understand delivery pains. On the other hand, you have logistics professionals offering solutions that accurately recognize the biggest delivery pains, but they underestimate how much of the problem can be solved through technology. These solutions tend to tick one or two delivery boxes, but do not provide a comprehensive enough solution to be worth their cost in the long run.

A third option, as more and more businesses are realizing, is a combination of the two — highly innovative end-to-end solutions that are developed by people who understand both technology and logistics. These orchestration solutions not only target present pain points, but are also forward-looking enough that they can grow alongside the business’s delivery operations. These technologies are built for omnichannel fulfillment, helping create profitable operations whether a company sells items online, receives orders in store or provides in-home services. By straddling the old and new worlds — logistics and supply chain, software and agility, offline and online — these solutions can be applicable for businesses no matter how far they need to scale their delivery operations, or how much they grow their revenues.

These technologies are available today, helping companies meet the challenges created by their customers’ ever-rising delivery expectations while allowing them to make the most of the new business opportunities created by the same market changes. With the right strategy, coupled with a smart technology-powered delivery and fulfillment platform, companies can digitize offline operations and relationships; optimize back-end operations to achieve greater efficiencies across the entire delivery ecosystem; and offer customers a seamless and transparent experience, all while growing their profit margins.

Closing note

The purpose of this book is to help brands across multiple industries close the gap between their online and offline operations, and explain what delivery excellence entails: What the opportunities are, as well as what the challenges are and how to overcome them. Each chapter addresses a different industry or delivery model, and explores real-life case studies that illustrate the core concepts underpinning the book’s approach.

This book was written as a reference guide, with the intention that each reader take from it what they find relevant. I invite you to turn to the topics that interest you and jump around as you please. I hope you find this book useful in understanding the challenges that stand in between you and logistical excellence, and how to tackle those challenges and reap the rewards of fast, efficient and customer-centric delivery operations. I also invite you to contact me with any comments or questions you may have after reading the book.

Lior Sion
Co-Founder & CTO, Bringg
March 2019

Chapter 2
Retail Delivery

The retail market is undergoing massive disruption due to the Amazon Effect, with the retailer’s value to the customer and the role of the physical retail store both evolving at a rapid pace. Amazon has clearly found a winning strategy; the powerhouse represents about 5% of total US retail and ecommerce, combined,1 and closed 2018 at an all-time high of 48% of US ecommerce sales and 13.3% of worldwide sales.2 Its growth has brought about significant changes to consumer expectations and retailer strategies, both of which are continuously evolving, and will continue to do so for the next few years.

Facing growing competition from Amazon and pure-play ecommerce marketplaces, many retailers are fighting back with more competitive delivery — more options, faster service, better prices, targeted personalization, improved returns processes and convenient fulfillment through their stores. The common thread to all of these changes is that retailers have no choice but to reposition their perceived value and their customer experience focus, as part of a shift towards omnichannel fulfillment operations.

It’s very important to address omnichannel delivery not as a preventative measure, but rather as an opportunity to be wherever your customers are, at any time. In fact, retailers have a distinct advantage over online-only brands when it comes to omnichannel delivery, as they can leverage their brick-and-mortar stores to extend the branded experience and create additional opportunities for sales.

The Retail Advantage

Though facing a challenging and changing landscape, retailers have a number of strategic advantages over pure ecommerce players. While retail sales are not growing as fast as ecommerce sales, retail sales numbers are still projected to grow at about three to five percent annually over the next five years. At present, 70% of retail growth comes via brick-and-mortar, and 35% of ecommerce growth comes from omnichannel businesses.3

When it comes to omnichannel customer experiences, retailers have several substantial advantages over pure-play ecommerce businesses. Retailers have inventory closer to shoppers, which can enable far faster order deliveries and pickups. Similarly, while 30-minute deliveries can be quite expensive, in-store or curbside pickups are far more efficient and less costly, and often far more convenient. Retailers can also drive customers to their local, physical stores where they can pick up, try out and return merchandise, consult with the local staff, add more items to their order, or round it out with related services, such as pet grooming to go along with their pet food purchases.

To further put retail into perspective, the majority (64%) of shoppers still shop primarily at retail stores or online from omnichannel retailers. Nearly all shoppers (94%) say that store associates help them feel confident in their purchase decisions. Shoppers are also more likely (36%) to buy in-store after exploring online, than they are to buy online after showrooming (29%). Furthermore, shoppers who primarily shop at retail stores are the most satisfied with buy-online, pickup in-store (BOPIS) solutions.

Customer satisfaction from brick-and-mortar still surpasses Amazon and ecommerce in terms of purchase confidence, ease of returns, emotional satisfaction and good deals. However, Amazon matches brick-and-mortar at finding what suits me, and surpasses brick-and-mortar in the discovering what I really like and convenience categories.

Similarly, shoppers prefer retail for the categories of replenishment, purchases they may return, purchases that complement what they have, risk decisions, assembly required and carrying and handling, while the only shopping characteristic where Amazon outperforms retail is infrequent but easy purchases.

Having a retail footprint is a unique advantage for retailers due to the ease of returns and the valuable in-store experience. At the same time, significant changes in customer expectations are making it increasingly hard for retailers to ignore the ecommerce challenge. To understand why, it is important to look at the changing customer landscape.

Great Expectations: Speed and Cost

Amazon gave rise to new customer expectations that have left shoppers dissatisfied with the delivery services they are used to receiving from retailers. With an average Net Promoter Score of -9, Capgemini research showed that delivery services from retailers disappoint because they are too expensive (59%), too slow (47%) and too unreliable (43%).4 The majority of US shoppers (74%) who receive same-day deliveries are likely to purchase from that retailer again.5 Another study found that when faced with an abundance of choice, nearly all shoppers (91%) will leave a retail site when the delivery options they are offered are not sufficiently fast or inexpensive.6

Although the Capgemini research also found a direct correlation between delivery speed and customer loyalty, meeting customer expectations for speed can be very difficult. Customer expectations for same-day delivery grew 59% in just one year, from 2017 to 2018.7 To put this in context, if they order by noon, 61% of US shoppers, 55% of European shoppers, 63% of Canadian shoppers and 52% of Brazilian shoppers expect to be eligible for same-day delivery.8 This is a complete game changer for retailers who only deliver through traditional warehouses and postal carriers.

However, even same-day delivery isn’t always fast enough. In metropolitan areas, research shows that over half of shoppers want a one-hour delivery option.9 This trend grows even stronger with 27–38-year-olds in metropolitan areas, with 69% of this age group expecting a one-hour delivery option! The same research shows that 77% of shoppers in Spain, 66% of shoppers in the US and 64% of shoppers in France want a one-hour delivery option. However, few retailers from these countries actually offer same-day delivery in metropolitan areas.10

It should come as no surprise that the number one challenge facing retailers when it comes to the last mile is keeping up with customer expectations for fast, convenient delivery.11

But customers expect more than just speed — they want it fast, and they also want it at the right price. Expectations for free or discounted delivery are on growing. In fact, retailers overwhelmingly report that the most crucial last-mile delivery initiative in their organizations is reducing delivery costs. While nearly half of online shoppers (46%) expect next-day delivery to be free, almost as many (36%) are willing to wait for free delivery.12 As of 2018, 15% of the top retailers offered free delivery on all orders, while most (69%) offered free delivery with a minimum spend.13

At the same time, many shoppers are happy to pay a premium for faster, more convenient delivery. A Metapack study found that most online shoppers (70%) expect to pay a premium for a one-hour, same-day, next-day or Sunday delivery. The same study found that the majority of US (81%) and UK shoppers (79%) are willing to pay a premium for fast, convenient delivery. Similarly, DHL found that the majority of online shoppers (approximately 75%) are willing to pay a premium for an expedited shipping option.14

These statistics regarding customer expectations present a number of challenges. First, retailers must decide how much they will charge shoppers for rapid delivery. Capgemini reports that there is a 25% gap between the average cost of delivery for retailers ($10.10) and the amount that shoppers are willing to cover ($8.08), a gap that retailers must somehow close if they want to maintain their profit margins. However, only 1% of shoppers are willing to pay the total cost of last-mile delivery. Clearly, retailers must find ways to measure and maintain their profitability.

Another major challenge is where the retailers deliver from, which has a large impact on the cost structure of their operations. For example, moving pick and pack operations from centralized hubs to decentralized fulfillment centers and retail locations presents both operational and logistical hurdles. In addition to changing how delivery orders are distributed, retailers must retrain staff, implement new processes and technologies, and perhaps engage external delivery providers. Businesses today need to implement new technology solutions to orchestrate and manage a restructuring of their bases of operations, while streamlining their delivery flows.

Enabling rapid and cost-effective local services also requires a new approach to delivery itself. To fulfill fast local deliveries, retailers now have the option to utilize flex staff (retail staff that are available to deliver as needed), regional couriers, 3PLs, crowdsourced delivery providers, or traditional post and parcel carriers. Retailers operating at scale generally have to utilize a mix of all of these delivery options in order to provide optimal delivery speeds and prices, as well as full peak season and geographical coverage. To do this, retailers need technology that can aggregate delivery quotes, automate dispatch and operational flows, and track drivers and deliveries, as well as measure and optimize performance, customer satisfaction and SLAs across all of these services. This is a must-have to ensure that retailers have the insight and agility they need to operate successfully in this new dynamic.

Changing Customer Expectations: The Need for Convenience & Transparency

The Amazon Effect is about more than speed and cost. It’s about the customer experience as a whole. Shoppers expect smooth delivery experiences during which they schedule their deliveries, receive delivery status updates (92%)15 and access real-time delivery tracking (88%).16 Most shoppers will blame a poor delivery experience on a retailer, and the majority (83.5%) won’t return to a retailer after even just one poor delivery experience (up 21.1% from 2017).

Beyond tracking, most shoppers expect the ability to modify their delivery or drop-off while their order is in transit, although few shoppers (30%) have actually done so. That is likely because few retailers or delivery companies actually offer customers the ability to track their order in real time or to change fulfillment and delivery flows on demand. This level of flexibility requires a technology solution that can integrate, track, manage, and update delivery and fulfillment flows across multiple stakeholders and platforms, all in real time.

Shoppers also expect to be able to schedule deliveries for time slots that are convenient to them. While 73% of consumers say that delivery scheduling is more important than speed, only 19% of retailers consider this a top priority. Offering this level of flexibility to shoppers requires deep integrations and streamlined workflows across both internal logistics and fulfillment platforms, and external delivery providers.

Finally, with the rise of delivery, many shoppers have grown weary of separately tracking and scheduling their multiple deliveries. Sixty-two percent of shoppers prefer to consolidate their deliveries into a single shipment. This, together with the associated cost savings, is what has driven Amazon to introduce Amazon Day, a program that consolidates all deliveries from Amazon into a single bulk delivery sent on a day the customer chooses.

The Retail Opportunity

As previously mentioned, retailers have a strategic advantage that pure-play ecommerce businesses struggle to match: their brick-and-mortar locations and staff. While retail transformation can be difficult, strategically leveraging these existing assets presents incredible business opportunities. This is achievable as long as the staff at the brick-and-mortar stores are provided with the right incentives to participate in the corporate omnichannel strategy, aligning the company’s goals with the employee’s personal goals.

Omnichannel shoppers spend more in-store and online than single-channel customers do.17 Furthermore, it has been demonstrated that spending increases with each additional channel that shoppers engage with. Shoppers who research their purchases online spend substantially more (13%) in-store. Omnichannel shoppers are also more loyal, with shoppers logging 23% more repeat shopping trips to brick-and-mortar stores within six months of an omnichannel shopping experience. Omnichannel shoppers are also more likely to recommend the retailer than single-channel shoppers.

However, there are many components to an omnichannel journey that must be considered. Successful omnichannel retail and ecommerce requires comprehensive coordination and synchronization across multiple systems and teams. For example, while many retailers offer channel-specific discounts (e.g., a sale price available only via the mobile app), the non-discounted prices should always be synchronized across all ecommerce sites, mobile apps, catalog or phone sales, and retail stores, so that customers can expect the same pricing no matter which channel they choose to complete their purchase.

Another example is the issue of inventory, which also needs to be synced across multiple systems. Many retailers do not have a real-time view of in-store inventory levels and cannot properly manage those levels for walk-in vs. online customers. This makes it difficult for them to provide a guaranteed pickup in-store or ship from store time to their online customers. The situation to be avoided is where online customers come to pick up their order in a brick-and-mortar store, only to find out that the item is not in stock because it was sold to a walk-in customer.

However, delivery operations often grow far more complex as we consider rapid, omnichannel customer experiences, which generally require the support of robust technology solutions to ensure smooth, efficient operations and flawless customer experiences.

One of the most challenging, but illustrative, examples of omnichannel retail delivery is a rapid, one-to-three-hour delivery flow which uses retail stores as distribution points. It is important to note that the same logic, flows, automation and technology that enable one-to-three-hour delivery can also enable same-day delivery, multi-day delivery, BOPIS, BOSS (buy online, ship to store), return pickup and BORIS (buy online, return in-store).

Sample Flow: Rapid Omnichannel Delivery From Retail

Checkout

To accommodate this omnichannel flow, the retailer’s ecommerce platform must be able to identify the nearest retail location, fulfillment center or warehouse that has the correct inventory in stock.

For maximum benefit to the customer, the ecommerce platform should be able to provide real-time delivery quotes based on inventory and fleet availability. To do this, information from the inventory management system, in-house delivery staff or third party fleets must all be collected in a single central location to determine delivery availability and pricing (also called delivery quote). With this information in hand, the ecommerce platform can now offer the shopper the best delivery options at the optimal price points. Additionally, if the retailer has special membership rates, deals on delivery and other internal considerations, the ecommerce platform also needs to sync with the CRM platform so that the delivery offers and fees can be adjusted accordingly.

After selecting the delivery type, the customer is presented with the option to select a delivery time window, sometimes at an additional fee. When checking out, customers can also share specific inventory and delivery instructions. For example, a premium customer ordering a shirt may request an extra pair of collar stays and instruct the delivery driver to leave the package with the receptionist.

When the order is placed, the same system that is syncing all of the information between systems and parties records the transaction for later analysis, syncs the purchase information back to the CRM platform, and notifies the pick and pack team, the delivery fleet (or driver, if internal), and the customer with the pertinent delivery order information.

Pick and Pack

When the order is received, staff at the inventory location, which can be a retail store, fulfillment center or warehouse, need to know how to collect and process the inventory for delivery. This means that the relevant staff members must be notified of the incoming order and its processing details so that they can prepare it for delivery. Ideally they will be using a mobile app for managing the order picking, prep and delivery staging.

At this point, the relevant employee or team will be notified that they have an order to complete by a certain time. If the store or warehouse is large, the employee or team will be given specific picking instructions, such as where the inventory is located in the store or warehouse, as well as where and when the order needs to be staged and made ready for pickup. Retailers with large delivery operations will generally have a dedicated staging team, whereas smaller delivery operations often stage deliveries in a back room, or even at the register.

The picker or staging team will then process the order following the instructions, such as gathering the entire order into a box or bag and printing an order receipt. Some businesses will also include free samples, catalogs or menus, or other promotional materials that can help build customer loyalty and drive secondary sales.

Delivery and Routing

The delivery drivers need to be given specific pickup and delivery instructions. For example, they may be asked to park in the rear of the store and use the employee entrance. For larger operations, the delivery staging team can be notified so that they can bring out the order to the delivery driver as they arrive. Automating this process ensures that instructions are provided clearly and easily.

Depending on the setup, the routing solution may group orders for delivery, increasing efficiency by delivering multiple orders in a single run. This becomes increasingly difficult when the delivery involves large items that require add-on services such as installation, as the routing must take into account time-on-site, driver capabilities and certifications, and vehicle capacity.

As the driver leaves the pickup point to start the delivery, customers should be notified via SMS or a push notification in the retailer’s app. This message should ideally include a link to a branded real-time delivery tracker and a more specific delivery time frame.

Like all other stages in the delivery flow, technology is required to measure everything from driver responsiveness, through new orders, and all the way to on-time performance. Analytical tools are critical for ensuring the business leadership and management can understand and optimize the automation flows and partnerships.

Delivery and Feedback

As the driver arrives at the delivery location, retailers would ideally be able to let the customer know that their order is arriving. This serves the dual purpose of allowing recipients to prepare themselves, while making it easier for delivery drivers to identify and engage recipients who are ready to accept the package.

During the delivery, drivers will typically be guided through an automated delivery flow. For example, drivers may be asked to collect a signature, scan product barcodes to mark them as delivered, or photograph an appliance at different stages for documentation and warranty purposes (e.g., as it comes out of the box or when it is installed). Technology is required to sync all of these activities with the driver app and the relevant internal systems, so that the drivers know exactly what they need to do, the support teams have full visibility and all documentation is properly preserved.

Following a delivery, most retailers will ask for feedback. While some retailers still prefer to ask for feedback via email, most retailers have found that it is best to ask for feedback immediately following the delivery — either via a push message from the app, or via an additional SMS with a link to a feedback page. The operations team needs to track the results by the day and over periods of time to ensure that they’re aware of any problems or complaints (whether specific or recurring), as well as of any consistently outstanding performance that should be rewarded.

While the above example demonstrates a one-to-three-hour delivery from a retail location, the same principles and technologies can be used to enable same-day, next-day and multi-day deliveries through fleets, carriers and 3PLs. Unlike the example above, next-day and multi-day deliveries are generally fulfilled from fulfillment centers or warehouses, with fleets, carriers and 3PLs arriving for pickups at designated times.

Similarly, a BOPIS flow would be nearly identical, with the customer receiving a pickup time, rather than a delivery time. Additionally, customers will typically be instructed to go to a particular area in the store, whereas drivers will often be sent to a backdoor or loading dock. Curbside pickup follows a similar flow to BOPIS, except that the customer may be asked to describe their vehicle during the checkout process (make, color, license plate, etc.). Like the driver, the customer will use an app or webpage that tracks their location and arrival, so that store associates can know when to bring the package out to the customer’s vehicle. Retailers with their own parking lots will often designate a particular area for curbside pickup, whereas retailers without them are often forced to be a bit more creative with their curbside offering.

Delivering to lockers is another model that follows much of the same flow as home or office deliveries. Retailers can set up or rent locker space in various locations, or work with companies that provide locker space in apartment buildings, various businesses or other public or semi-public areas. Automated updates notify customers when their package is en route and when it’s ready to be picked up from the locker.

Lockers are also a great plan-B option for home deliveries. If a delivery provider is running late, they can send a message to the customer asking if they would prefer that the package be dropped at a locker, where the customer can pick it up at their convenience. Similarly, customers who realize they won’t be at home on time can message service providers and request that the package be dropped off at a locker location.

These options provide customers with convenience and flexibility that can be a competitive advantage for businesses but require a high degree of delivery automation to fully optimize the possibilities provided by this delivery model.

Strategic Cost Considerations

It is clear that shoppers prefer the fastest possible delivery, and that these expectations for speed are challenging each and every player in the retail supply chain. Last-mile deliveries are the most expensive step in the supply chain, accounting for around half of total supply chain costs (41%–53%18 by various estimates). While delivery speed is considered by many to be the primary impact of the Amazon Effect,19 cost has become a primary concern for retailers thanks to rising consumer expectations.

There are many ways for businesses to manage delivery costs. To start, there are some segments of the market where customers are willing to pay substantially more for premium deliveries. Testing delivery pricing in different markets can help retailers identify the optimal offering for different market segments. However, many retailers report a gap of about 25% between their growing delivery expenses and the amount customers are willing to pay.

A handful of large retailers have begun addressing this by offering discounts and incentives for customers who choose to pick up in-store or who select more cost-effective delivery options. By driving online orders to cost-effective channels and sharing the savings, retailers create a strong differentiator that pure-play ecommerce providers simply cannot match, while lowering their overall supply chain and operational fulfillment costs.

One of the most popular strategies for closing the gap between delivery costs and customer payments is to improve efficiency through digitization, automation and coordination. When properly deployed, a strong delivery technology solution can help businesses improve their efficiency across the supply chain, helping offset the higher cost of rapid delivery. Many retailers are also investing in automated or robotic warehouses, and some are experimenting with self-driving vehicles or drone-aided deliveries (though these are often just PR stunts these days).

One of the most expensive inefficiencies that can be addressed through technology solutions is the cost of failed deliveries and the follow-up delivery attempts that are required. The IMRG reported that late deliveries cost an average of $28, and replacing lost parcels cost $160.20 Closing these gaps through better delivery scheduling and rescheduling via an orchestration platform can easily offset much of the gap between customer payments and delivery expenses.

