The challenges of last mile logistics
As the shift from brick and mortar to online retail continues, new customer expectations regarding last mile fulfillment speed, convenience and costs have strengthened existing challenges for online retailers and logistics providers.
These logistics challenges fall into four main categories:
One Incisive report showed that 84% of surveyed shoppers ranked speed of pickup for “buy online pickup in-store” or curbside orders to be very important. In an American Express and Forrester survey, 57% of respondents stated that same-day shipping would make them more loyal to a customer’s brand.
Still, speed is not as critical of an issue today as it was in the past. Safety and convenience have taken the lead as top priorities for customers. Price, as always, is another major consideration. Many customers prefer to wait another day for free shipping rather than pay 5 or 10 dollars for same-day shipping. By offering flexible choices, customers are able to choose if speed, price or other considerations are their priority.
Businesses may have an advantage by delivering faster as this will reduce their cost to deliver and, as a byproduct, their shipping prices. Also, the faster that orders get delivered, the sooner capacity is opened up, enabling more deliveries with the same amount of resources.
Last mile delivery anxiety is the stress consignees feel when they don’t know where their order is, or when it is arriving – and it’s become a serious concern for brands and ecommerce sellers.
In the era of on-demand everything, tracking codes are no longer enough. Shippers and end customers want and expect full, real time tracking with their order: to see where the driver is at any given moment and exactly when he or she will arrive.
Customers today expect fast delivery that requires efficient last mile logistics processes. One method of increasing efficiency is to make sure that vehicles maximize load capacity. Take, for example, a mattress company with an order to ship 20 mattresses, but a truck which can only manage 5 mattresses at a time. The driver has to perform several runs back and forth between warehouse and end location to complete a single order. The cost of gas is greater than if a more appropriate vehicle had been assigned to that order. This is an example of an inefficient last mile process.
This inefficiency costs both logistics companies and retailers large sums of money. The same goes for dispatchers who manually plan routes, the call centers that have to deal with unhappy or confused customers and more. As soon as the process becomes efficient, everybody wins.
For both retailers and logistics companies, efficiency is also critical to increasing order fulfillment capacity. When lacking efficiency, large order volumes can cause your services to veer off schedule and lead to late or failed deliveries and annoyed customers.
This is where technology can make a difference. Innovative logistics management software allows retailers to automate traditionally manual processes: from deciding where to fulfill orders from, to dispatching orders to different fleets or drivers across multiple geographic locations based on multiple variables.
Managing a last mile delivery service provider
Today, 3 out of 4 retailers expect to work with third party fleets, often in combination with an in-house fleet. Being able to manage drivers from third party sources on the same dashboard and through the same system as your own fleet is crucial for scaling last mile delivery operations.
When planning order fulfillment, evaluating and choosing the best last mile carrier or 3PL for your business is of the utmost importance . At the end of the day, the carrier is the face of your brand when it finally meets your customer. It is important to evaluate a last mile delivery service provider based on your specific needs, and have access to operational and commerce performance in order to effectively compare logistics providers.
On demand vs. scheduled deliveries
Efficiency also means different things for on demand and scheduled deliveries:
Planned deliveries – Planned deliveries 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. Dispatchers would review the next day’s deliveries at noon, often with the help of automated route optimization software. There are numerous variables to be taken into account, including driver ratings, driver certifications (e.g., licensed for cable installation), inventory availability, transit time, parking availability, time-on-site, vehicle type and vehicle capacity. To take more variables into account requires a dedicated technology.
Whereas manual routing typically takes dispatchers a few hours, an intelligent route planner app 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.
Same day delivery – on demand delivery comes with its own set of problems to tackle, revolving mostly around lack of time and the costs involved.
- Lack of planning: with ASAP orders, dispatching and mapping routes must be done automatically, otherwise it is essentially impossible to optimize for speed and cost.
- Managing customer expectations: There’s no time for customers to make changes such as delivery location or even a change in the order.
- Costs: Sending out a delivery to one person is typically not highly cost-effective. You don’t have time to figure out what goes in each vehicle, and how to organize to get each delivery out and to its destination in the shortest amount of time possible and with the smallest use of resources, unless you are digitized and automated.
Dealing with exceptions
Every on-demand fulfillment model needs to include the ability to efficiently manage delivery exceptions, such as:
- An order that includes an out-of-stock item
- An order is not staged on time, so it is not ready when the truck is due to leave
- A customer requests a change in the delivery time or address
- A previous delivery, particularly a service delivery, cannot be completed on time, delaying the next service appointment
- A failed or missed delivery
- The customer rejects part of the order due to missing or faulty products
Each of these issues can have an impact on every other function in the last mile delivery process, as well as on the customer.
Driver efficiency and churn
Investing in optimized routes and other efficiency tech is worthless if there is no compliance from the drivers. For this reason (among others), the ability to track where all drivers are at any given time is tied with greater operational efficiency. A centralized system that tracks driver location in real time helps businesses keep track of their drivers, understand issues in performance, and see whether their tech solutions are being utilized.
Logistics providers can also tackle driver churn through a mobile app for drivers that helps them manage their routes and all the requirements per order. This makes the driver’s work easier, and also allows them to complete more orders per run.
According to some estimates, 28% of the total delivery cost to a business comes from the last-mile. Too often, companies pass these costs on to the customer. Combine the issue of cost with the heightened expectations for same day or on-demand delivery, and you have a recipe for strain on budgets and logistics providers.
Additionally, retailers often find their last mile delivery costs soaring when they haven’t properly planned for inconsistent demand – for example, during peak seasons or peak times of day. All of this makes it challenging to run delivery