Another common strategy is to improve delivery flexibility and lower fees by engaging third party and crowdsourced delivery fleets. While most retailers are still heavily reliant on post and parcel companies for last-mile delivery, regional 3PLs and crowdsourced fleets often offer superior rates for local, rapid deliveries. Larger retailers may also find that engaging additional delivery services may improve their leverage in rate negotiations with traditional carriers.

Some retailers have even begun managing their own in-house crowdsourced fleets. For example, the Walmart Spark program allows anyone to deliver for Walmart in select areas. To take this a step further, most shoppers (55%) would be willing to deliver products to neighbors in their vicinity. A recent study in the journal Sustainability21 demonstrates the feasibility of crowdsourcing delivery through the general public’s everyday commute. (For more on crowdsourced delivery, see chapter 6.)

A major part of the transformation in retail delivery strategies shifts the focus to delivery from retail locations. Most retailers that offer two-hour deliveries fulfill them from their store fronts (57%) or back rooms (12%), while most same-day deliveries are fulfilled from store back rooms (43%) or storefronts (19%). However, less than a third of retailers are currently prepared to ship from stores, and nearly 40% of in-store pickup orders could not be fulfilled through retail. While roughly one in three retailers offer click-and-collect or fulfill BOPIS within 24 hours,22 most retailers are still held back by the fact that they do not have the necessary real-time information regarding product availability, and even fewer retailers have the ability to inform a customer about an issue with their order.

Obviously, pricing strategies also vary depending on the type of retailer. For example, discount retailers may find that 30-minute deliveries do not provide sufficient margins to cover the high cost of delivery for $25 purchases. However, they may find that $100 purchases may offer sufficient margins to offset the 25% delivery cost gap.

It’s clear that utilizing retail locations is becoming a strategic necessity, one which both helps retailers manage delivery costs while also broadening delivery offerings to be more in line with customer expectations today. With the growing importance of retail stores as last-mile delivery and fulfillment hubs, retailers must make the strategic investments needed to digitize, manage and optimize their retail-based fulfillment processes.

Changing Perspective: Focus on The Customer

Rather than thinking of delivery and fulfillment speed as a basic competitive necessity, many retailers are now looking at delivery and fulfillment as a core part of their brand value and customer experience efforts. They have come to realize that they need to focus on customer value, since faster delivery strongly correlates with both customer satisfaction and customer loyalty.

For example, luxury and premium brand customers shop online more frequently, are willing to spend more for faster delivery, and have higher delivery and returns expectations.23 Luxury and lifestyle brands should therefore extend their brand by going beyond the substantial investments they’ve already made in creating exceptional retail shopping experiences and embracing the expectations of their consumers as well as the unique opportunities of delivery.

The importance of these efforts is that with deliveries, instead of interacting with the retailers at the stores, customers are inviting the brand into their homes. Putting a human (and hopefully smiling) face on a brand is one of the easiest ways that online retailers can create the kind of personal connection with their customers that leads to lifetime loyalty. Coupled with fast, on-time delivery, this face-to-face touchpoint becomes a powerful branding tactic. It also creates incredible opportunities for added value services (e.g., installation and tutorials), home showrooming and upsales.

The battle for omnichannel retail and the challenges and opportunities of retail in the era of Amazon are clear. To succeed and grow in this new market, business leaders every part of the company — from the supply chain and IT through operations and marketing — must work together to provide superior customer experiences, build new markets, establish new processes and find new efficiencies.

This transformation requires a new type of technology that enables businesses to measure, gain insights, collaborate, automate, and otherwise connect all the dots throughout the complex delivery process. Businesses that perform this transformation to omnichannel delivery have a unique opportunity to improve operational efficiency and last-mile performance, while simultaneously perfecting the customer’s end-to-end delivery experience and even generating new revenue streams.

Gifts and Holiday Season

Holiday shopping is by far the most critical time of the year for retailers, accounting for over a quarter of annual sales.24 However, managing retail and last-mile operations to meet customer expectations during this high-stress, high-demand period can be extremely difficult.

Supply chain logistics during the holiday season are notoriously difficult. Holiday ecommerce continues to grow on a global scale with dedicated shopping holidays, such as Singles Day, Black Friday, Cyber Monday and Super Saturday, setting new sales records year after year. In one 2018 study, nearly every holiday shopper (98%) planned on purchasing gifts that would require delivery, placing incredible stress on supply chain and logistics.
Holiday shoppers preferred to research online and shop at retail locations (66%) over trying in-store and then shopping online. Click-and-collect (aka BOPIS) hit an all-time high (45%) as well. These shoppers are particularly important, as the vast majority (86%) of 2018 click-and-collect shoppers purchased additional items in-store.25

Shopper expectations and anxiety around holiday delivery are exceptionally high. Most shoppers (77%) plan on purchasing last-minute gifts, and nearly all (92%) last-minute shoppers are concerned about last-mile delivery speeds. Over half (67%) of shoppers abandoned a gift purchase due to unsatisfactory, slow delivery options.

Even shoppers that plan ahead have anxiety about gift delivery, with an equal distribution of shoppers that are excited while waiting for delivery (39%) and those that are anxious while awaiting their deliveries (39%).26 While last-mile delivery innovation and capabilities continue to grow, holiday shoppers are growing increasingly worried about gifts arriving on time (91%), arriving damaged (84%), or being stolen (72%). Millennials have particularly high expectations of supply chain fulfillment during the holidays. These young shoppers are more likely (118%) to pay for premium, same-day gift delivery.

Retailers recognize the importance of winning over holiday shoppers, as this time presents a great opportunity to build relationships with both new and existing shoppers. Over the 2018 holiday season, Walmart, Amazon and Target all boosted their delivery offerings, lowering shipping fees and increasing delivery speed in an effort to win over shoppers. This is reinforced by the fact that nearly all (87%) US shoppers who receive same-day gift delivery will return to purchase from the same retailer down the line, and almost as many (86%) will recommend the retailer to a friend after receiving same-day delivery.

However, many retailers fail to capitalize on this remarkable opportunity. The holiday season is the busiest season of the year, and resources are already stretched to the limit — both at the retailer and at its delivery partners. Stores are open longer, inventory turns over faster, and everyone from marketing through operations is working at a breakneck pace to capitalize on the opportunities presented by this special season.

This dynamic produces the perfect storm for creating disappointed shoppers. Over one-third of peak season deliveries in 2018 were late or incomplete.27 Most shoppers blame retailers when their deliveries arrive late (80%) or damaged (74%). US holiday season delivery disappointments grew dramatically from 2017 (36%) to 2018 (56%).28 Remarkably, the global average is even higher than that.

With holiday deliveries, the potential for profit is as high as consumers’ tolerance for bad deliveries is low. Retailers must look for innovative new solutions to ensure delivery operations run smoothly across the entire supply chain.

Notes

1. Lunden, Ingrid, “Amazon’s share of the US e-commerce market is now 49%, or 5% of all retail spend”. TechCrunch, 2018.
2. eMarketer, The Future of Retail 2019. 2019.
3. IDC InfoBrief, Winning Over Shoppers in the Digital Age: A Guide for Retailers and CPG Companies. 2018.
4. Capgemini Research Institute, The Last Mile Delivery Challenge. 2018.
5. Dropoff, Consumer Expectations for Holiday Deliveries. 2018
6. Pitney Bowes, 2018 Global Ecommerce Study. 2018.
7. Convey, Last Mile Delivery: What Shoppers Want and How to #SaveRetail. 2018.
8. UPS Pulse of the Online Shopper Study, April, 2018
9. Metapack, 2018 State of eCommerce Delivery. 2018.
10. Gartner L2, Retail Europe: Omnichannel. Insight Report, 2018.
11. Eyefortransport & Quintiq, D3 2019: Dynamic Distribution Disruption. 2019.
12. Accenture, Reroute Your Strategy for Last-Mile Delivery. 2017.
13. Sword, Alex, “Has Amazon’s Free Delivery Week Changed Peak Forever?” eDelivery, 2018.
14. DHL Group, Shortening the Last Mile: Winning Logistics Strategies in the Race to the Urban Consumer. Euromonitor International, 2018.
15. Zetes, Turning Lost Opportunities Into Profitable Sales During Peak Trading. Retail Report, 2018.
16. Dropoff, I Want It Now. Same-Day Delivery + The U.S. Consumer. 2018.
17. Sopadjieva, Emma et al. “A Study of 46,000 Shoppers SHows That Omnichannel Retailing Works”. HBR, 2017.
18. Business Insider Intelligence, 2018
19. MultiChannel Merchant, Merchants Looking to Differentiate in the Last Mile, Returns, Outsourcing. MCM Special Report, 2018.
20. IMRG Valuing Home Delivery Review. 2018.
21. Giret, Adriana, et al. “A Crowdsourcing Approach for Sustainable Last Mile Delivery”. Sustainability, vol. 10 no. 12, 2018.
22. Stratton, Felicia, “Click & Collect Not Clicking Yet”. Inbound Logistics, 2018.
23. Narvar, The State of Returns: What Today’s Shoppers Expect. Consumer Report, 2018.
24. Deloitte, 2018 Holiday Survey of Consumers. 2018.
25. International Council of Shopping Centers, Post-Holiday Survey. 2019.
26. Uship, Holiday Shipping Stress Test. 2018.
27. Zetes, The Final Mile Imperative for Flawless Execution and Sustainable Delivery Performance. 2018.
28. “Biggest E-Commerce Irritant? Post-Purchase Problems”. Retail Touchpoints, 2019.

Chapter 3
Grocery Delivery

The advent of online shopping has disrupted the grocery sector as much as, if not more than, other industries. The modern consumer has grown accustomed to the convenience offered by online shopping in other sectors. Largely as a result of the Amazon Effect, consumers now expect an flawless online shopping experience that provides multiple inexpensive delivery options to their location of choice.

These demands are now being directed at grocery retailers, who are facing escalating customer expectations for both home delivery and pickup in-store options. In fact, these demands are driving a serious disruption to the grocery industry: it’s forecasted that $1 trillion of grocery earnings will shift to online, discount and non-grocery channels, eliminating half of today’s grocers from the playing field.1 Reinforcing that point, nearly all (82%) of the 2018 sales growth in the FMCG market came from ecommerce.2

Amazon’s purchase of Whole Foods raised a red flag for the 80% of retail grocers3 for whom online grocery, curbside delivery and rapid grocery delivery had been secondary concerns until then. The acquisition alerted grocery executives to the reality that the grocery shift to online is happening now. Amazon’s expansion of the Whole Foods retail footprint to enable two-hour delivery further laid bare these shifting market trends.

In response, many grocers have accelerated their digitization and supply chain innovation programs. Where many were previously heavily reliant on a single picking and delivery provider, these businesses are now diversifying their delivery fulfillment partnerships and capabilities to better withstand changing market pressures.

Recent studies predict that 20% of all grocery spending will move online in the coming years, with 70% of US shoppers forecasted to be purchasing their groceries online by 2024,4 and online grocery sales are expected to triple in the next three years alone.5 All of this points to the fact that online grocery shopping is quickly growing in popularity, and grocers that expect to successfully compete in the long term must adopt a multichannel offering.

There a number of considerations grocers need to factor in as they explore how to roll out or scale up their delivery offering. How will delivery and curbside pickup impact in-store sales and operations? How to generate digital brand awareness and loyalty? How and when should dark stores or warehouses be used to enable greater efficiencies at reduced costs? How can profitability be maintained given the high costs of delivery from retail stores?

While these questions may seem daunting, they also indicate that the shift to online presents exciting opportunities for grocers looking to diversify their offerings, strengthen their brand position and build stronger customer relationships.

While the grocery vertical as a whole lags behind other verticals such as restaurants in the shift to accommodate online shoppers, this delay presents grocers with the opportunity to leverage and adapt the latest solutions, along with the knowledge that their counterparts have accumulated as a result of their experiences. Although grocery delivery presents its own unique challenges — such as the need to address a wide variety of order sizes containing foods that need to be maintained at different temperatures — there are fundamental aspects of a successful delivery operation that apply regardless of sector.

In order to provide customers with reliable, cost-efficient deliveries while also generating a positive ROI, grocers need to navigate the logistics of delivery, identifying the specific methods and processes that will enable them to reach optimal efficiency. The keys to delivery success for large grocery chains and regional grocers alike will revolve around creating scale, maintaining flexibility and establishing the right processes.

The Growth of Grocery Delivery

In certain geographies outside of the United States, online grocery shopping has already become an ingrained part of grocery culture. South Korea leads the world in online grocery penetration (20%), followed by Japan (7.5%) and the UK (5%–7.5%), then China (5%), France (4%), Australia (2%) and Spain (1%), with the US (1%) and Germany (0.4%) closing the list.6

While consumers in the US have been slower to move to shopping online for their groceries, the market as a whole is rapidly developing. 2018 saw a 500% growth in same-day grocery delivery,7 largely because of the convenience that online grocery shopping offers. Indeed, 81% of consumers shopping for groceries online do so because it enables them to shop at their leisure.8 Kantar research identified the leading factors driving online grocery growth as the desire to minimize spending (65%), find a “good deal” (64%), achieve stress-free shopping (60%), shop in one place (48%), quickly complete shopping (44%) and purchase high-quality goods (37%). These desires likely reflect two distinct buyer personas, budget shoppers vs. premium, convenience-oriented shoppers.

Recognizing the need to offer grocery deliveries in order secure their market position, major US chains including Walmart and Kroger are regularly expanding and improving their curbside pickup and delivery services. While many in the market are rolling out various delivery services, some grocers have begun investing in and/or testing automated warehouses and self-driving vehicles for last-mile delivery. Whereas some grocers have already scaled the former option, autonomous vehicles are likely a mix of branding and PR, with less of a focus on scalability in the near term. All of these initiatives provide grocers with better solutions for younger, more urban shoppers who are generally the most likely to shop online for their groceries.

Considering the modern shopper’s familiarity and comfort with technologies that enable easy and quick online shopping, the overall move of grocery shopping to online options will happen much faster than the same shift in other industries. Indeed, according to an FMI/Nielsen survey, online grocery sales in the US are expected to reach $100 billion by 2025. This means that now is the time for brick-and-mortar grocery retailers to figure out how they plan to meet consumer demands for an easy and efficient online grocery shopping experience.

What Do Grocery Shoppers Want?

The central force behind the growth of online grocery shopping is convenience. Today’s consumer wants to enjoy the utmost convenience when it comes to their online shopping experience, whether they need office supplies or are checking items off their weekly grocery list. This desire for convenience translates to fast, low-cost deliveries.

Amazon Prime Now, for example, is pushing two-hour deliveries, especially for groceries, to meet shoppers’ demand for speedy receipt of their goods. Amazon is leveraging its acquisition of Whole Foods, providing this service free of charge for Prime members across a growing number of major cities. What’s more, for an additional $7.99 fee, Amazon will deliver Whole Foods groceries within an hour in many locations.

It’s important to note that grocery deliveries have been around for years — but in a form that hasn’t involved a web interface. Grocers have offered in-store shoppers the option to have their purchase delivered, which is especially appealing to shoppers in urban geographies, and to those without vehicles or for whom carrying bags of groceries may be physically challenging. However, this is rapidly changing, with over a third of primary household shoppers indicating that they are interested in home delivery (36%), click-and-collect (34%) and curbside pickup (34%).

Today, convenience in grocery delivery starts with an easy online experience, either through a retailer’s website or a dedicated mobile app, where shoppers expect a smooth online product selection experience with up-to-date inventory. In terms of delivery speed, next-day delivery might be acceptable to some US shoppers while the North American online grocery market matures out of its early stages, but more stringent demands are rapidly developing for same-day or even two-hour or faster deliveries. In the UK, where the online grocery market is more developed, consumers expect to receive their deliveries within one hour. The race for speed in grocery is particularly acute, with over half (55%) of shoppers reporting that they would switch grocers for faster delivery.

This transformation places a great deal of focus on delivery from retail stores. Retail grocers that offer two-hour deliveries fulfill them mostly from their retail storefronts (57%) or retail backrooms (12%), while same-day deliveries are fulfilled mostly from retail backrooms (43%) or, to a much lesser degree, retail storefronts (19%).

In light of consumer demand for fast delivery, grocers must understand the implications of the operational and cost levels of same-day deliveries vs. next-day deliveries. Same-day deliveries of grocery orders generally follow the planned / on-demand hybrid delivery model (see chapter 9), while next-day deliveries follow the classic planned delivery model (see chapter 8). Next-day deliveries can also be fulfilled through dark stores or specialized warehouses optimized for grocery pick and pack operations, such as temperature-controlled delivery staging.

For grocers fulfilling same-day orders from their retail stores, it’s important to take into consideration the fact that retail stores are designed to maximize shoppers’ cart value, and are not set up or staffed for pick and pack operations. On the other hand, centralized dark stores or warehouses used for pick and pack operations are generally designed with picker efficiency in mind. Similarly, automated warehouses are designed for robotic fulfillment efficiency. Therefore, grocers that choose to fulfill online delivery orders from retail storefronts must also factor in the cost and time required to set up, staff and manage the store for pick and stage.

For grocery retailers already offering same-day curbside pickup, expanding to same-day delivery orders from the same location is generally easier. By adding a dispatch and delivery service on top of existing curbside pickup flows, many grocers have been able to more rapidly scale grocery delivery from retail, without needing to reinvent their in-store fulfillment processes.

Grocery delivery should not be limited to large deliveries that replace the week’s shopping trip. Many grocers, particularly those in urban areas and those that are open 24 hours, must also factor in customer demand for smaller, on-demand grocery deliveries. These convenience delivery trips may include just a few items, from personal care items to bread and snacks, or perhaps an emergency purchase of diapers. These types of orders generally require fast, on-demand delivery. Whereas customers may be fine with waiting three to five days for the delivery of heavy pet food packages that can be difficult for them to carry themselves (indeed, relative to the growth of online and offline pet consumables combined, ecommerce sales of pet consumables grew 10x more in 2017),9 they expect shorter delivery times for their household groceries, and even faster delivery for convenience shopping.

Grocery Delivery Fulfillment: Picking and Staging

In addition to the delivery fees, one of the main concerns consumers have regarding grocery delivery relates to who (or what, in the case of automated warehouses) will be picking the actual products — and, more specifically, whether pickers will be able to pick the same high-quality products that the shoppers themselves would pick.

This is a very relevant question, especially because there are many types of pickers. They may be in-house employees, crowdsourced contractors or even automated robots. They may do their picking at retail locations, dark stores or local warehouses. Some grocers employ delivery drivers who also pick groceries prior to executing the delivery, particularly for smaller orders such as convenience shopping.

Complicating the picture even further is the fact that larger grocers may use different solutions for different markets. Picking for larger deliveries in dense, urban areas may be best accomplished using advanced automated warehouses located just outside the city, while convenience grocery delivery in that same market may be best picked and delivered by a messenger on a bicycle.

Picking operators are provided with printed lists or, better yet, with digital devices that contain their pick lists. Pickers typically work in zones, collecting multiple orders in a single pass. In a well-organized delivery operation at scale, multiple pickers will likely collect different parts of a single order.

As store layouts often change, it can be difficult to map where each product is in a given store. Grocery picking solutions might (a) provide the option to upload updated inventory maps by aisle; (b) use a series of camera arrays together with object recognition technology to identify the location of each item; or (c) gain information on product locations throughout the store based on the data collected by pickers.

Grocers must also consider the fact that pickers need to be trained on how to accurately pick items, and to make sure they are the correct weight or amount. Also, particularly when it comes to produce, meat and fish, they need to know how to pick high-quality, fresh items that are the same or better quality compared to those that customers would pick themselves. Customers are often presented with the ability to add comments for special requests, such as for bananas that are not yet fully ripe, a well-marbled steak, or a specialty item that is only available upon request (such as a specialty cut of meat).

Sometimes, the requested item is simply unavailable and substitutions must be made. For example, pickers must know what to do when the particular carton of a dozen eggs that the customer requested is out of stock. Do they send a carton of 18 eggs and discount the price, or do they attempt to contact the customer for further instructions? Managing substitutions requires a precisely defined, streamlined and carefully orchestrated process.

Typically, as pickers complete a run, they place their picked items into the delivery staging area, which is usually organized by temperature, with separate temperature-controlled areas for frozen, refrigerated and fresh items. Pickers will typically unload their items into barcoded or RFID-enabled box totes (large plastic containers), although some grocers use cardboard boxes in place of totes. The delivery staging team then scans each inbound tote, linking delivery orders across temperature zones to ensure that all the orders are properly and completely dispatched.

Additional Grocery Delivery Opportunities

Small grocery delivery (e.g., convenience store or top-up grocery delivery) typically uses a model that is closer to restaurant delivery, with orders that can usually be delivered via bicycle, public transit, on foot or a small car. Top-up shopping growth (3.9%) in the UK is outpacing the growth of weekly shopping trips (2.5%), and convenience shopping is projected to grow significantly across the entire world (5.8%).10

This model presents a remarkable opportunity for grocery delivery, as the operations are often simpler with significantly shorter delivery times. Sometimes the delivery drivers even do the product picking themselves. These quick “filler” or “emergency” grocery deliveries can help build customer habit and trust while improving loyalty, by demonstrating that the brand is there for the customer whenever needed.

As grocery shopper behavior evolves, many grocers are diversifying their brand positioning through differentiated products, packaging and services. For example, many grocers have begun offering meal kits in-store, and those with strong delivery operations will be exceptionally well positioned to also deliver them. By tapping into the meal kit trend, grocers can build relationships with shoppers by providing them with the option to have their meal kits delivered with all of their other groceries in one convenient delivery.

As grocers continue to expand prepared foods and catering operations, delivery presents new growth opportunities for these offerings. For example, some grocers have begun partnering with restaurant ecommerce aggregators or restaurant delivery fleets to offer fresh and affordable on-demand lunch deliveries.

Grocery Delivery Fulfillment: The Optimal Options at the Right Price

Once an order placed online is ready for pickup, there are two primary ways a customer can receive their order: either via a delivery or by picking it up at a store using services such as curbside pickup. Between the two options, customers have a very strong preference for home delivery (70%).
For delivery to the customer’s location, most grocers are currently focusing on whether to offer only next-day delivery at previously scheduled time windows, or to also add the option of same-day delivery, or even on-demand delivery options for smaller orders. With 73% of shoppers valuing convenient delivery times over delivery speed, providing the options that consumers are expecting is of paramount importance.

While some grocers operate their own delivery fleets, many work with multiple third party delivery solutions, including 3PLs, crowdsourced fleets and/or in-house crowdsourced fleets. Large grocers are increasingly using hybrid models, partnering with specific delivery providers in different regions, or even spreading out deliveries across multiple providers in a single location (for example, using a crowdsourced delivery provider for on-demand delivery and a 3PL for planned, next-day deliveries).

Curbside Delivery

Alternatively, grocers can offer online shoppers the opportunity to pick up their orders at the curbside, which offers a number of advantages for both sides. For the shopper, curbside pickup is convenient, offering the speed of online shopping without the delay of the in-store checkout experience, while also eliminating delivery wait times.

For grocers just making the move to online, offering curbside deliveries can be a great starting point. Rolling out this type of service can also be less expensive compared to delivery services, and serve as an entryway to home delivery down the line. Moreover, a curbside pickup service provides customers with the opportunity to get more comfortable with the idea of shopping online, especially in geographies where grocery delivery is less mature.

Regardless of the fulfillment path, grocers must be able to track, analyze and optimize their operations. Only then will they be able to successfully manage every aspect of their delivery fulfillment operation, across every internal and external team and touchpoint, in order to maintain their profit margins while building customer habit and loyalty.

Delivery Operations Challenges

Grocery delivery may be one of the most challenging types of delivery, mainly due to the combination of the internal coordination required for assembling orders, the internal and external processes involved in the actual delivery, and the need to overcome the many consumer concerns about the idea of grocery delivery in general.

Grocers are feeling significant pressure to provide fast and inexpensive delivery. As the market for online grocery shopping across geographies matures and the competition becomes ever fiercer, grocers will need to find ways to execute deliveries in the time frames that customers demand, at price points that are reasonable for both them and their customers. Moreover, grocers who expect to compete successfully in the new marketplace will need to create a delivery experience that’s as comfortable as an in-store experience for their customers. This means offering a seamless, simple and effective online ordering process with reliable, transparent deliveries.

To achieve this, grocers must adopt well-documented processes and embrace the technologies that will enable them to track and optimize every component of their delivery operation. This is especially necessary due to the complexity of grocery orders and the large variations in order size. While curbside pickup is a simpler and more straightforward service, grocery delivery is a whole different ball game. For curbside pickup, customers arrive on site and the staging team brings out their order. With delivery, the order picking and staging process has to be timed exactly right so the delivery can be coordinated with other orders on a specific route to ensure that all promised delivery windows can be made.

Similarly, grocers must track and adhere to strict food temperature safety standards. While insulated delivery totes and disposable cold packs will extend this time window, frozen and refrigerated food can only be out of cold storage for very limited durations. Similarly, fragile items like eggs should either be labeled as fragile and handled with care, or placed in a dedicated part of the delivery vehicle (such as the passenger area) to prevent damage. Additionally, large grocery orders may require larger than normal vehicles, or even two vehicles to deliver.

Special instructions or added-value services, such as grocery unpacking or remote access to a customer’s home to unload the groceries, will increase time-on-site, as will the delivery of any exceptionally large order. With many grocery deliveries taking ten minutes or longer to deliver,11 deliveries that require extra time-on-site present added complexities for grocery dispatch and delivery routing.

Another challenge for grocers relates to how they handle mistakes and returns for delivery orders. Given the cost of returns relative to the inventory cost, many grocers will simply refund customers for almost every return request and allow them to keep the delivered grocery items. Similarly, those focusing on customer loyalty will often refund the delivery fee when customers are frustrated by a poor delivery experience.

The various challenges surrounding grocery delivery highlight the need for grocers to find ways to optimize delivery operations, delivery times and profit margins. They need technologies that will make every aspect of the delivery operation transparent, so it can be tracked and optimized. This technology must be integrated into every system, including order management systems, to ensure the efficient flow of information and visibility from the moment the order is placed through to customer delivery or pickup.

Key milestones for an order and its delivery include:

Order Receipt
Order Picked and Ready to Ship (or be picked up)
Order Scheduling (optimized on a driver’s route)
Delivery ETA (track and trace)
Delivery Confirmation
These are key data points for the customer, too. Having real-time access to their order and delivery information along with a user-friendly interface is crucial for providing a positive customer experience. Satisfying these demanding shoppers, however, is often incredibly rewarding. Most satisfied delivery customers (74%) have increased their spend by 12% with the retailer, have shared positive delivery experiences with friends and family (82%), are more willing to try to new offerings (73%), and over half (53%) are willing to purchase a paid membership for a delivery service.

The Economics of Grocery Delivery

Grocers expanding to an online offering must factor in the economics of grocery delivery. Indeed, nearly all executives (97%) see last-mile delivery as a critical differentiator to drive revenues. And while shoppers are pushing the trend to online grocery shopping, the fee for delivery is a major prohibiting factor. As competition grows fiercer, this will prove to be a major point of differentiation between grocery retailers.

A $110 grocery order can cost up to $20 to fulfill, and grocers often have to foot a loss of $5 to $15 of this cost. When it comes to the delivery, grocers are generally left to cover about 25% of the delivery fees. These numbers have led analysts from Morgan Stanley, Deutsche Bank and MoffettNathanson to estimate that grocery retailers could lose 30% of profits as a result of ecommerce. According to McKinsey, “When the dust clears, half of traditional grocery retailers may not be around.” Considering these statistics, it should come as no surprise that 97% of retail grocers believe that current last-mile delivery models are not sustainable at scale.

Closing these gaps requires improving automation, efficiency and delivery profitability. In fact, warehouse automation alone can increase margins by 8%. Further opportunities for optimization include more streamlined dispatch and delivery flows; engaging multiple delivery fleets to find the best one for each delivery, time or location; improving delivery batching by sending multiple deliveries in a single delivery run; and introducing value-added services or subscriptions that will increase revenues per shopper. Another goal is having satisfied customers, since they are not only more loyal but will also spend substantially more with their online grocer, which will further improve profit margins.

Grocery Delivery Strategy

Ultimately, the goal for grocers is that consumers will regularly order delivery from them, and that their spending volume will equal or exceed that of their in-store purchases. This goal revolves around creating new habits for customers — and this starts with providing a seamless online buying experience. For grocers to succeed at providing customers with the delivery experience they desire, they must offer an easy online ordering experience and a reliable delivery experience where the customer receives exactly what they ordered at the exact time they expected the order to arrive.

While customers demand an easy and reliable online shopping and delivery experience, they also demand reasonable delivery costs. Indeed, cost is one of the central prohibiting factors to ordering groceries online. Delivery fees and tips are not the only extra costs customers must bear; items sometimes cost more online than they do in stores, especially since in-store sales and promotions may not apply online.

To capitalize on the new opportunities offered by grocery delivery, grocers must determine how to build and maintain efficient fulfillment processes — both to keep costs down, and to keep customers delighted with their delivery experiences. Grocers must find ways to streamline, fulfill and optimize their delivery operations, factoring in considerations such as whether it makes the most sense for online orders to be picked and packaged in central warehouses, dark stores or their retail locations, as well as who will be picking and delivering the orders.

Demand for grocery delivery has never been higher. The industry’s shift to online is an exciting one that offers grocers a number of new opportunities — new, creative ways to meet customer demands and new touchpoints where they can engage and retain customers, as well as new revenue streams. Of course, grocery delivery presents real challenges too, but grocers that have yet to invest in their delivery strategy run a very serious risk of falling irreparably behind in the near future. To avoid this and capitalize on the opportunities offered by delivery, the first step grocers need to take is to embrace technology that allows them to measure, optimize and streamline their delivery fulfillment operation from start to finish.

Notes

1. Kuijjspers, Dymfke, et al. “Reviving grocery retail: Six Imperatives”. McKinsey & Company, 2018.
2. The Nielsen Company, Total Consumer Report. 2018
3. Redman, Russell, “Survey: Amazon is top threat, disruptor to supermarkets”. Supermarket News, 2018.
4. FMI and Nielsen, The Digitally Engaged Food Shopper. 2018.
5. Kantar, Retail in Motion – What U.S. retailers can learn from France. 2017.
6. Macquarie Research, Concierge Economy in Retail. 2018.
7. Commonsense Robotics, Crossing the Grocery e-Commerce Rubicon. 2019.
8. Capgemini Research Institute, The Last-Mile Delivery Challenge. 2018.
9. Nielsen, An uptick in clicks and bricks for pet food: An Omnichannel Perspective. 2018.
10. Kantar Worldwide, Winning Omnichannel: Finding Growth in Reinvented Retail. Issue 2, 2018.
11. Semuels, Alana, “Why People Still Don’t Buy Groceries Online”. The Atlantic, 2019.

Chapter 4
Restaurant Delivery

Restaurants today are facing new and growing customer demands for delivery that are changing the nature of the marketplace. The modern customer expects restaurants to offer delivery, pickup and in-store experiences that are fast, reliable, convenient and — most of all — enjoyable.
These demands are impacting the industry to such an extent that delivery is now the strategic imperative for restaurants, and chains must adapt, or risk being left behind. While the industry as a whole has seen varying rates of acceptance and success in mastering this new reality, many early adopters are seeing positive results, including higher revenues and improvements in customer loyalty.

Delivery is about more than just getting food to people. Customers want an experience that is similar to the one they enjoy when they visit the restaurant. Fast food buyers are looking for simple, fast and cost-effective deliveries, and high-end aficionados expect high-quality delivery and food experiences, while everyone in between wants reasonably priced, convenient and smooth deliveries that bring restaurant-quality experiences right to their doorstep.

A new generation of businesses have thrived by meeting and exceeding these customer expectations, backed by strong technology. These include delivery services such as Postmates or Doordash in the US and Deliveroo in the EU, and technologically advanced restaurant innovators such as Panera Bread. This has created an urgent need for every restaurant chain to provide a competitive delivery offering that meets customer expectations regarding speed, convenience, freshness and cost.

Embracing Delivery Today, Building for the Long Term

Delivery is one of the fastest-growing trends in the history of the restaurant industry, with customer demand for high-quality, convenient food delivery higher than ever before. Established chains and independent restaurants alike are making moves to gain from this enormous market opportunity, which was once enjoyed almost exclusively by pizza chains like Dominos. Within seven years of embracing delivery, Dominos stock outperformed those of Apple, Google and Netflix.

Other types of restaurants can also reach this level of success. Panera Bread, for example, rolled out its delivery service in a limited number of US cities in 2016. Only two years later, Panera forecast that delivery would increase revenue by 10% — or $250,000 — annually per store as it expanded the service to 43 states nationwide.1 Panera’s delivery success can be attributed to a number of factors, a central one being the adoption of technologies that help automate and streamline delivery operations.

In addition to the convenience consumers are seeking from food delivery, they also want variety that extends beyond the classics such as pizza and Chinese food. This creates an opportunity for every restaurant chain to capitalize on these new consumer demands, embracing new revenue streams that will help generate sustainable, long-term growth.

Restaurants that succeed in providing ideal delivery experiences enjoy big payoffs, too. It’s estimated that by 2020, 40% of restaurant sales will come from delivery.2 Couple this with the fact that delivery orders can have a 50% higher payment amount compared to pickup,3 and it quickly becomes clear how lucrative this revenue stream can be.

Most chains that have already added new delivery programs or enhanced their existing ones have generated incremental sales with no cannibalization of dine-in revenue.4 And with 74% of food delivery customers ordering regularly from the same source,5 restaurants that succeed in providing an attractive delivery offering also benefit from the sustainable growth generated by customer loyalty.

The Challenges of Delivery

The advantages of offering delivery for chain restaurants are clear. Delivery offers the opportunity to give customers at their own home or office the same positive experience they enjoy in-house, with the utmost convenience — thus extending a brand’s reach and strengthening customer loyalty. However, actually implementing a new delivery offering can present a number of challenges. Every element — including the people running the delivery operation and the technologies supporting their flows and processes — must be carefully designed and executed to give the restaurant the best chance to succeed.

Given this, some restaurants are understandably wary of delivery. In this sector specifically, there are a number of challenges that complicate matters.

1. Speed

Time is a pivotal element of restaurant deliveries. Once food is prepared, its quality and freshness begin to decline immediately, turning delivery into a race against time as soon as an order is placed. Customers ordering delivery expect to receive their food very quickly, and there is little room for error if restaurants don’t want to sacrifice on the customer experience or on the quality of the food they’re delivering. For restaurants to provide a delivery experience customers will want to repeat again and again, they must be strategically and logistically equipped to ensure that delivery orders get prepared in a timely manner, handed off to drivers without delay, and quickly arrive at customer doorsteps while still fresh and at the desired temperature.

2. Quality

Restaurants must also consider the ways their delivery offering will match the dine-in experience in terms of the brand experience and food quality that customers have come to expect. To achieve this, restaurants need to make sure they “own” their customers — both their interactions and their data — so they can provide consistent, high-quality experiences over time.

3. Reliability

Another challenge of implementing deliveries is reliability. Restaurants have to hit their target SLA every time, or risk dissatisfying their customers. Returning customers are a major contributor to restaurant revenue, with 74% of food delivery customers ordering repeatedly from a particular source. If customers feel that the delivery service is unreliable — because they receive the wrong order, or the food is late, or some other reason — then the restaurant can end up losing the future lifetime value of that customer. Restaurants must establish processes and check that they have all the necessary tools in place to ensure to ensure reliability across every aspect of delivery.

Earning and maintaining customer trust and loyalty in delivery requires consistently satisfying customer expectations around quality, reliability and speed, every time. Moreover, from the restaurant’s side, maintaining a delivery network and generating a positive ROI requires consistent demand for delivery services. Because it takes time to build the necessary velocity of orders, delivery can come with a higher cost of acquisition, especially in the earlier stages of development.

The growth of delivery in this space presents unique opportunities for restaurants to enjoy new revenue streams and extend the experiences their brand offers beyond their brick-and-mortar locations. For restaurants aiming to ensure their long-term sustainability, now is the time to focus on their delivery offering — to optimize this crucial component of the business and ensure that it is as streamlined, efficient and lucrative as possible.

Catering

The business of catering provides a unique delivery opportunity for chain restaurants. Customers love the brand recognition and the familiarity that comes with their favorite chains. At the same time, restaurants appreciate both the added revenue and the ability to plan large orders in advance, without disrupting their day-to-day operations. Catering orders are often prepared in dark kitchens (kitchens located outside the retail location, often in lower-cost locations) and delivered during non-peak dine-in times. Because of the longer lead time, catering allows for a more planned delivery process.

But catering also presents its own challenges. Some catering orders are still prepared in the restaurant kitchen, which can disrupt operations and lead to longer prep times. The larger portions in catering orders also take longer to prepare. Additional time is a big risk, since it can impact delivery times. In catering, sales are most often built through relationship and trust, and if the catering does not arrive on time, that trust may be destroyed.
Maintaining food quality is also more difficult with larger orders, sometimes requiring distinct packaging. Catering orders also involve additional items that traditional food delivery does not — such as serving utensils and a larger number of plates and cutlery — as well as ways to keep food warm on site until it is served. On the other hand, catering can also create new revenue streams, such as on-site setup and wait staff, and clean-up services.

As with any new delivery offering, a restaurant expanding into offering catering services must create standardized processes for managing and executing these operations. Technology for effectively managing a catering program is key to its success, since it enables restaurants to streamline the way they receive and manage catering orders, easily onboard and manage drivers, and automate the process of handling customer requests and complaints, among many other benefits.

Designing for Delivery

The need for delivery is clear. But given the complexity of restaurant delivery, achieving success requires that the entire delivery operation be meticulously orchestrated. A number of crucial factors must be considered, including:

Making Delivery Operations Profitable

Cost consideration is paramount for delivery operations. Creating a new delivery offering, or expanding an existing one, may present the need for additional staff members in the kitchen and on the road, increased food supply to meet increased demand, technologies to support an efficient and streamlined operation, resources for packing deliveries, packaging materials and more. Restaurants should consider how they can maintain their profitability while managing these new costs.

When restaurants expand into delivery, they often need to advertise and/or offer discounts in order to inform customers about their new offering, encourage them to test the delivery process to reinforce new customer behavior, and build the business channel. This is true for restaurants that collect orders via their own ecommerce systems as well as those that sell through food ordering aggregators.

Using the right packaging is another essential expense in successful delivery operations. Restaurants invest heavily in the right containers and carrying bags to keep food fresh and warm, prevent cross-contamination and prevent spills during delivery. Using the wrong packaging can result in a bad customer experience, but the most durable packaging is quite costly. Restaurants must find cost-effective packaging that meets their needs while maintaining the overall profitability of delivery operations.

Collecting and Leveraging Operational Insights

Restaurants must be equipped to collect data about their delivery operations and leverage it in order to make operational improvements. Everything from the time it takes to prepare a delivery order and get it to the customer’s location to driver timeliness and the customer satisfaction ratings that drivers receive must be measured and used to optimize the KPIs for delivery efficiency and profitability.

Delivering Quality Experiences at Scale

Consumers want their delivery meal to match the quality of the one they’d enjoy in-house. Restaurants expanding their delivery offerings need to consider how they can attain the right balance of cost, speed and quality to ensure that the meal that reaches customers’ doorsteps meets their expectations, even if the restaurant is making millions of deliveries per month. For example, some restaurants decide not to add menu items that are not delivery-friendly to ensure they can deliver quality across the board.

Offering the Right Convenience: Balancing Delivery Speed and Affordability

Speed is a key concern for customers ordering delivery, as is a reasonable delivery fee. Restaurants must consider how they can quickly execute delivery orders — including whether they’ll rely on in-house drivers, third-party providers or both — and whether orders will be prepared in the restaurant or at an alternative location such as a dark kitchen. Restaurants must also find ways to keep delivery fees low enough that they won’t put customers off, while still maintaining reasonable margins.

Managing Space Issues

Delivery presents a number of physical space challenges. These include having enough room in the kitchen to handle the added volume of new delivery orders, enough spots in the parking lot for delivery vehicles, and enough space for online order pickups by drivers and customers. Additional questions include whether to provide curbside pickup for delivery drivers in areas without convenient parking solutions, or whether to consider a location redesign to support smooth delivery operations that don’t interfere with in-house operations. Even a small step like designating a portion of the service counter for delivery can significantly impact delivery operations at scale.

The Four Keys to Successful Delivery Operations

Restaurants must formulate ways they can establish and execute successful delivery operations while remaining competitive. To achieve the full potential of this new revenue opportunity and ensure customer satisfaction in the long term, restaurants need to first study and determine their approach to ordering and ecommerce, order preparation and dispatch, fleets and technology.

Ordering and ecommerce

Many restaurants accept delivery orders over the phone, via their website or app, in person, via fax (especially for catering) and even through social chat bots or voice assistants like Amazon’s Alexa. Restaurants should carefully consider which channels they will support for incoming delivery orders.

Restaurant delivery journeys often start with an ecommerce transaction (orders made online or via an app). This makes the decision of whether to partner with a food aggregator service one of the most important considerations in a restaurant’s approach to deliveries.

Food ordering aggregators can offer a variety of compelling advantages. To start, restaurants without an ecommerce offering can leverage aggregators as a rapid, scalable online storefront. Even restaurants with amazing websites and mobile apps often build compelling partnerships with aggregators, whose websites and mobile apps can help restaurants generate more orders, increasing both revenues and brand exposure.

Furthermore, aggregators shoulder the cost of customer acquisition, presenting restaurants with hungry customers, ready to order. Many aggregators also provide a turnkey end-to-end solution, including the delivery itself, which allows restaurants to quickly and easily start offering both ecommerce and delivery, at scale. Trusted aggregators bring a wealth of subject matter expertise in ecommerce and in complex, on-demand delivery operations. The right partnerships can provide immense value to both restaurants and aggregators.

At the same time, there are some additional considerations that surface when restaurants partner with food aggregator sites for ecommerce and/or delivery. These include:

Revenues and competition

Food aggregator sites typically take a fee of 20%–35% of the order value. They tend to more prominently feature restaurants that (a) offer discounts, (b) buy advertising or (c) have high customer ratings. This rewards popular restaurants that have exceptional food, and may lead others to further invest, which cuts into their margins.

Some restaurants, particularly those with premium brands or those with average to poor customer ratings, are concerned that being listed alongside their competitors commoditizes their food and brand. Moreover, some aggregators are now either testing or deploying their own dark kitchens to prepare delivery orders, competing directly with existing restaurants.

Restaurants that choose to partner with food aggregators for ecommerce, delivery or both can address many of these concerns by selecting the partners that fit their long-term vision and strategy, as well as implementing efficient delivery order prep processes so customers enjoy high-quality, fresh food that sets the restaurant apart from the competition.

In-house operations

Many restaurants have taken a broad approach, working with multiple food aggregators to increase their exposure and delivery business. However, using multiple food aggregator sites often puts dispatchers and in-store staff in “tablet hell,” where they are forced to manage multiple digital tablets, one for each aggregator. Not only does this present significant operational hurdles for handling incoming orders, it also creates the added burden of needing to streamline orders across providers so they are all prepared and batched the right way and handed off to the right drivers.

Restaurants can address this challenge with the right technology stack and integrations that ensure smooth and efficient order preparation and dispatching, regardless of the number of and which food aggregator sites they partner with. Technology can provide a centralized hub for order aggregation that puts all aggregator orders into a single platform that’s easier to manage. This integrates into the location’s own POS (point of sale) and KDS (kitchen display system), eliminating tablet hell, and making incoming and canceled orders easier to handle. Delivery preparation processes are similarly streamlined, with each service’s orders being grouped to avoid confusion. Perhaps most importantly, this technology layer enables restaurants to partner with as many providers as needed while maintaining control over their delivery operations — ensuring that the many varied parts that comprise the delivery flow work together smoothly and efficiently.

Menu compatibility

Food aggregators often cause menu confusion, as individual services often use a slightly different menu than the restaurant. For example, where a restaurant may list an item as Double Bacon Cheeseburger, the food aggregator may list the same item as a Double Cheeseburger with Bacon. These small differences can make integrating food aggregator orders directly into the restaurant’s ecommerce and POS systems challenging. To address this issue, restaurants can have a “single source of truth” that eliminates menu confusion, allowing them to smoothly embrace food aggregator services and also gain insights into order trends and performance.

Customer and performance data

When restaurants rely on food aggregator sites, they’re often left in the dark about the customer: who is ordering from them; customer order patterns; customer delivery satisfaction (when the aggregator also delivers); and broader order volume and delivery SLA performance. These datasets and insights are fundamental components of the restaurant’s delivery operations and customer experience. Restaurants need this data in order to improve and grow.

Many restaurant aggregators offer their own reporting to restaurants on order trends as well as delivery SLAs (as applicable). Centralizing data across all aggregators can help restaurants understand their business performance, and the right technology solution can provide reporting across order aggregators and in-house ecommerce transactions. However, there is generally less customer data available when working with aggregators as compared to in-house ecommerce.

Customer Relationships

When aggregators perform deliveries on behalf of the restaurant, positive customer experiences are often attributed to the aggregator, making it challenging for the restaurant to use these experiences to build brand loyalty. Restaurants also generally miss out on branding and promotional opportunities when they’re not the ones executing their deliveries.

However, savvy operators will find that creative packaging, technology solutions and strong partners can help close some of this gap. For example, adding branded “extras” such as promotional items or samples of new dishes into delivery orders can build both the customer relationship and the brand. Similarly, restaurants can negotiate with their delivery partners on the branding of the customer delivery trackers, as well as the ability to send a customer survey following a delivery.

Order Preparation and Dispatch

Embracing delivery means that restaurants must plan how to handle an increased volume of orders, efficiently manage expanded food preparation needs, and “stage” delivery orders for pickup. For example, each delivery service or driver will ideally have a specified place for order pickup so as to avoid confusion, and the restaurant will have the exact change in cash ready or mobile card readers that allow drivers to collect payments.
A successful delivery operation cannot exist without streamlined and efficient flows in the kitchen which ensure that meals are prepared quickly and reach customers while they’re still fresh and hot. For this purpose, restaurants need to consider how they will streamline delivery order preparation, and which technologies they’ll use to achieve maximum efficiency.

At the same time, restaurants also need to design and integrate their new dispatch capabilities. They’ll need to hire and train dispatchers who will decide, among other things, how to prioritize orders and which fleet or driver will handle which delivery. Dispatchers will also need to address customer complaints and other delivery issues that arise. Will the restaurant have a dispatcher handling delivery operations in each location, or will it use a centralized approach to dispatch? Restaurants must determine whether they’ll embrace technologies that can automate the core dispatching functionality, as these technologies typically optimize better and faster, freeing up dispatchers to handle delivery exceptions.

Fleets and Drivers

Restaurants that are building their delivery operation have several options when it comes to drivers. This component of the operation must be considered carefully because the delivery driver becomes the restaurant’s key touchpoint with customers. Restaurants must determine whether it makes the most business sense to employ an in-house fleet, a third-party service or a combination of the two.

Hiring and training staff for an in-house fleet presents a number of opportunities, as well as unique challenges. For example, this approach allows restaurants to more easily maintain control over the brand and the customer experience, avoiding the use of third party services whose drivers may also deliver food for the restaurant’s competitors. Using an in-house fleet also allows restaurants to “repurpose” their staff as needed — during slow delivery times, drivers can perform other tasks in the restaurant such as cleaning or order preparation. Technology can be used to automatically track when “flex staff” are working in-house or doing deliveries, allowing restaurants to easily manage different payment models.

Restaurants that choose to engage third parties for delivery, whether in place of an internal fleet or alongside one, can adopt a variety of delivery models, such as partnering with crowdsourced delivery firms or managing an in-house crowdsourcing program (for more on crowdsourcing, see chapter 6). Each of the various third party models presents unique considerations, with different advantages and challenges. For example, crowdsourcing drivers eliminates much of the burden and cost of developing and retaining an in-house fleet — especially for restaurants that are at the earlier stages of developing their delivery offering. But relying on third party drivers also presents challenges surrounding driver loyalty and performance, branding, and more.

Technology

Recent years have seen the emergence of technologies that make it possible for restaurants to more easily and quickly launch a new delivery offering or optimize an existing one. These technologies center around optimizing and automating delivery operations while providing real-time visibility into everything associated with deliveries — from backend operations and management insights all the way through to driver flows and the customer experience — ensuring that all associated processes are streamlined and efficient so as to deliver the necessary ROI to the business.

Today, restaurants aiming to achieve true excellence in their delivery operations must embrace technology solutions that focus specifically on delivery and fulfillment. Fortunately, many of these technologies can be embraced without requiring restaurants to make significant changes to the processes or technologies they already have in place.

There are a number of key considerations restaurants must factor in when they explore the technologies that will support their delivery operation. These include operational efficiency — including the extent to which technology will enable the restaurant to streamline and automate its delivery processes while enjoying flexibility and visibility surrounding delivery operations — and big data, ensuring that, through technology, the restaurant will be able to collect and utilize the operational insights that drive constant improvements to its delivery operation, and the strategic, executive macro insights that will inform strategy and growth.

Delivery: A Strategic Imperative

Customers’ increasing demands surrounding food delivery aren’t going anywhere. Just like the ecommerce boom that redefined the role of brick-and-mortar stores, the growing demand for food delivery is reshaping the restaurant industry. The question is no longer whether delivery should be offered at all — but rather how restaurants can bring an effective and profitable delivery operation to market.

Notes

1. Klein, Danny, “Panera’s Delivery Program Goes National”. QSR Magazine, 2018.
2. Morgan Stanley, “Alexa, What’s for Dinner Tonight?” Morgan Stanley, 2017.
3. Olo, Want to Scale Delivery? Implement These Best Practices. 2018.
4. Wirth, Sara Rush, “The Stats Are In: Consumers are Upping Restaurant Delivery”. Restaurant Business, 2019.
5. Alix Partners, “From the Challenges of Technology, Delivery and Labor Costs, to Sparse Growth Possibilities, the Restaurant Industry Faces a Defining Moment”. Alix Partners, 2017.

Chapter 5
Big and Bulky Delivery

In the era of Amazon, customers have learned to expect unprecedented levels of delivery speed and convenience at remarkably low prices. These expectations place incredible pressure on every company’s leadership team, with business and supply chain executives feeling the squeeze. They have by now come to recognize that their delivery and logistics capabilities need to be upgraded if they want to match or exceed modern customer expectations while maintaining profit margins. This becomes all the more challenging when managing expensive white glove deliveries, such as furniture, large appliances, construction materials, and other big and bulky items.

The Current Big and Bulky Delivery Market

If we take retail white glove services as an example, the number of deliveries demanding special handling is growing rapidly. In 2018, ecommerce sales of furniture, home furnishings and other big items amounted to $65 billion in the US alone, and the sector was projected to have the highest ecommerce growth rate of any category.1

Many of these deliveries are for oversized items that come with their own unique challenges. Unlike smaller and lighter package deliveries, big and bulky deliveries often require substantially more expensive resources. Delivery vehicles generally need to be larger and more specialized (e.g., with electrical lifts for unloading). Big and bulky deliveries typically require drivers and service technicians that have specialized licenses and certifications, which increases staffing costs and adds a level of complexity to delivery coordination.

Time-on-site is another expensive consideration given that these deliveries can take substantially longer than regular deliveries. Unloading oversized inventory generally takes far longer than delivering standard-sized products, and almost always requires that the inventory be brought into the recipient’s residence or place of business. In addition, it often takes drivers of large delivery trucks substantially longer to find a suitable place to park. If the planning process underestimates the time-on-site, then subsequent deliveries will be delayed, frustrating both the customers and the delivery staff, while if time-on-site is overestimated, then expensive driver and vehicle resources will be left underutilized and a subsequent customer might not be home or available when the delivery arrives.

Often, these deliveries will require more than one delivery person, as well as additional services such as assembly or installation (for more on service deliveries see chapter 5). Each of these considerations makes the work of dispatching big and bulky or white glove deliveries quite challenging, underlining the importance of optimizing and efficiently managing these flows.

In addition to the many logistical considerations that dispatchers and executives must manage concerning big and bulky delivery, customer expectations add substantial strain. Big and bulky, like most white glove deliveries, requires that the customer stay home for a longer period of time, be there for the installation and sign for the successfully completed delivery. Understandably, customers prefer as little constraint on their time as possible. Almost three-quarters (73.2%) of customers expect to be able to select a morning or afternoon delivery window, and almost half (45.1%) expect a two-hour delivery window or less.2 Over a quarter (27%) indicate that having more precise delivery time slots would improve their experience.3

While customers have very high demands regarding their deliveries, they also have a tendency to make the work of delivering their oversized items very difficult. Over a quarter (30%) of big and bulky shipments require multiple contact attempts to schedule. More than half (55.2%) of recipients need to reschedule their deliveries at least 20% of the time, and more than one in three delivery exceptions are due to scheduling issues. Even when everything is scheduled correctly, over a quarter (28%) of deliveries still fail.

As big and bulky deliveries in particular are incredibly expensive, harder to optimize (requiring accurate time-on-site) and require more from the customer, failed deliveries are both common and costly. Failed deliveries are very expensive for businesses, representing an average of nearly $70 in added costs per delivery to the retailer. Failed deliveries also add an average of 4.6 days to the delivery process. Businesses cannot simply respond by raising their delivery fees, as nearly half of customers say that high delivery fees for oversized items have caused them to shop elsewhere.

This is a frustrating experience for businesses, their delivery partners and their customers. Customers often miss work in order to wait for their delivery (21%), they waste a great deal of time trying to track down their deliveries (11%), and they end up frustrated and arguing with customer service representatives (11%). Those who hesitate to purchase big and bulky items online (28%) point to the delivery headaches it often entails.

Adding to the frustration, when ordering oversized deliveries, more than one in five customers have received damaged goods, while more than one in seven customers have ordered oversized deliveries that never arrived. Considering all the risks involved, it’s not surprising that 40% of the top 100 retail sites with active home delivery programs only offer curbside delivery, whereas only 5% deliver into the customer’s house.4

Facing seemingly impossible demands for faster, more convenient and professional deliveries at reasonable costs, business executives and supply chain leaders are turning to technology to improve their performance, agility, margins and customer experience. The right technology synchronizes the delivery flows, integrates every component of the business’s delivery operation, and ensures streamlined and efficient processes that enable the business to meet customer expectations while generating a positive ROI.

Customer Demands for Big and Bulky Deliveries

At every stage of their journey, from research through to purchase completion, customers are generally aware of the shipping and delivery options available to them. At checkout, whether online or in-store, they expect to be provided with clear delivery options and prices. While some customers, particularly those purchasing premium goods, may be happy to pay a premium fee for expedited white glove delivery and installation with a short delivery window, others may prefer less expensive options, even if it entails a longer wait.

At the same time, customers do not want to be faced with dozens of delivery options at checkout; they simply want to be shown the best available options in an easy-to-understand manner. In order for businesses to make this possible, they must put into place automated quote generation capabilities that present customers with the optimal delivery prices and delivery windows.

As orders are prepared and dispatched, customers also appreciate visibility into their order’s progress. They want to be given a short, accurate window of time during which they can expect the delivery to arrive and real-time visibility into exactly where their order is once it is en route. This offers an important level of convenience that frees customers from spending an entire day at home waiting for their delivery.

At any time leading up to the delivery, customers also appreciate the option to reschedule. While these last-minute changes often challenge dispatchers who are not using an automated system, it is easier and less costly to skip a delivery than to arrive at the customer’s location only to discover that they are unavailable. Customers expect support staff to have real-time visibility into their order progress and delivery timing and that they are able to take action, such as to reschedule a delivery or schedule a follow-up service call, as needed.

In the hours before a scheduled delivery, customers appreciate being provided with a real-time tracker that provides both a live map of their delivery and a more precise delivery time window. These trackers are generally shared through text messages or mobile app push notifications, and should always be optimized for mobile devices.

Trackers typically show the driver’s first name and photo and also allow customers to share their exact location with drivers. They also generally offer customers the ability to communicate with drivers directly via text message or phone call, using masked phone numbers to protect both the driver’s and the recipient’s privacy. These features are particularly helpful for customers in remote locations or businesses on construction sites where traditional street addresses may not offer sufficient accuracy.

As the driver approaches, customers should be reminded that their delivery is on the way, often in the form of a text message or push notification. These reminders help customers make final preparations for delivery.

Throughout the delivery experience, customers expect staff to remain professional. Delivery personnel should be professional, presentable, fluent in the local language and capable of helping with related tasks such as scheduling a follow-up service appointment. They should also be able to document and report any damaged merchandise or accidental damage they caused during the delivery.

Finally, following a completed delivery, customers appreciate being asked for feedback in the form of a follow-up survey or phone call, especially when businesses later further follow up with them on the feedback they gave. This feedback provides valuable insight for businesses as well.

Making it simple for customers to provide feedback via in-app messaging will increase feedback volume and thus the opportunities for businesses to gather customer insight and use it to improve processes and the delivery experience.

Backend Operations, Delivery From Retail and Third Party Delivery

Providing the exceptional customer experience outlined above is sure to set any retailer or delivery fleet apart. In order to provide this level of service at scale, businesses need technology that will help them synchronize, measure and optimize every stage of the big and bulky delivery process.
For example, customers appreciate a clean and straightforward set of delivery options while shopping and particularly when checking out. Behind the scenes, this requires visibility into where the inventory is physically located (e.g., warehouse, retail location, fulfillment or distribution center), as well as real-time sync with the delivery providers, including both in-house delivery staff and third party delivery fleets.

The business’s backend platform must determine delivery options, available time slots and prices. The platform must also take into account discounted shipping rates on these large purchases, as well as any discounts the customer may have as a result of a coupon code or premium membership (which also requires synchronizing with the CRM platform). These backend data syncs provide businesses with a unified solution that takes into account all their business logic, inventory availability and delivery options, presenting customers with the optimal delivery options and prices.

Once orders are placed, they must be staged and dispatched for delivery. Delivery staging teams at the warehouse or retail location must know which deliveries need to be prepared and when they are due for pickup. However, manually synchronizing pickup times and delivery across multiple fleets at scale is nearly impossible and terribly inefficient. Instead, technology solutions can provide automation to coordinate an efficient process across both the internal staging teams and the various delivery fleets, ensuring that retail or warehouse staff prepare the correct order for each driver with a clear, tracked chain of custody.

Often, the closest inventory for a big and bulky delivery is at a retail location. While delivery from the retail location’s warehouse follows a delivery flow very similar to delivery from a resupply warehouse, delivery of oversized goods from the retail floor, such as floor models or delivery from warehouse clubs, requires further collaboration with on-site pickers.

Typically, the ecommerce or delivery technology provider will ping the local retail team’s task management platform or mobile tablet. Pickers or retail associates follow the step-by-step instructions to collect and hand over the merchandise for delivery staging. In the case of warehouse clubs, a single order may be divided across multiple pickers, with each assigned to a specific store section. In this case, pickers will scan merchandise as they progress through the store, grouping items by recipient. The delivery staging team will then assemble and stage the deliveries for pickup. For fresh, refrigerated or frozen items, staging may be segmented by temperature, with orders assembled for hand-off to delivery fleets only minutes before the drivers arrive. Delivery staging teams generally utilize barcodes and printed delivery labels to ensure that all orders are correctly staged and handed over for delivery. For more on staging fresh and frozen last-mile deliveries, see chapter 2.

These technology solutions should also ensure that the appropriate delivery instructions and supporting documentation are included with each delivery. They can also manage delivery flows and documentation by syncing directly with the delivery fleet’s mobile app for drivers, or provide a mobile app for in-house drivers. As a major added benefit, this sync across platforms also provides dispatchers, support and customers with real-time driver tracking and SLA performance reporting, and can even synchronize proof of delivery and photo uploads.

Dispatch and Routing

Dispatch and routing for big and bulky deliveries is another aspect of delivery which requires careful coordination and management. In addition to projecting drive times and accounting for traffic, big and bulky deliveries must take into account time-on-site, which should include everything from the time it takes to find parking to unloading time and service time (if the delivery includes services like installation or assembly).

While there are dozens of potential time-on-site considerations, most businesses will find that a good data science team with the right machine learning models can identify which parameters are the most significant for calculating this critical variable. These analyses are usually performed by dispatch, routing or delivery management providers, and, as data about time-on-site is collected with each delivery, more accurate predictions will be provided over time.

Another important use case for cross-team delivery management is big and bulky delivery sequencing. Many big and bulky deliveries require white glove services, such as setup, assembly, installation and training. However, these services cannot generally be provided before the delivery is completed, hence the need for delivery sequencing. While some businesses simply use their delivery staff as service staff, others prefer to schedule two distinct appointments: one for the delivery and another for the white glove service. Though there is theoretically no reason that these two delivery appointments cannot be scheduled back to back, any delays in the first delivery will also delay the second. Automated sequencing can prevent such delays and schedule the most efficient delivery sequences for big and bulky deliveries, setup and installation.

Nearly all big and bulky deliveries utilize either a planned or a hybrid planned / on-demand delivery model (for more on these delivery models, please see chapters 8 and 9). Given the complexities of big and bulky deliveries, businesses gain substantial efficiencies from automated routing solutions.

Many businesses use fully automated routing and dispatch tools, allowing dispatchers to focus on exception handling. Others prefer to use automated routes as a starting point, and then task experienced dispatchers with validating and tweaking delivery routes as needed. This added human touch helps businesses make the best use of the dispatcher or driver’s personal experience. A strong routing provider will allow dispatchers to run near real-time simulations, gauging the impact of each manual change on the rest of the delivery flow so that the dispatchers can determine the best possible options.

Given the substantial expense of big and bulky deliveries, dispatch and support require real-time access to driver location and delivery progress. Businesses that have already invested heavily in telematics installation can integrate these legacy investments into their dispatch operations. Businesses that are looking to streamline and modernize, or businesses that do not yet have a telematics solution, typically turn to driver apps running on mobile phones or tablets.

There are many benefits to driver mobile apps for big and bulky deliveries:

Automated status and location updates

If a delivery driver is running late, the dispatcher can be automatically notified. The dispatch system can then calculate which orders may be impacted, so that the dispatcher can take corrective action as needed (e.g., notify customers, reroute other drivers in the area, etc.). The dispatcher may want to message the driver and ask why they are running behind, or send a reminder that they need to wrap things up in order to fulfill their next delivery on time. When running sequential delivery flows (e.g., delivery from one provider, services from another), these delays must also be synchronized with the second or tertiary white glove delivery providers to avoid further disruption.

Upselling

Many businesses allow and even incentivize drivers to upsell additional products and services while on site. From warranties to installation services, service packages and ancillary hardware (such as HDMI cables for a TV), drivers can easily upsell and fulfill these orders via their mobile apps.

Automated delivery flows

Management can predefine a delivery flow, and all drivers across all fleets will be directed to follow the preset flow. For example, a flow may require that drivers first take a picture of the delivered item, then scan the barcode to mark the inventory as delivered, and then collect a signature from the customer to complete the delivery and activate the warranty. Whereas many delivery drivers, especially newer drivers, may forget the required paperwork at the depot or forget to collect a signature, mobile apps will not allow drivers to mark the task as complete until they have satisfied all the necessary requirements. All these delivery details then need to be synchronized with the business’s backend systems to update customer records, activate the warranty and store proof of delivery.

Customer communications

For example, if a driver cannot locate the customer’s address, the driver can message or call the customer right from the mobile app. The driver’s and customer’s phone numbers will be masked, protecting everyone’s private contact information. If the customer chooses to share their geolocation through the delivery tracker, this information will be automatically sent to both the dispatcher’s web app and the driver’s mobile app.

Driver empowerment

Some businesses allow drivers to dynamically update their delivery routes and schedules based on their personal experience, as long as they can still meet promised delivery times. Naturally, dispatchers will be able to see these changes and contact the driver or override them as needed.

Process rejected orders

This functionality includes collecting proof of damaged merchandise (by taking a picture of it), proof of returns (e.g., customer signature), initiating return tasks and even helping customers schedule any follow-up white glove or service deliveries.

Capacity Planning, Multi-Fleet Dispatch and Driver Communications

With levels of demand changing regularly and broad geographies to cover, business leaders must maintain a careful balance between meeting delivery capacity and utilizing resources efficiently. This has led many big and bulky vendors and delivery providers to invest in both capacity planning and multi-fleet dispatch.

Capacity planning typically requires synchronizing five primary components:

People: location, skills, languages and certifications, working hours, break times
Vehicles: location, capacity, load, capabilities (e.g., towing, hydraulic lift)
Inventory: availability, location
Demand: location, delivery time windows
Timing: Loading/unloading time, transit time, parking time, time-on-site, break time

When managing capacity to provide the optimal customer experience at the best possible margin, businesses generally optimize deliveries for flexibility across every possible capacity constraint. For example, in-house delivery staff and vehicles can often be supplemented by 3PLs. Larger businesses often contract multiple 3PLs to provide the optimal coverage, rates and flexibility, especially during peak seasons.

In a multi-fleet scenario, mobile driver apps and technology solutions enable businesses to maintain a unified operational flow and customer experience. For example, allowing warehouse management and staging teams to coordinate delivery pickup with both internal teams and outsourced providers; enabling dispatchers and support to track and manage driver progress across internal and outsourced providers; and providing management with the ability to track customer satisfaction and SLAs across all deliveries, regardless of how they were fulfilled.

Performance Measurement and Business Performance

Nearly three-quarters of supply chain organizations (72%) lack the technology to measure and improve their customers’ experiences.5 While the overwhelming majority of customers (84%) won’t return after a single poor delivery experience, supply chain leadership is missing the tools to understand when changes are necessary.

Successful big and bulky delivery operations require the measurement and optimization of a number of variables: delivery preparation and staging at the retail, warehouse or fulfillment center; the hand-off to delivery fleets (in-house and outsourced); drivers’ on-time performance; time on-site; customer satisfaction; and more. These should be measured at the team, region and provider levels, as well as at the individual team member, driver and customer levels. All platforms and providers must measure the same core KPIs and SLAs, in the same manner.

One of the most important abilities is to create and aggregate data across internal teams and external providers. This allows supply chain and operations teams to understand where their delivery flows are lagging or inefficient and where automation and optimization are necessary, as well as the speed and quality of their in-house and third party delivery fleets. Without these insights, management is simply flying blind.

In addition to operational performance data, leadership is increasingly in need of business performance insights. The last mile is by far the most expensive step in the supply chain, with estimates ranging from nearly half (41%) to over half (53%) of total supply chain expenses.6,7 As businesses typically have to foot about 25% of the cost of last-mile delivery,8 measuring and managing these expenses is vital to maintaining profit margins and to the sustainability of last-mile delivery efforts.

Performance insights allow management to make informed decisions, prioritizing and optimizing various parameters such as delivery options, speed and convenience, service offerings, fleets by region (both internal and external), and more. For example, businesses often face the challenge of balancing automation and standardization with customer experience. In addition to helping leaders make informed decisions, robust data and reporting allow businesses to rapidly test, validate and scale new solutions.

Customers today expect more from every business: more choice, more speed and more convenient options at lower prices. This presents an incredible challenge for business and supply chain leaders in the big and bulky space, particularly given the high cost of oversized delivery. At the same time, the last mile presents incredible opportunities for growth. Businesses that can successfully coordinate, streamline and automate their last-mile logistics while providing exceptional customer experiences will be well positioned to thrive in this new and exciting market.

Notes

1. eMarketer, June 15 2018, Consumers Are Warming Up to Purchasing Furniture Online
2. Convey, Last Mile Delivery: What Shoppers Want and How to #SaveRetail
3. Realities in Oversized eCommerce Delivery in the Amazon Era: uShip’s 2018 Consumer Insights Report for Larger-than-Parcel Online Sellers
4. Convey, Finding Your Delivery Sweet Spot
5. Eyefortransport & quintiq, D3 2019
6. Capgemini, The Last-Mile Delivery challenge, 2018
7. Business Insider, “The Challenges of Last Mile Logistics & Delivery Technology Solutions”
8. Capgemini, The Last-Mile Delivery challenge, 2018

Chapter 6
Service Delivery

Enterprise businesses today, more than ever before, are rethinking the value they deliver to their customers. Increasingly this means making house calls, providing a flawless experience of both their traditional and newly expanded services at the customer’s convenience — exactly when, where and how they want. From retailers expanding revenues by offering home installation to consumer brands delivering in-home training and setup services, it seems like every business is quickly becoming a service business as all seek new channels of growth.

Service Delivery Challenges

More than other sectors, service businesses often face anxious customers. With planned service calls, customers generally have to stay home from work and wait for the technician. Someone who calls for an on-demand service, such as roadside assistance or emergency plumbing repair, becomes anxious as they wait for the service provider to arrive and will often call multiple times to ask when the technician will show up. A long wait for the delivery — or worse, a late delivery — will result in a disgruntled customer. Customers expect service providers to arrive on time and complete their work as quickly as possible. In fact, the foremost customer concern when ordering a service delivery is on-time performance.1

In order to meet these demands, reduce costs and improve efficiency, service businesses are turning to a new generation of logistics solutions, ones purpose built to manage their service operations and deliver exceptional customer experiences.

High Urgency:

Doctor/medical
Home repair (HVAC, plumbing)
Roadside assistance

Medium Urgency:

Internet/cable service / phone connectivity
Hospice, in-home care
Appliance delivery and installation
Appliance repair (dishwasher, washing machine)

Low Urgency:

Home tutorials
Merchandising
Furniture setup
Carpet installation

Rising Customer Expectations of Service Providers

One of the most common examples of rising customer expectations of service providers is in-home cable installation. Whereas cable providers used to offer half-day service windows, most customers now expect to be able to schedule shorter service delivery windows (e.g., a two-hour installation window). However, accommodating this customer expectation is particularly challenging for dispatchers.

It is incredibly difficult for dispatchers to manually manage dozens of service people in a given geography while taking into account each customer’s preferred time windows, the estimated time-on-site, transit time between jobs, break times for employees, on-hand inventory, and other parameters. Add in emergency calls, and it’s easy to understand just how overwhelming dispatch for service delivery can be. These limitations end up posing an incredible challenge to service business executives.

Every time a service call is not completed successfully, the service provider faces $250–$500 in wasted resources.2 Nearly a third of customers report having missed a scheduled service call. When asked why they missed the service call, 69% of respondents reported that something came up, they forgot about the appointment, they hadn’t been given a service window time, or they were unable to cancel or change the appointment.

Businesses must develop the flexibility and visibility required to ensure that such services meet, if not exceed, the customer’s expectations.
This includes, but certainly goes well beyond, scheduling shorter delivery windows. Over 55% of customers identified rescheduling service provision at their convenience as an important factor. Allowing customers to do this can dramatically reduce missed service calls and deliveries, providing substantial savings to businesses. However, introducing this type of dynamic routing generally requires advanced dispatch and routing capabilities as part of an overall delivery optimization effort.

In addition to scheduling convenient service delivery windows, customers expect the service professionals to meet their standards of personalization and professionalism. They must arrive on time, understand the customer’s service history and needs, present themselves in a professional and personable manner, satisfactorily complete their service tasks, answer customer questions, clean up after themselves, and complete their on-site services on time. Nobody likes a rude service provider or enjoys hearing that the repair person is missing a critical piece of equipment and must come back another time.

In order to address these issues, businesses must develop the ability to track service provider efficiency and customer satisfaction. For example, management should be able to track how often service providers close service calls in a single visit and how often they arrive and leave on time, as well as their customer ratings as determined by a post-service customer satisfaction survey (either digital or via phone).

Managing Costs, Recognizing Efficiencies

Another hurdle that service business leaders face is the cost of these growing customer expectations. For example, a single truck going out can cost as much as $250–$500. Satisfying rising customer expectations will often require substantial investments in technology and personnel. However, for businesses to remain viable, these investments need to show not only positive returns, but equal or better margins compared to traditional service models.

Market data reflects this trend: the leading organizational initiatives for service enterprise businesses in 2018 were to drive down operating costs (64%), followed by investments in new or improved technology (49%) and process automation / robotics (45%).3 In fact, the leading 2018 trends projected to have the strongest positive impact were intelligent automation (62%), followed by greater access to innovation (56%) and improving customer demand (42%). These trends clearly reflect the new market reality: Service businesses must find new and affordable ways to improve their efficiency through automation, outsourcing and technology.

With this focus on resource optimization, it should come as no surprise that the trend with the most negative impact was the talent shortage (55%), as the satisfaction, retention, utilization and efficiency of the service providers are paramount to the success of a service business. In today’s market, service businesses are increasingly turning towards outsourcing and even crowdsourcing in order to address their talent shortages.

However, success requires more than just automating dispatch and technician workflows. Sixty-five percent of service business executives pointed to fragmented organizations and processes when asked about the biggest challenge facing them when it comes to successfully completing strategic initiatives.

Improving Service Delivery and Business Performance

One of the most important strategic imperatives for service businesses facing growing customer expectations is service delivery orchestration. To successfully plan, coordinate and track deliveries at enterprise scale, they need to have in place technology that can provide three levels of insight and optimization:

Planning, Capacity, Routing, Dispatch and Automation

Dispatch has become increasingly complex in the last ten years. Where once customers stayed loyal to a single service provider, they will now leave for a competitor if they think the service provider failed to arrive fast enough. Service businesses are addressing increasingly complex service delivery dispatch processes with automated and semi-automated routing and scheduling.

A well-tuned automated routing and dispatch solution can take into account dozens of considerations, automatically generating suggested routes. Common considerations include service tasks required, capacity, service provider languages and certifications, the number of service providers required per task, vehicle capacity and capabilities (e.g., towing capacity), inventory required, inventory availability (on-vehicle or along the driver’s planned route), driver ratings, transit time between service tasks, break time, parking and loading/unloading time, and time-on-site.

More so than any other segment, service deliveries often require substantial time-on-site. Projecting time-on-site is critical for dispatchers; however, time-on-site typically varies substantially (over 100% variance) across different service providers and white glove tasks. For example, while some service technicians may typically require only 25 minutes to install a particular model of washing machine, others may generally take 35 minutes. Due to the many variables involved, it is notoriously difficult to project time-on-site. The ideal solution is to use a system that dynamically learns from real-world service or delivery provider behavior and adapts dispatch and routing accordingly.

Another important component of dispatch and routing is capacity planning. Often, customers expect to be able to book service providers on their own, up to a week before the actual service call. Similarly, customers expect that retail and support staff can book their service appointments for them. This requires a centralized appointment booking engine that can calculate service provider availability in real time. Many businesses will also offer customers the option to pay a premium for faster service or a premium time slot, all of which must also be managed through this centralized platform. To further complicate matters, some service businesses will engage third party providers to increase their service capacity, so they need to manage third party dispatch and routing as well.

All of this must be coordinated and automated in real time, following predefined business logic, in order to provide the optimal solution for both the business and the customer. This is why businesses are increasingly looking to either automate or semi-automate the dispatch and routing systems for their services.

Once routes are finalized, instructions and documentation must be sent to all service and delivery staff. While many businesses still rely on pen, paper, spreadsheets and radios, modern dispatchers are using digital dispatch and driver management mobile apps to streamline and measure the entire process.

Digital and mobile app-based systems also provide faster onboarding and fully automated process management. For example, businesses can use mobile apps to track service provider and vehicle locations, driving speed, and progress in real time. This information is not only invaluable for benchmarking service providers and improving service flows, but can also provide customers with real-time maps that show the progress of the service or delivery provider. Mobile apps can also prompt providers to follow predefined service flows, including uploading photos at key junctures, scanning barcodes, collecting customer signatures, uploading warranty information, viewing and collecting customer notes, and more.

By standardizing service and delivery provider flows, businesses can increase efficiency while quickly and easily onboarding new service providers, both internal and external.

Whenever businesses outsource to third party service providers, they must ensure that there are no compromises in (a) the customer experience, (b) service quality and (c) data visibility. Often, a service business will provide its outsourced technicians with the same mobile apps that its own in-house service technicians and delivery staff use. This helps ensure that they all provide the same levels of service, have the same capabilities, follow the same standardized service flows and maintain similar levels of customer satisfaction.

While this helps businesses maintain their standards, service providers also greatly appreciate how mobile apps automate and streamline their workflows. For example, traditional dispatch solutions often require that they “radio back to base” to report on their progress or receive new assignments. With mobile apps, they no longer need to check in with dispatch or manually manage mountains of paperwork.

While some businesses require that the service providers follow strictly enforced flows, many businesses have substantially increased employee satisfaction by collecting feedback via their mobile apps and providing more flexibility where it matters most to customers. These small tweaks not only empower service providers to do their jobs the way they know best, but also help to improve their productivity.

On-Demand Dispatch, Dynamic Service Execution and Follow-up

The considerations and requirements mentioned above become particularly acute when dealing with on-demand service deliveries. While a customer with a dead car battery at home may be happy to schedule a less expensive battery replacement service at a convenient time, a customer stuck on the side of the road with the same problem generally needs a technician as soon as possible.

This highly anxious customer is also more likely to call customer support multiple times, wasting expensive dispatch resources to provide the same basic answer over and over again (such as “the tow truck should arrive by 10:30 pm”). On-demand dispatch almost always requires dedicated driver tracking and dispatch management software.

Whether dealing with on-demand or planned service deliveries, every service business must be able to dynamically handle exceptions, particularly those situations that require unanticipated time-on-site. For example, a healthcare provider on a home visit may find that the patient requires additional care, which will extend their time-on-site and cause delays throughout the rest of the day. Similarly, the cable repair person might find that the modem is fine but there is a problem in the line, which can take hours rather than minutes to repair. Alternatively, using the example in the paragraph above, the tow truck driver may find that the customer had not one but two flat tires, and needs a tow job rather than just switching the standard and spare tires.

Real-time dispatch management solutions can dynamically reassign the service calls impacted by the extended time-on-site, reroute other service providers to assist (e.g., have another truck with two spare tires on board drop them off so the customer doesn’t need to be towed), or notify the subsequent customers that their service deliveries will be delayed. Regardless of the outcome, digital dispatch and service technologies will help businesses make the best possible decisions and keep their customers in the know at all times.

Lastly, service providers may find that the customer needs a follow-up service appointment. For example, a cable provider may provide the customer with an interim modem. For the customer, having to call to schedule a repeat visit is a frustrating, unnecessary experience. Service providers should be able to schedule follow-up service visits for customers while they are on site. Typically, businesses will enable service staff to book follow-up appointments through the company’s website or mobile app.

Beyond making the customer’s life that much easier, these small steps towards empowering service technicians add up to higher customer ratings, improved customer loyalty and better driver retention.

Data Tracking, Integrations and Reporting

Executing successful service delivery requires deep, end-to-end integrations across backend and frontend systems. For example, allowing the customer to book their preferred service time or delivery window requires that the frontend website sync with the backend dispatch and routing systems, taking into account the service location as well as the eligibility and availability of service providers.

The fastest and most effective way to manage all these integrations and data flows is through a centralized system, which is generally vendor, hardware and software agnostic. This enables service businesses to continue using their current supply chain and logistics platforms and providers, while adding a digital, intelligent layer that coordinates activity across all platforms and providers. This allows management to dynamically track, understand, synchronize, take action and, ultimately, automate all business logic and service delivery flows.

Another major advantage of integrating all backend systems is the powerful reporting it enables. When all systems are integrated to a single central repository of data, every team member has real-time access to the information and performance reporting on what matters most to them. Service providers and delivery teams know exactly where to go and what they need to do. Dispatchers and backend support know precisely where every provider and asset is and what they have coming up, and can even set up alerts and custom logic flows when teams are running behind schedule and unable to fulfill their next service call on time.

Dispatchers can also better measure on-time performance and customer satisfaction at the employee level, identifying poor performers, who will be sent for further training, and identifying top-performing staff members, who can be used as a model for improving overall performance. Payroll and human resources can track hours worked, services provided, distance driven, number of service calls provided and on-time rates. Fleet management can track vehicle usage, distance driven, drive speed and more. C-Suite execs can even track the KPIs and performance metrics that are important to them, from service calls per type or geography to customer satisfaction and loyalty.

Customer Experience

Strong customer experiences drive strong businesses, and the customer experience starts with the promises that the business makes in its marketing and sales process. For example, when booking a service call, customers expect to be able to select a reasonable window of time. No one wants to wait at home for an entire day, only to have the service provider show up late (or not at all). Also, customers now expect to be able to book service calls on their own through the provider’s mobile app or website, as well as through phone support, service providers and even retail staff.

Additionally, customers expect to be able to reschedule service calls, and many assume they will receive a reminder about the scheduled service. This feature is also helpful for the business, as it increases the likelihood that the customer will be present for their service appointment. On the day of the service delivery, customers expect to be offered shorter, more accurate service delivery windows. Live progress updates also help customers plan their day and prepare for service deliveries as needed.

Customers expect to be able to track the service provider’s progress as they wait for them to arrive. They expect them to arrive on time and, if a provider is running late, they want to be notified in advance. Businesses can provide customers with tools that deliver real-time updates on the service provider’s location and estimated arrival time. If a secondary service call is required, automated rescheduling within a communications app can enable the customer to schedule the service with a single click.

Customers also expect service providers to be polite and presentable and to clean up after themselves. Failure and frustration with a single service call can undermine all of the business’s efforts to gain that customer’s trust and build the relationship. Given these expectations, it is essential that businesses track not only their service technician’s on-time performance, but also their customer satisfaction ratings immediately after the service experience and in the following weeks.

By collecting customer satisfaction ratings and feedback at every stage across the customer journey, and by asking customers what can be done to improve, service leaders can improve their performance, customer relationships and loyalty, and bottom-line performance.

In the era of Amazon, customers expect more from their service providers, making the providers expect more from their dispatch and operations technologies. Given the growing demand for complex, convenient and affordable services, service businesses have no choice but to streamline and grow their offerings through real-time information that ensures full alignment across the entire service and delivery ecosystem.

Notes

1. Harris Interactive & Glympse, The State of Last Mile Service & Delivery, 2018
2. S&C, March 2017, The Real Cost of a Truck Roll
3. KPMG Global Insights Pulse Survey, February 2018

Chapter 7
Crowdsourced Delivery

The business of delivery is rife with interesting, albeit complex, opportunities and challenges. Businesses in different industries and verticals must factor in a variety of unique considerations surrounding their delivery operation and how to best execute it. In the grocery sector, these challenges include the tactics the business will use to keep food fresh while it’s in transit. For retailers, it’s important to consider the areas where delivering from a brick-and-mortar location would be faster and more lucrative than delivering from the warehouse. For businesses in any vertical that are doing delivery, two questions in particular are of utmost importance: Who will do the driving, and how will the business ensure it has an appropriate capacity of drivers at all times?

Crowdsourcing can offer businesses across sectors an effective and efficient solution to many of their delivery challenges. Many businesses turn to crowdsourcing providers because of the flexibility of this approach, one that can easily be scaled up or down as needed. Crowdsourcing can also be used to augment an in-house fleet, adding excess capacity to meet peak delivery demands. In some cases where there are also physical, space-related concerns, such as ensuring that the retail parking lot has enough room for a fleet of delivery vehicles, crowdsourcing can offer a solution.

Crowdsourced delivery also offers businesses a unique solution to the ever-present balancing act between ensuring customer satisfaction, handling the peak delivery rush and managing expenses. As businesses explore whether crowdsourcing is the right option for them, they must ensure that any crowdsourcing model they adopt allows them to manage and coordinate the entire delivery operation across every provider or platform without forfeiting control, and also keep control over the customer relationship.

With the right technology stack in place, businesses can effectively and dynamically manage every process — and person — associated with their delivery operation across both in-house staff and crowdsourced delivery contractors.

An Overview of Crowdsourcing

A wide variety of businesses, including restaurants, retailers and grocers, crowdsource their delivery drivers. By having access to an on-demand, scalable pool of delivery drivers, they can easily and quickly launch a delivery offering and meet capacity when needed — such as when delivery volumes are making it hard to meet SLAs during peak delivery hours or peak delivery seasons.

The most common model for crowdsourcing is working with delivery providers who manage a fleet of crowdsourced drivers and offer crowdsourced delivery as a service. While some providers offer white-labeled delivery as a service (deliveries appear to come from the merchant), many notable providers, such as UberEats, have established strong, customer-facing brands of their own.

Many providers with strong customer-facing brands also offer ecommerce marketplaces that can help expose a wider audience to the business’s products. On the flip side, marketplaces generally place the business and its products alongside its competitors, thereby directly commoditizing its offering.

This creates the need for businesses to find ways to differentiate themselves from the competition. For example, in order to increase their order volume, restaurants can purchase sponsored listings on UberEats’ ecommerce platform, offer discounts, and more. While many businesses invest in marketing to their customers “where they already are,” other businesses have remained skeptical, and do not list their products for sale in any ecommerce marketplaces.

Crowdsourced delivery providers typically charge a fee for both delivery and ecommerce (when available). When they operate as both ecommerce marketplace and delivery fleet, crowdsourced delivery provider fees can be as much as 35% of the total order value. However, these fees are much lower if the business uses only the delivery or ecommerce aspect.

Building Your Own Crowdsourced Fleet

While the majority of this chapter discusses businesses using crowdsourced delivery providers, in-house crowdsourcing is another possible model with its own advantages and disadvantages. Using in-house crowdsourced fleets, businesses can create an on-demand, scalable pool of delivery drivers for their exclusive use. This allows them to quickly launch a delivery offering and then easily scale it, while maintaining their branding and meeting capacity as needed — such as when they can’t meet their SLAs in specific geographies or during peak delivery hours and seasons.

Whereas in some cases the business is responsible for recruiting, managing and training drivers, in others, the business may pay a staffing firm for these services. In-house crowdsourcing models also differ in terms of which work is taken on by a staffing firm and which by the business — sourcing (e.g., hiring and retaining), day-to-day management, training and compensation. The amount of control the company retains over the process can also vary. For example, a staffing firm may be in charge of driver management, while the business provides drivers with performance feedback and eliminates drivers who don’t perform up to the business’s standards.

For example, Walmart, which works with an external staffing firm to operate its fleet of crowdsourced drivers, enjoys complete ownership over the customer fulfillment journey, from order through delivery. That power of branding ensures that customers connect good service with the brand, rather than with a third party such as the crowdsourced delivery provider. An in-house fleet also gives a company insight into customer delivery data. In short, many of the same benefits that are relevant to other crowdsourcing models apply twofold for in-house crowdsourced fleets.

However, operating an in-house crowdsourced fleet is rarely the solution of choice for retailers, grocers, restaurants or other businesses, due to the resources required to develop and maintain the fleet. Amazon is one of the very few companies to develop its own in-house delivery fleet. Walmart, with 1.5 billion employees in the U.S. alone, is another one: the retail and grocery giant has the funds and personnel to manage an in-house crowdsourcing model, including all of the processes and people it involves. Rarely can any but the largest enterprises afford the same investment in time, technology and management that operating an in-house crowdsourced fleet demands.

The Benefits of Crowdsourced Delivery

A central benefit of crowdsourced delivery is the speed and flexibility it provides businesses, both when launching their delivery offering and at scale. Often, crowdsourcing also provides significant financial savings over other delivery models. Maintaining an in-house fleet introduces a number of expenses, including social benefits, paid break times and vacation days, mobile phones for delivery management and tracking, as well as fleet costs such as the lease or purchase of fleet vehicles, insurance, maintenance, fuel and more.

With crowdsourcing, businesses don’t need to shoulder these fleet costs, as drivers are expected to provide their own vehicles. Additionally, because crowdsourced drivers are typically contractors, businesses also save on social benefits, which are quite significant in many regions. With crowdsourced drivers, businesses typically pay drivers per delivery. They rarely pay for the drivers’ down time between deliveries, or for the costs of the first leg of drivers’ journeys (the time or miles they cover picking up a delivery order). This often introduces substantial savings.

Many businesses, particularly in the restaurant and grocery verticals, turn to dedicated crowdsourced delivery providers to ensure a properly executed delivery operation while they gradually transition to their own, in-house delivery service. This allows them to begin offering delivery by outsourcing to these providers while concurrently transitioning to a stable, controlled, lower-cost internal fleet. There are also many businesses using crowdsourced delivery as a cost-effective way to provide delivery in geographies where maintaining in-house driving staff isn’t yet viable.

The Challenges of Crowdsourced Delivery

As with any service that takes the management of a certain business operations out of the hands of the business, crowdsourced delivery presents some important challenges businesses must consider.

A high crowdsourced driver turnover rate is a common challenge. The high turnover stems from the competitive nature of the crowdsource market. Crowdsourced drivers have no shortage of gigs to choose from. Given this, it can be challenging for the crowdsourcing provider to make the economics both favorable to the business and attractive to the driver. In addition to regularly needing to train new drivers, this presents businesses with the challenges of maintaining control and quality. With constant turnover, simplifying and automating driver tasks and delivery flows is key.
Crowdsourcing by its nature demands rethinking both branding and control. One of the great benefits of delivery is that it allows the business to extend its reach to the customer’s doorstep, presenting invaluable opportunities to delight the customer and strengthen customer loyalty. However, crowdsourcing can make it difficult to deliver the desired brand experience. Often, customers are exposed to the delivery service’s brand in place of the business’s.

Businesses using outsourced delivery should try to brand as much of the delivery experience as possible, from the delivery status updates they provide to customers to their live delivery tracker, customer feedback forms, branded delivery bags and more. Similarly, drivers who aren’t employees are typically not as committed to the business and may have less of an incentive to provide the optimal branded experience at the point of delivery, particularly for deliveries in verticals or regions that don’t offer tips. They might even be simultaneously delivering for a business’s competitor.

This is why it’s essential for businesses to define and enforce delivery timing, quality and customer satisfaction SLAs with every outsourced delivery partner. They should plan to embrace technology that will not only track the performance of each delivery partner in real time, but also provide alerts when problems arise.

Using the ecommerce services of a crowdsourced delivery provider presents further brand awareness and loyalty challenges that must be taken into consideration. By their nature, marketplaces that feature competitors side by side can be viewed as commoditizing a business’s offering. This presents businesses with the need to differentiate themselves by ensuring that they have high customer ratings. Additionally, many businesses are further improving their visibility with discounts and paid promotions.

As these tactics further eat into profit margins, each business must do its own financial analysis and build its strategies accordingly. Even with the added expenses, many businesses have found that the sheer volume of orders from aggregators outweighs these concerns.

Finally, and perhaps most importantly, businesses must consider how they can maintain quality and control when using crowdsourced delivery. For example, in the restaurant vertical, research suggests that when facing a delivery issue, customers are more likely to blame the restaurant than the delivery service.1 It logically follows that the same concerns are present across other verticals as well. One of the challenges when working with crowdsourced drivers is their lack of loyalty to the business. When drivers are not motivated to create an exceptional delivery experience for customers, businesses may lose out on brand loyalty.

Only by maintaining control of the entire delivery chain can businesses truly deliver on the high-quality customer experiences that help them generate sustainable growth. In addition to measuring customer satisfaction with the driver’s performance, businesses must also be able to track and utilize data about driver responsiveness to new orders and drivers’ success rates at delivering orders within the promised time frame, so they can make informed decisions, adjustments and improvements.

Maintaining quality and control over crowdsourced deliveries requires a dedicated technology layer. Technology can make it possible for businesses to embrace crowdsourcing — tracking, managing, optimizing and scaling their delivery operation while enjoying the ability to control driver flows, measure driver performance, understand customer satisfaction and collect customer feedback. Dedicated reporting dashboards should provide real-time alerts, timely insights and the top-level reporting needed to make critical business decisions.

The right technologies can even ease the process of training a constantly changing team of drivers — walking them through the processes they need to execute not only to ensure they fulfill their jobs as needed, but also to enhance their experience and help retain them. By helping crowdsourced drivers do their jobs better, this technology layer helps businesses deliver quality customer experiences — alleviating some of the concerns relating to delivery by drivers that are not the business’s employees.

Crowdsourcing in Action: 3 Verticals

Restaurants

In the restaurant vertical, the most popular crowdsourcing delivery models are crowdsourced RDSs (restaurant delivery services) and ecommerce / marketplace / RDS combinations. Restaurants that have been slow to adopt delivery will typically start with one of the major RDSs, such as DoorDash or UberEats (in North America). As they scale, restaurants will often add additional RDSs and marketplaces to broaden their geographical reach and increase scale. As operations scale, most restaurants will transition from simply enabling delivery to also measuring and optimizing it, forming strategic partnerships and taking more control over their customer experience. This is the stage at which they typically seek the supporting technologies that can enable them to effectively measure, brand and streamline their entire delivery operation.

Retail

Excluding white-glove delivery and the delivery of large or bulky items, the delivery of retail packages is an emerging market that is currently served predominantly by crowdsourced delivery fleets, couriers and postal services. These crowdsourced fleets are often ideally positioned for rapid delivery fulfillment. After all, from the customer perspective, if a pizza can be delivered within 20 minutes, it should also be possible for a shirt to be delivered within a similar timeframe.

Retail is a unique market, as not all brands or delivery types are best served by crowdsourced solutions. For example, premium retailers will often want to provide a premium delivery experience — one that is branded and executed by a well-dressed delivery representative. These representatives might also be required to provide on-site services such as installation, setup, upselling warranties or user education. While this can be crowdsourced, the specialization required often leads retailers to take this operation in-house or to work with a trusted outsourced fleet.

Grocery

Grocers are embracing a few different crowdsourced delivery solutions. Until recently, many grocers relied on a single crowdsourced solution for their delivery. However, given the challenging economics of grocery delivery and the increased competition from Amazon, many grocers are now exploring ways to diversify their delivery partnerships and develop their own in-house picking operation and delivery fleet.

Leading grocers like Walmart are deploying multiple delivery solutions, including a mix of crowdsourced delivery services and crowdsourced delivery fleets. Though a relatively small market, online grocery is poised for fantastic growth.2 As the market continues to evolve, with major grocers improving their offerings to better compete with Amazon’s growing grocery delivery operation in North America and around the world, the economics of crowdsourced delivery will change. Grocers seeking to improve their agility to best position themselves in this changing market will increasingly look to crowdsourcing and the supporting technologies that will help streamline and optimize these complex operations.

There are a number of crucial requirements for a successful delivery operation however it’s executed or scaled. As businesses explore the possibility of adopting, scaling or optimizing crowdsourced delivery, they must maintain control over delivery operations. This control is critical to the business’s ability to track, measure and optimize its performance in delivery in order to continuously achieve the most efficient and streamlined delivery operation. Furthermore, businesses must carefully manage crowdsourced delivery so that it fits seamlessly into their delivery operations, enhancing rather than disrupting their delivery flows. Most importantly, businesses must keep their eye on the prize: providing exceptional delivery experiences and building customer relationships.

With the right technology stack in place, businesses across industries can enjoy the freedom to adopt crowdsourced delivery without forfeiting control over crucial components of their delivery operation.

Notes

1. SMG, webinar, What Impact Is Third-Party Delivery Having on Your Brand + Business?
2. McKinsey and Company, Reviving Grocery Retail: Six Imperatives, 2018

Chapter 8
ON-Demand Delivery

Over the last few years, innovators such as Amazon and Uber have disrupted the market to such an extent that customer expectations in terms of delivery speed and convenience have risen exponentially across multiple verticals. Whereas it once took several days for an ecommerce order to arrive, customers now expect everything to be available for ultra-rapid fulfillment, on demand and at a reasonable price.

These expectations are growing around the world. In Europe, over three-quarters of Spanish customers (77%) and slightly fewer French customers expect one-hour delivery. In metropolitan areas, over half of customers expect retailers to offer one-hour delivery.1 Expectations also change according to age, with 67% of millennials expecting one-hour deliveries.

The bottom line is that businesses need to quickly find sustainable ways to meet their customers’ expectations. Although most customers (70%) are willing to pay more for faster or more convenient delivery, virtually all customers (99%) expect the business to foot some of the delivery expense.2 Depending on the vertical and how the orders are fulfilled, businesses can expect to cover anywhere between 25% and 75%3 of these rapid fulfillment and delivery expenses.

On-demand delivery is particularly important for services such as food delivery, grocery top-up shopping, emergency services (e.g., roadside assistance) and any type of delivery to busy, high-income shoppers. These types of customers want the ability to pick up the phone, order a product or service, and have it show up at their door within the hour. That said, not every business is best served by optimizing for speed alone. Multiple studies have shown that customers generally prefer discounted or free delivery, as well as convenient delivery windows, over rapid, on-demand delivery.

Nonetheless, on-demand deliveries are quickly becoming a necessity due to the highly competitive online market, turning them into strong differentiators in otherwise crowded markets. For example, over half (69%) of consumers would not make a second purchase if their delivery was late,4 and over half would go with a competitor who offered faster service.

As well as enabling retailers to maintain market hold and retain customers, the on-demand model presents opportunities for new revenue streams through premium offerings and subscription services. For example, service companies can offer premium rates for on-demand services, while grocers and other retailers can explore white glove options such as garage drop-offs.

The Challenges of On-Demand Delivery

Businesses new to on-demand delivery will need to reorganize their entire last-mile delivery processes and deal with multiple challenges to ensure that their on-demand logistical operations — including backend operations, dispatching, new fleets or drivers, and customer-facing actions — run smoothly so that their customers can be provided with a flawless delivery experience. These challenges include:

Short Time Frames, High Delivery Volumes

On-demand deliveries, with their short time frames and high volumes, hardly leave any room for human error and require a high degree of automation to be completed seamlessly and on time. To ensure a seamless flow, everything from order placement to dispatching to batching should be automated.

For companies using a multi-fleet delivery model in certain geographies or at certain times, an automated system can make the right decisions based on business rules and preferences regarding capacity, and determine whether to dispatch the order to an in-house driver, a crowdsourced one or a 3PL. The system can also make automated decisions regarding extending delivery times or offering alternative delivery options. These decisions must all take place in real time, which necessitates automation technology and other smart solutions.

Functional Silos, Goals and KPIs

One of the most basic, yet complex issues businesses face when it comes to on-demand deliveries is the need to coordinate the real-time collaboration across teams and platforms. The job specialization that is required to scale an enterprise often results in separate functional teams, each acting according to its own objectives, priorities, KPIs, performance incentives and technologies. To overcome this challenge, platforms that were not built to work together in real time must be synchronized to ensure that orders are prepared, staged, dispatched and delivered in a timely manner. Often, new technologies must be added, while old technologies need to be pulled out and replaced with more agile solutions.

Team structures, performance objectives, and even roles and responsibilities may have to be rethought. For example, warehouse and inventory management solutions designed to load eighteen-wheeler trucks for middle-mile replenishment may now be tasked with staging last-mile deliveries using crowdsourced vans and sedans. Similarly, dispatchers trained to manually manage first-mile and middle-mile routing now need to now be able to manage exceptions raised by automated last-mile dispatch platforms. Retail teams trained to sell and convert customers in the store need to be trained and tasked with picking and packing online orders for delivery.

Lack of Customer Focus

The entire value proposition of on-demand delivery is the speed and quality of the delivery experience. This places the supply chain front and center when it comes to the customer experience. However, most supply chain organizations (72%) lack the technology to measure and improve the customer experience,5 and the majority do not see customer-centricity as important enough to invest in.6 Instead, supply chain organizations are substantially more invested in cost saving (77%), increasing revenues (56%) and supporting new business models (53%). This is also reflected in Gartner’s supply chain maturity model, which suggests that supply chain organizations only start putting a strong focus on customer value at stage four out of five.7

There is no reason why supply chains cannot break the mold and adopt a customer-centric strategy. Without this focus on the customer, successful on-demand delivery at scale becomes exceptionally difficult.

Speed and Automation

One of the greatest challenges of on-demand fulfillment is the speed required to make the deliveries on time. On-demand deliveries, particularly emergency services and restaurant deliveries, often have SLAs that are measured in minutes and not hours. Any inefficiencies along the preparation, dispatch and delivery flows will result in poor financial performance and negative customer experiences.

These challenges are compounded further when operating at scale, causing businesses to waste expensive resources. For example, if an order is not sent to a restaurant kitchen on time, the delivery driver will be left waiting for their pickup, and the customer’s delivery will be delayed. If an order was prepared on time but the driver does not arrive on time to pick it up, or if the driver is delayed while trying to locate the order due to poor delivery staging, then the food will be cold by the time it is delivered to the customer. If an order was prepared on time but the dispatcher waited too long while attempting to batch it with other orders in a single delivery run, the first order will arrive late, soggy and/or cold.

The same is true of delivery flows for grocery or emergency auto parts that encounter delays. Any time that was unaccounted for in the planning process wastes expensive resources, increases delivery times, and results in late deliveries and frustrated and dissatisfied customers.

Dispatchers play a very different role in on-demand and planned deliveries. In planned deliveries, they often interact with individual deliveries, either manually planning routes or optimizing automated delivery routes. On-demand deliveries, on the other hand, are generally dispatched on a first in, first out fashion, and this speed causes significant limitations in terms of the dispatcher’s ability to properly control the process.

The only way to ensure that the on-demand dispatch process functions at optimal efficiency despite the constraints is through the use of powerful automation. In fact, fulfilling demanding SLAs relies on speed, which in turn requires that automation be embedded into every aspect of the delivery operation: from backend systems to managers, drivers and customer-facing communications.

Peak Demand

Managing the logistics of on-demand delivery can be extremely difficult during peak times and peak seasons. Holiday shopping accounts for more than a quarter of annual retail sales in the U.S.,8 and each year during the holiday season businesses struggle to manage delivery coverage to make their promised delivery times.

Restaurants, too, face uneven demand on a daily basis. During the rush lunch and dinner hours, restaurants typically have to scramble to send out enough drivers to cover deliveries. Before, in between and after those two blocks of time, the number of drivers they need dwindles. Often, restaurants will take employees who typically function in other positions and deploy them as drivers during the lunch and dinner hours. However, given that driving usually has a different pay rate than other roles, restaurants have to carefully track when these employees perform which roles.

One possible solution for both of these scenarios is to hire third party delivery services to provide additional delivery personnel for peak hours. However, because it can be hard to know in advance how many drivers will be needed, restaurants may be overspending if they pay a subscription fee to 3PLs and/or crowdsourced delivery services. Logistics platforms that automate staging can help food brands keep deliveries cost-effective, while handling the ebb and flow of employees at peak times and ensuring that there are always enough drivers for on-demand deliveries.

The Keys to On-Demand Delivery Success

With its focus on speed and incredibly tight timelines, on-demand delivery requires enterprise businesses to standardize their operational flows while integrating their fulfillment and delivery teams and technologies into a single seamless flow. Every step in the delivery process must be measured, benchmarked and optimized to provide optimal turnaround times at minimal cost. In order to succeed, several crucial factors must be taken into consideration at the strategic level:

Breaking Down Silos

To coordinate massive delivery quantities while meeting the promised delivery times, all systems and teams must work smoothly and in full sync with one another. Many businesses retain legacy systems that are not set up to transfer data in real time, and are thus impossible to use when managing orders where the entire lifecycle from click to delivery can be as short as 30 minutes. Companies must precisely plan how to integrate their systems and human resources on both an organizational and a technical level. This is critical not only for on-demand delivery, but for customer experience as well.

Focus on the Customer

For any business with an on-demand delivery model (and for those without), the focus must be on the customer experience. Looking solely at market demand is not the same as understanding customer needs and taking them into consideration at the strategic level.

The reasons for this are obvious: supply chain leaders are not used to having insights into the customer. While four out of five organizations are investing in cost-cutting measures for their supply chain, only 38% invest in making their supply chain more customer-centric. This needs to be remedied by approaching customer success as a goal of the entire supply chain and holding leaders from all departments responsible for KPIs relating to customer satisfaction. Insights can also be gained by creating post-delivery surveys through various third party technologies. In general, brands must invest in technology that can help them orchestrate, measure and improve their performance as it relates to customer experience.

Peak and Exception Handling

The main objective when it comes to on-demand delivery is to make sure the orders are delivered quickly and on time, at the minimum cost to both the business and the customer. Every step of the delivery flow must be properly managed to ensure that the delivery is relayed to the next team or stage as quickly and efficiently as possible to meet tight deadlines, without affecting quality and reliability. Any delay can disrupt the entire flow.

These considerations become particularly important during peak hours or seasons. Retailers facing a massive increase in order volume during holidays, and restaurants facing the same problem around lunch time, often work with third party providers to successfully deliver all of the orders at these peak times. This means that data will be coming in from disparate fleets and systems, and automated processes are needed to automatically identify driver shortages and assign orders to third party drivers as necessary.

Exceptions, too, must be managed in order to prevent disruptions to an entire batch. With short delivery windows, there is very little time to check quality or verify the efficiency of optimized routing. As a result, exceptions such as late changes to orders, sudden shifts in personnel or unexpected inventory shortages risk disrupting the entire delivery flow.

Successfully executing deliveries in a manner that can account for exceptions requires that every delivery flow be carefully orchestrated and heavily automated. Backend data from all teams should be synced seamlessly and automatically for real-time accuracy across all delivery stages. Changes in one system, such as order cancellations or a change in drivers, must be automatically updated in all other systems. For example, restaurants that use their own POS may not receive updates about a late driver from an external fleet. This must be rectified with a centralized platform that can connect data points from third parties. Automated alerts from that system can notify relevant stakeholders when an exception has taken place. Then, the person in charge of the next stage in the flow should consult the company playbook in order to resolve the issue in a timely and effective manner.

ROI

While businesses must address multiple issues to effectively run on-demand deliveries, the primary goal must be profitability. The economics of on-demand delivery is such that it is difficult to make it profitable, especially in lower-margin industries. To make their delivery operations successful, particularly when operating at scale, businesses must be able to look at the big picture of their business and gain insights on ROI from aggregated data. The leadership must have the high-level information to understand whether delivery times were met — and if not, why not. Costs should be visible on dedicated dashboards and broken down by stages and disparate elements. For example, if multiple fleets are used for deliveries in the same region, decision makers need insights into performance and costs for each fleet, to understand which are over- or under-delivering and which may be too expensive.

Implementing data-tracking technology is critical to understand both delivery performance and how resources play into both performance and costs.

Must-Have Technology

On-demand deliveries are complex and time-dependent. As businesses work to scale this delivery model, technological solutions and process automation become critical success factors. Automated flows ensure that orders are dealt with accurately and efficiently; that every stage of the flow receives the correct, relevant data about the order and delivery; and that the delivery goes smoothly, with any exceptions handled automatically. The only way to ensure reliable handoffs is to use technologies that can integrate with existing legacy systems, while remaining user-friendly for all ecosystem participants.

Also critical for scaling enterprise delivery operations are technologies that provide faster staff onboarding, eliminating the need for extensive training time and speeding up time to optimal performance for the fleet or driver. Similarly, delivery routing, dispatch and driver management all benefit from the introduction of technological solutions that can aggregate data from disparate systems and multiple fleets. Outsourced or crowdsourced drivers in particular benefit from process automation. For example, an app that includes route and stop information, detailed delivery instructions, and prompts for individual stops (e.g., collect proof of delivery, perform an on-site service, etc.) help ensure that every driver, new or experienced, gets their deliveries out on time.

On-demand delivery opens up new avenues for market share through customers who value speed and are willing to pay a premium to get their orders delivered on demand. To take advantage of this growing consumer base, businesses must ensure that they fully understand the unique challenges of this highly customer-centric, time-sensitive delivery model, starting with the processes and technologies required to ensure that the large volumes of orders with highly demanding SLAs can be delivered without a hitch.

Notes

1. Metapack, State of eCommerce Delivery, 2018
2. Capgemini Research Institute, The Last Mile Delivery Challenge, 2018
3. Commonsesnse Robotics, Crossing the Grocery eCommerce Rubicon, 2019
4. Dropoff, 3rd Annual Report, I Want It Now: Same-Day Delivery + The U.S. Consumer, 2018
5. Eyefortransport and Quintiq, D3 2019
6. Capgemini Research Institute, The Digital Supply Chain’s Missing Link: Focus
7. Gartner, Supply Chain Maturity Assessment for Demand-Driven Supply Chain
8. Deloitte, 2018 Holiday Survey of Consumers

Chapter 9
Planned Delivery

In the age of Amazon, customers expect better delivery options. What those options are depends on the individual and their specific situation. A person may prefer free and convenient delivery for specific purchases, but still be willing to pay a premium price for speedy delivery in other situations. Meeting these new demands requires that businesses optimize and manage their planned deliveries using robust technology that allows them to rethink how they approach their delivery operations: how they operate them, how efficient they are, and what kind of customer experience they provide.

By establishing the right processes, guided by technology, businesses can reach optimal efficiency and keep costs down for planned deliveries, while providing flawless customer delivery experiences at the right price point.

Balancing Speed, Cost and Convenience

Despite the growing demand for same-day delivery, there are always situations where people prefer to spend less money and receive their goods or services later. In fact, over a third of online shoppers are happy to wait longer for free delivery.1 However, thanks to Amazon and other ecommerce giants who have full visibility into and control over their entire supply chain, customers (46%) now expect next-day delivery to also be free. Furthermore, if they do have to pay for next-day delivery, 56% of customers are only willing to pay up to $5. For this reason, much of the focus of innovation in planned deliveries has been to reduce multi-day delivery to next-day, while keeping the associated costs to a minimum.

At the same time, planned deliveries do not have to be slow, and must definitely be convenient. Gone are the days when a customer will accept staying at home for nine hours anxiously waiting for their purchase or a service provider to arrive. An overwhelming 73% of big and bulky customers expect a manageable delivery window of half a day, while 45% expect a window of two hours or less.2

Customers are not looking for one single factor — be it speed, cost or convenience. Rather, they are looking for options, and for the best delivery option for their specific needs.

Answering these demands is critical: Customers will go where there are more, and better, delivery options. Seventy percent of US consumers have purchased goods from one store over another because of better delivery options, as would 58% of consumers overall.3 Multiplicity of options is a large reason for Amazon’s success, and one that brands and businesses can duplicate. Indeed, 65% of US Amazon shoppers would order from a different source if the same delivery options were available.

This news is heartening as it is evidence that consumers are attached not to an ecommerce platform per se, but to a level of convenience which can, with the right strategy and processes, be replicated by brands and providers.

Consumers are also demanding a greater hand in planning their own deliveries, including full visibility into the process. In fact, 88% of ecommerce customers expect real-time delivery tracking.4 This is especially true when consumers are anxious about the service or delivery they’re waiting for. If someone has to stay at home for a furniture or electronics delivery, they want to be certain that the delivery or service provider is en route and will arrive at the stipulated time. The same is true for planned grocery deliveries; consumers are anxious that the fresh produce and frozen goods they’re waiting for do not spend too much time in transit. If customers are unable to be at home for the delivery, they want more convenient options than having their package returned to a store.

In order to meet these demands and maintain a competitive place in the market, businesses need to take a fresh approach to their supply chain and create a strategy for planned delivery operations which places the customer — their expectations, fulfillment experience, and any data-driven insight about these needs — at the center of it all.

The Planned Delivery Opportunity

The growth in the number of next-day and other planned deliveries through online purchases presents numerous opportunities for brands and businesses. Over 50% of all ecommerce orders are now scheduled for next-day delivery, reaching a peak of 55% in September 2018.5 These planned deliveries are attractive for convenience-oriented consumers, who want more options regarding where and when their packages are delivered. In one study, 44% of consumers indicated that they planned to take advantage of pickup or dropoff points, so they could avoid staying at home waiting for a delivery or missing a delivery, while 28% were interested in delivery to a locker near their home.

Online ordering has already proven popular with shoppers, and digitizing delivery will provide further opportunities for businesses to retain existing customers as well as attract new ones. Across the US, Canada and Europe, shoppers are 15%–20% more satisfied with their online shopping experience than with their retail shopping experience.6 With most companies, however, innovation ends when an order is placed. This can no longer be ignored, given the clear advantages of providing better planned deliveries, especially considering that 61% of consumers will choose to shop with the same online retailer after a positive delivery experience.

Transforming the customer experience with planned deliveries is aided by the fact that, for many businesses, it’s not new. Retail, service, third party logistics, healthcare and a plethora of other industries have traditionally offered planned deliveries and have much of the infrastructure and many of the resources for optimized delivery already in place. Adding technology layers on top of existing infrastructure (e.g., drivers and fleets, dispatchers) and implementing new solutions to improve efficiency and visibility takes time, but less so than with on-demand deliveries, and less so than if implementing an entirely new delivery model.

The opportunity to create more efficient delivery services is of particular relevance to 3PLs, which are judged based on their ability to meets SLAs and offer the best rates. By optimizing their existing dispatching and routing operations for efficiency, these service providers can offer better, more competitive SLAs and delivery pricing that will net them more customers.

Planned Delivery Considerations

The new expectations for deliveries are clear: Consumers expect deliveries that are faster, more convenient, more accurate and, of course, on time. The primary challenge for businesses lies in finding the balance between efficiency and price point. Retailers overwhelmingly report that reducing delivery costs is the most crucial last-mile delivery initiative in their organization.7 Similarly, 77% of companies report that the key driver of their supply chain investments is cost savings.8 However, only 38% listed becoming customer-centric as a key investment.

This means that the need for cost-effective, efficient operations is clear, but businesses have not yet taken into account the impact on the customer — either in terms of efficiency or in terms of price point. What they may not realize is that the two go hand in hand: Efficient, cost-effective operations enable businesses to provide the improved delivery services that their customers expect.

Many cost considerations are unique to the planned delivery model. Unlike on-demand delivery, planned delivery involves managing vehicle capacity and projected traffic. Each truck roll is expensive (ranging from $250 to $500),9 and dispatchers spend hours organizing routes to ensure, among other things, that every vehicle goes out at full capacity and that drivers can make multiple drop-offs and even pickups on a single run.

The problem is that when the routing and dispatch process is not automated, last-minute changes and exceptions can disrupt SLAs for multiple orders and lead to a succession of missed delivery times. Route optimization today must be highly accurate, as well as flexible enough to account for exceptions, since customers used to ordering from Amazon will not accept anything but on-time delivery. (For more on efficiently managing exceptions, see chapter 9.)

Time-on-site is another expensive consideration that manual route optimization rarely gets right. Big and bulky deliveries in particular can take substantially longer than regular deliveries, making time-on-site hard to estimate, especially if the delivery also includes white glove drop-off or installation, two added extras that show dramatic variations in terms of the time spent on site. Additionally, the large trucks used in these types of deliveries, as well as some types of services, take up more parking space, and it may take drivers substantially longer to find a place to park.

Underestimating time-on-site leads to frustrated drivers and annoyed customers, while overestimating it leads to inefficient routes and expensive underutilization of resources. (For more on the challenges of big and bulky delivery, see chapter 4.)

Efficiently working with multiple fleets is another key step towards keeping delivery costs down and meeting customer needs. Most companies that offer planned deliveries at scale work with multiple fleets, in various combinations of in-house drivers and third party providers. When planning optimized delivery operations, companies will have to look at how they manage both the fleets as a whole and the drivers individually.

Many types of planned deliveries, including big and bulky, white glove, and most types of service, are carried out by drivers and other staff with special skill sets. Each delivery or service must be matched to the team with the right skill set. Furthermore, each order must be matched to the right medium of delivery. Retail, for example, usually requires trucks, especially for big and bulky purchases; restaurants, by contrast, often have bicycle or motorcycle messengers and use crowdsourcing and marketing services.

Even if drivers and routes are both perfectly organized and running smoothly, businesses still need to be able to manage customer-facing difficulties during planned deliveries. Many industries still offer long delivery windows, which demand more from the customer, are particularly hard to schedule, and once scheduled, are difficult to change. This is juxtaposed with the fact that the majority of shoppers are looking for more flexibility when it comes to scheduling deliveries, and are unhappy with their current inability to change a delivery date if they cannot be home.10

This is not theoretical: 30% of shoppers have made changes to delivery preferences after their order has been dispatched, and a further 48% would have done so were the option available. In addition, every missed delivery adds an average of $70 in additional delivery costs and an average of 4.6 days to the delivery process. Despite these realities, long, inflexible delivery windows are still common, even though in the long term, businesses will have to offer the flexibility to enable changes post-dispatch in order to remain sustainable.

Developing solutions to address these common customer pains at scale must be an integral part of the supply chain strategy for any business to remain competitive in today’s landscape. Businesses need to implement delivery technology solutions while creating a strategy that is centered around developing the efficiency, visibility and flexibility they need to be cost-efficient and deliver the flawless fulfillment experience that customers are looking for.

Creating Efficient, Flexible and Cost-effective Planned Deliveries

The goal of effective planned deliveries is to create the most efficient flow for order staging, dispatching and delivery at the minimum cost to both the business and the customer. To achieve this at scale, the delivery strategy must include the use of advanced technologies and the careful orchestration of processes with a focus on how they affect the customer.

Planned deliveries start out with a defined flow. There is a cutoff time for receiving orders that need to be delivered the next day. For example, a logistics provider might have an 8 pm cutoff for all orders. In this process, there is some tolerance for a lack of integration and for working with EDIs rather than APIs.

However, if companies wish to include real-time capabilities such as real-time delivery quotes, they need to be integrated with systems belonging to the relevant vendors, 3PLs and brands. Each company’s backend data must be synced seamlessly to a centralized repository. Changes in any system, such as order cancellations or changes in delivery time, are then updated automatically in both the central and end systems.

This visibility results in faster reaction times, greater efficiency and the capabilities that enable teams to perfectly meet their SLAs. These factors are especially important when managing deliveries at scale: 86% of those who failed to scale lacked end-to-end visibility, whereas only 66% of those that scaled had the same problem. Implementing integration solutions allows for more visibility into each and every participant in the delivery ecosystem, an integral part of launching and scaling more efficient planned deliveries.

Staging and Dispatching

Staging and dispatching planned deliveries is traditionally a low-tech process. For many logistics providers, staging is as simple as moving packages from a pile on a warehouse floor to a truck after it arrives. Often, no one scans the packages until the driver arrives to load them into the truck. This lack of visibility means there is no oversight into orders until they are practically en route.

Technology that can automatically determine which order should go to which fleet adds flexibility to the process of dispatching planned deliveries, enabling dispatchers to shift driver capacity across multiple fleets. This provides the real-time ability to either move or create driver capacity where it is most needed, as well as where inventory or specialized service capabilities may be closest.

Dispatchers and routing stand to gain a great deal from automated solutions. Often, a dispatcher will manually sort packages for each driver, and even use pen and paper to plan routes. This hours-long process fills up most of the dispatcher’s role, leaving them with little time to deal with exceptions. For example, if packages come in after all routes have been planned, the dispatcher cannot reroute from scratch; the most they can do is to hastily add the package to a driver’s front seat, hardly the most efficient or transparent way to transport goods.

An automated staging or dispatching solution can reroute with every change and provide updated routing within minutes. These solutions can be programmed to include logic specific to that company’s operations. For example, in some countries, breaks for drivers are strictly regulated, as are their working hours. A good routing solution will apply all relevant rules to its logic and quickly determine a route optimized for speed and capacity. This opens up significant resources for managing exceptions and fine-tuning routes instead of doing manual ad hoc work.

Time-on-site is another important aspect of routing that technology can help define more accurately, especially a holistic solution that incorporates route optimization, machine learning and driver tracking. Driver apps can record how long drivers spend at a given location, and to account for parking difficulties, they can mark drivers as having arrived when they get close to the destination, marking that time as the beginning of time-on-site. Tech solutions using machine learning can then aggregate that data to find patterns per driver or location and eventually predict time-on-site. The resulting route optimization can accurately include time-on-site, which dramatically improves delivery estimates, on-time deliveries and overall customer satisfaction.

Third Party Fleet and Driver Management

While dispatchers working with in-house fleets can still scrape by working with pen and paper, if not very efficiently, management tools are a must-have for multi-fleet deliveries. Multi-fleet is a practical model for maintaining enough resources to perform deliveries across multiple regions or in verticals with varying demand across different times of day. However, brands and service providers face bottlenecks to efficiency due to the high churn rates of outsourced drivers, drivers who deliver for multiple brands, and the expenses involved in onboarding new drivers.

A multi-fleet delivery operation can include in-house drivers in combination with regional couriers, 3PLs, crowdsourced delivery providers, and traditional post and parcel carriers. Each fleet has its own logic, employs drivers and providers with different skill sets and levels, and may be using a different driver app and routing system. In order to efficiently operate at scale, delivery providers need to automate their dispatch and operational flows and use technology to strictly standardize all their different processes.

Some businesses regularly run into a situation where they don’t have enough internal capacity to meet demand and need to engage additional fleets to reach the required capacity. These situations can be addressed ahead of time by using dispatching tools that automatically assign orders to a specific driver or team of drivers. When additional drivers will be needed, dispatchers can plan accordingly.

Additionally, when delivery data is captured via technological solutions, management can understand how fleets and drivers perform, breaking down elements such as on-time deliveries, number of deliveries, successful delivery rates and customer satisfaction. This helps companies identify more successful fleets and create a more effective balance between in-house and external fleets — taking into consideration everything from the average delivery time, to the associated costs and all the way to the specific skill sets of each fleet.

This level of insight into driver and fleet efficiency must be implemented using the right solution, and it must be viewed at a high level by management in order to provide actionable insights that improve delivery efficiency.

Through the use of automated delivery planning and dispatching tools, dispatchers have the flexibility to plan more deliveries while ensuring that they meet SLAs for existing capacity. Moreover, with the standardization, automation and flexibility that these technologies provide, businesses can actually grow by efficiently increasing the geographical reach of their delivery services while keeping costs down.

Driver empowerment

If customers are to be at the heart of any planned delivery strategy, driver empowerment must be one of its core tactics. Drivers often have to scan their own packages; some even have to plan their route by typing each order into the route planner of their choice — or even just Google Maps. The first step in adding efficiency to this process is to align routing methods, ideally through a single tool.

On a centralized management platform, the moment an order enters the system, it syncs with the integrated driver apps. Drivers immediately see the relevant order details on their app and, if the platform includes a routing solution, also have their entire day mapped out before they begin. This saves precious time that can be used to include extra orders on their regular route or to extend it. Outsourced fleets with their own driver apps can integrate with the central platform to receive the order details and report back driver location and other real-time data about the delivery.

These solutions are a strategic imperative, both for removing inefficiencies from the planned delivery process, and for providing visibility to management and customers alike. Driver apps and integrated fleet management tools also accelerate the onboarding process for new drivers, improving the delivery fulfillment process far more quickly than if the drivers had to develop the knowledge and expertise on their own.

The strategy for these improvements should focus on getting more done in less time with fewer resources, while providing a great customer experience. It is also important that, whichever technological solutions are implemented, they be flexible enough to work with the delivery resources already in place, so that businesses can start seeing immediate results without having to start from scratch.

Optimizing Customer Fulfillment and Data

Dig deep enough into any successful strategy for delivery today and you will find customer fulfillment at its core. Almost every tactic implemented throughout the delivery flow, be it solutions for accurate time-on-site and route optimization or data syncing across stages and teams, will result in a better delivery experience for the customer.

A customer experience app that incorporates real-time delivery updates will give customers a much-desired sense of control over the delivery. If it is synced with the order source, customers can even reschedule deliveries while their orders are en route. This type of app complements tools in earlier flows that provide visibility from order through delivery. Businesses also benefit by being able to receive direct feedback from customers through the app.

Similarly, building better delivery operations and more efficient delivery flows introduces a great degree of flexibility that helps meet customer demands. When dispatchers can run last-minute changes through a route optimization tool, instead of taking another hour to do it manually, customers get the opportunity to make last-minute changes or to select next-day services that weren’t previously available. More accurate estimates of time-on-site, in particular for white glove and service deliveries, enable businesses to provide customers with shorter delivery windows. If a provider is running late, they can use a customer-facing app to update the customer with a pre-written, automated update and suggest an alternative collection time or location such as a local shop or locker, instead of having the driver return it to the pickup point.

Customer-facing technologies also provide excellent opportunities for a branded experience, as delivery is often the only touchpoint a brand has with customers who shop online. While marketplaces have their advantages, ownership of the customer experience, brand awareness and customer data are the first things lost when control is passed to a third party. Solutions with white-labeled apps mean that the optimal delivery experience will be attributed to the brand, and not to the source of ordering, as is too common today.

Having integrated data and delivery operations with full visibility opens up opportunities for offering add-on services and loyalty programs that can help defray the cost of deliveries. These add-on services are a fairly new development in the world of planned deliveries and may not be relevant for all industries. For furniture retailers, large electronic appliance vendors, and other businesses that offer big box deliveries and white glove services, add-on services help differentiate their brands while providing customers with the multiplicity of options they are looking for. (For more on add-on delivery services, see chapter 5).

The term planned deliveries refers to how a company organizes its delivery processes ahead of time, but also to the customer’s desire to make the choices around their own delivery. Customers now expect the ability to plan where, when and how they will receive goods and services, along with options that will allow them to balance convenience and price to their satisfaction. As businesses adopt new tools and strategies — including customer-centric operations, multiple fulfillment channels, and automated dispatch and delivery solutions — they are able to become more efficient and cost-effective while simultaneously providing their customers with more convenient delivery options and better fulfillment.

Notes

1. Accenture, Reroute Your Strategy for Last-Mile Delivery. 2017.
2. Convey, Last Mile Delivery: What Shoppers Want and How to #SaveRetail. 2018
3. Metapack, 2018 State of Ecommerce Delivery. 2018.
4. Dropoff, I Want It Now. Same-Day Delivery + The U.S. Consumer. 2018.
5. IMRG, Valuing Home Delivery Review. 2018.
6. UPS, Pulse of the Online Shopper Study, 2018.
7. Eyefortransport & Quintiq, Dynamic Distribution Disruption, 2019.
8. Capgemini, The Digital Supply Chain’s Missing Link: Focus. 2018.
9. Yakel, Jerry, “The Real Cost of a Truck Roll. S&C Electric Company, 2017.
10. Convey, “Overcoming the Large-Item Delivery Challenge”.

Chapter 10
Planned / On-Demand Delivery

Every enterprise business with goods or services that need to be delivered faces the same challenge: balancing high customer expectations for convenient delivery at reasonable price points with the high costs involved in offering same-day and next-day fulfillment. Meeting these continuously increasing expectations in a cost-effective manner demands both careful planning and the operational agility to deliver multi-day, next-day, same-day or on-demand as required by the customer.

Many businesses are turning to a planned / on-demand hybrid model in order to utilize the same resources to offer both rapid on-demand delivery and pre-scheduled, planned deliveries. This model can be difficult to maintain, as it can easily overwhelm traditional dispatch and routing solutions. However, when implemented successfully, it provides companies with the choice, flexibility, efficiency and effectiveness they need to succeed in today’s ever-changing market.

Striking the Optimal Balance Between Speed, Cost and Quality

The frequent assumption today is that customers equate great customer experience with fast delivery. In reality, customers look for delivery options that can provide them with the right combination of value and convenience; speed is only one variable in that equation. A high-quality customer experience starts with the right product selection and pricing, continues through delivery-related factors such as optimal timing, and ends with an exceptional level of customer service. Customers expect their deliveries to arrive on time, but they also expect to have the ability to select a convenient delivery time window; receive a narrower delivery time slot closer to the actual delivery; reschedule a delivery; easily return any unwanted items; and track their delivery progress in real time.

In short, while speed matters greatly to customers in some cases, there are times when a slower, planned and less expensive delivery option turns out to be more valuable to the customer.

For example, customers who urgently need a large home appliance are often happy to pay a premium for on-demand, same-day delivery and installation in a very narrow delivery window (e.g., 6 pm to 7 pm). However, a customer whose house is undergoing construction may not want the appliance delivered immediately; this type of customer would be happy to save on delivery costs in exchange for a slower, three-to-five-day delivery.

In order to provide on-demand or next-day deliveries, as well as lower-cost planned deliveries, delivery providers must develop the functional flexibility to manage both models in tandem, without compromising delivery quality.

The Growing Demand for On-Demand

The market for on-demand delivery is growing across every sector. Whereas exceptional restaurant delivery has already emerged as the new norm in many regions, on-demand retail and service deliveries are often strong differentiators in otherwise crowded markets. Nearly half of US consumers (43%) now expect companies to provide “faster” delivery times, a 23% increase in one year — and among younger consumers, the percentage expecting fast delivery is even higher.1 Over two-thirds of consumers (69%) would not make a second purchase from a retailer if their delivery was late — and most consumers (55%) would switch to a competitor that offered faster service.2 Although the call for on-demand delivery is clear, so are the difficulties of successfully implementing it, especially at scale.

Nearly all on-demand orders are dispatched for delivery as soon as possible. This requires expediting and efficiently managing fulfillment and delivery flows with the goal of minimizing the time from when the order is placed to when it is delivered to the customer. While businesses can sometimes use historical data to roughly forecast order volumes, with on-demand, delivery planning and optimization becomes particularly challenging since they rarely have advance notice as to what and how much will need to be delivered where and when.

Given the nature of on-demand delivery’s incredibly rapid delivery promise times, this model necessitates a high degree of automation for dispatch, routing and optimization. Since there is rarely sufficient time to optimize delivery flows on the fly, improvements to on-demand delivery models typically occur higher up the organizational ladder, by tweaking the dispatch algorithm logic or changing operational flows.

The economics of on-demand delivery these days make it particularly challenging for businesses to establish profitable delivery offerings. For example, delivery costs are the number one hurdle to online grocery profitability.3 While most consumers (64%) want same-day delivery, the amount they are willing to pay for it is a serious constraint. Although most customers expect to pay extra for one-hour delivery, 30% of consumers are only willing to pay $6 or less for two-hour delivery.4 To compare, most US grocery stores charge around $8–$10 for same- or next-day delivery and require a minimum purchase.5 Since many companies, including Amazon, use shipping as a loss leader, the incentive to closely manage delivery costs is obvious.

For more insights into on-demand delivery, please see chapter 7.

The Nature and Complexity of Planned Delivery

Planned deliveries pose different challenges than on-demand delivery and typically fit a highly specialized cadence. For example, one type of planned delivery might require that any orders for next-day delivery be placed by noon. In this scenario, dispatchers will review the next day’s deliveries at noon, often with the help of automated routing software. There are numerous variables that dispatchers must take into account, including driver ratings, driver certifications (e.g., licensed for cable installation), the number of team members required, inventory availability, inventory location, transit time, parking availability, time-on-site, vehicle type and vehicle capacity. Obviously, a human being can only take a limited number of variables into account, which is why technology must be involved in the process.

Continuing the example above, an automated routing system would be able to efficiently match driver certifications and truck capacity with delivery requirements. This frees up dispatchers to deal with exceptions and situations where humans need to apply common sense in order to fine-tune the machine’s results.

Whereas manual routing typically takes dispatchers a few hours, automated routing technology can provide a fully optimized route within minutes. Many dispatchers will then further optimize these routes based on their personal knowledge of the business, the drivers and the local geography. When drivers arrive the next morning, they are given their runs so they can begin their day’s work.

For more on planned delivery, please see chapter 8.

The Challenges of Planned / On-Demand Hybrid Delivery

Given the very different natures of the planned and on-demand delivery models, businesses looking to offer their customers the convenience of choosing between these delivery models must be able to efficiently manage their supply chain operations and delivery dispatch at scale.

For many businesses, this planned / on-demand hybrid delivery model takes the form of a set schedule of cut-offs that occur over the course of the day, at which times orders are aggregated and then planned for delivery during the same time slot. Whenever a cut-off kicks in — every 4 hours, for instance — a new batch of orders is consolidated and routed.

In order to meet these small cut-off windows, inventory picking and staging need to happen at regular intervals, with strict internal deadlines. While the inventory is being collected and staged, the delivery operations team needs to assign delivery drivers and vehicles, quickly optimizing the delivery route.

However, these tight timelines and complex operations require that every component of the delivery fulfillment operation run in perfect synchronization, leaving operations exposed to potential errors or delays if even one aspect of the process is not up to speed. For example, when items are picked from the retail store, every inventory item’s location must be precisely mapped, and these retail maps must be updated every time inventory is moved. Manual delivery routing and optimization, particularly for complex deliveries such as white glove deliveries, becomes exceptionally difficult with these tight timelines.

A “just get it done” mentality is understandable at times, but quickly proves inefficient and expensive at scale.

The last but most important consideration is data collection, quality and synchronization. Planned / on-demand hybrid delivery models require that different teams in an organization operate as a streamlined, efficient assembly line. Everyone from dispatch, picking and staging teams, to the drivers, customer service and end customers must be kept in the loop with the right information at the right time.

To scale any planned / on-demand delivery operation, companies must utilize advanced technology that efficiently manages the flow of information and data from the order through to the final delivery.

Creating an Efficient Planned / On-Demand Hybrid Delivery Operation

One important objective of an effective planned / on-demand delivery operation is to allow the maximum time for order preparation, picking, staging and delivery, all at the minimum cost for the business and the customer. Every element of the delivery flow has to be orchestrated so that each stage in the relay will have the optimal amount of time and direction required to meet tight delivery windows without affecting quality or reliability.

For example, if an order window closes every three hours, there is little time for the preparation work to be done, not to mention the handling of important details like checking quality control or optimizing routing efficiency. In this situation, any exceptions, such as late changes to orders, inventory shortages or substitutions (for example, swapping one brand of pretzels for another in a grocery order), can disrupt the entire flow.
To prevent such disruptions, every element of the fulfillment flow must be properly defined, executed and benchmarked. Each stage in the relay, from order picking and collection to delivery staging, dispatching and delivery, must follow its own logic and flow before being efficiently handed off to the next stage in the relay chain.

In order to manage and optimize this process, each team’s backend data must sync seamlessly and bi-directionally with all the others, so that it is available and accurate for everyone involved, at all times. Furthermore, as processes often occur in tandem (e.g., picking and staging occur while dispatchers are planning the delivery routes), changes in one system, such as order cancellations, must be automatically updated in all other systems.

The downside to all this efficiency is the danger of “data overload”: teams on tight deadlines becoming overwhelmed by data that is irrelevant to their roles and responsibilities. The warehouse and picking teams need a view of the orders so as to efficiently manage labor and inventory, but they do not need to know customer addresses. Dispatchers, on the other hand, need a view of order sizes and required skills, as well as delivery addresses and customer profiles, in order to plan routes and ensure the drivers are where they need to be. For example, a dispatcher may find that a particular customer left a strongly negative review regarding a particular driver, and the dispatcher  may want to now avoid sending this driver to that customer. However, this information would likely distract the picking team and should not be shared with them.

Drivers need to know at every stage where they are expected to be, at what time, and what is expected of them. Drivers must also be instructed to bring along the proper physical documentation (e.g., warranty forms) and payment methods, and they need to know when and how to collect proof of delivery. Customers also need a window into what is happening, making real-time updates on order status and delivery ETAs the minimum expectation they have when scheduling a delivery. Finally, management dashboards that visually display high-level data across all of these processes are required to ensure smooth delivery operations.

For more on the planned and on-demand delivery models, please see chapters 7 and 8.

Dealing With Exceptions

Every on-demand delivery model needs to include the ability to address contingencies and exceptions, such as:

An item is out of stock, and therefore an order cannot be shipped complete.
An order is not staged on time, so it is not ready when the truck is due to leave.
A customer changes an order at the last minute.
A customer requests a change in the delivery time or address.
A previous delivery, particularly a service delivery, cannot be completed on time, delaying that driver’s next service appointment.
The delivery driver is delayed in transit due to traffic or weather.
The customer is not available to accept the delivery.
The customer rejects the order due to missing or faulty products.

Each of these issues can have an impact on every other function in the delivery supply chain, as well as on the customer.

Successfully executing complex delivery flows using a planned / on-demand model requires that every flow be carefully orchestrated and, to a large extent, automated. While exceptions are inevitable, they should not stop or slow down the delivery progress. Common exceptions and the correct resolution flows should be pre-programmed into the fulfillment flows and logic.

For example, if a picker finds that the grocer is out of a specific brand of potato chips, the picker app might be programmed to instruct the picker to substitute another similarly priced brand of potato chips. The picker app will note the substitution, and the customer’s order receipt will reflect this change. If the customer is dissatisfied with the substitution, the grocer will refund the money and note on the customer profile that the customer does not want substitutions.

In contrast, big and bulky appliance delivery flows will rarely need to deal with inventory issues or deploy a substitution flow. However, customers increasingly look for the ability to reschedule deliveries up to the day of delivery. In this case, the retailer must determine how and when it can accommodate these requests, with the goal of providing an exceptional customer experience without damaging the bottom line.

Regardless of the vertical, every operations team must have a clear, centralized view of delivery activities from order placement through hand-off to the customer, and a preset flow for handling the inevitable bumps along the way. Today’s technology solutions make this possible by providing real-time visibility into delivery fulfillment progress, as well as automating the logic and flows across the organization. There are even applications that will proactively notify dispatchers or management of projected and actual delays, so they can take corrective action both proactively and reactively. For example, if a driver is running late returning from a previous delivery and may miss their next delivery time slot, the dispatcher will be alerted to the problem. The dispatcher can then either send an SOS broadcast to all on-shift drivers asking if they can fulfill the delivery, or engage a third party service, all without leaving the application.

Optimizing Planned / On-Demand Delivery

The more complex the delivery flow, the harder it is to manually manage or optimize it. Businesses must find the relevant tools to provide them with the insights and automation required to optimize planned / on-demand hybrid delivery models. This typically takes place in three steps:

Integration and Data Synchronization

When it comes to complex, hybrid delivery models, real-time data integrations are essential to ensuring that the entire ecosystem is working in tandem, on the right tasks at the right time, in order to ensure on-time and efficient delivery. Furthermore, when there is an exception, such as a cancellation or rescheduling, the changes should automatically cascade to all the teams, updating them through the platforms they already use.

It is important that whatever technology businesses use will integrate with the business’s existing supply chain systems, from the TMS and WMS all the way down to inventory management and CRM systems. A robust, two-way data synchronization ensures that every supply chain and business platform, as well as all team members, are aligned at all times.

Process Standardization and Automation

As businesses scale, particularly if they have complex delivery flows, process standardization becomes increasingly critical. Delivery fulfillment operations should run like an assembly line, with each team member and function playing a specific role, following prescribed processes that can be measured and optimized. Standardization also enables smooth and consistent handovers between teams. For example, standardization allows the grocery delivery staging teams to know exactly where, when and how they will receive inventory from pickers, as well as when, where and how they need to hand the orders over to the delivery drivers.

Delivery fulfillment operations should run like an assembly line, with each team member and function playing a specific role, following prescribed processes that can be measured and optimized.

Similarly, automation helps businesses scale their operations, especially when delivery timelines are very tight. Continuing with the grocery example, automation ensures that the right orders are sent to the right pickers at the right time, and that the right inventory is collected and staged in time for pickup.

Standardization and automation become vital when it comes to delivery routing, dispatch and driver management. Automated dispatch and routing allows businesses to rapidly scale up their delivery operations. Ideally, this automation should, at a minimum, take into account the same considerations that a human dispatcher would. For example, an automated routing solution can identify when an on-demand delivery is slated for the same general time and neighborhood as a planned delivery, calculate the impact of adding the on-demand delivery to the existing planned delivery run, and then add it if appropriate.

While full automation may sound like the ideal solution, many businesses prefer to engage experienced staff at specific touchpoints. These staff use automation as a starting point and refine the results based on their own experience. For example, an auto mechanic may request an ASAP delivery from an auto parts retailer for a standard tire. The retailer’s dispatcher uses automation to identify the nearest driver with an extra tire on their truck and to calculate their arrival time. The dispatchers then ask the automation system to calculate the arrival time of a dedicated delivery from a nearby warehouse or retail location, so they can make the optimal decision, which balances the need to provide the best customer experience with the requirement to do so at a reasonable cost.

Process automation is particularly important for businesses that contract outsourced or crowdsourced delivery drivers. Many applications for managing delivery drivers provide the ability to define a set delivery process, as well as the ability to automate the sending of driver progress reports back to dispatch. For example, the app can instruct drivers on where to arrive and when, as well as how to pack their vehicles, and can provide driving directions and delivery instructions (e.g., don’t ring the doorbell), prompt drivers to collect proof of delivery or perform an on-site service, and more. By automating the management of each delivery driver, businesses ensure that drivers perform their delivery duties as required.

Insight and Optimization

Enabling a bi-directional sync between the business’s various internal platforms and teams will help enterprise leaders gain powerful insights into their entire delivery logistics ecosystem. While this use case is not unique to businesses using a hybrid planned / on-demand delivery model, the resulting insights are particularly relevant for those using complex delivery models.

For example, unifying performance data can help leaders identify where processes are lagging and which stages in the process can be modified to improve performance. This becomes particularly important when considering the tight timelines of on-demand delivery.

Similarly, businesses can test multiple price points for different delivery options, and match the selected price and delivery options with their customer satisfaction ratings to identify the optimal price point and delivery options for each market.

Hybrid delivery models, such as planned / on-demand delivery, provide businesses with the best of both worlds: the ability to plan ahead for deliveries while still offering the convenience of on-demand delivery. While this complex model introduces a number of challenges, the rewards can be substantial for businesses with the right processes and technologies in place.

Notes

1. Dropoff, I Want It Now. Same-Day Delivery + The U.S. Consumer. 2018.
2. Capgemini Research Institute, The Last-Mile Delivery Challenge. 2019.
3. Kuijjpers, Dymfke, et al. “Reviving grocery retail: Six Imperatives”. McKinsey & Company, 2018.
4. Macquarie Research, Concierge Economy in Retail. 2018
5. Magill, Elizabeth, “15 Best Grocery-Delivery Services That Are Worth the Money”. GoBankging Rates, 2017.

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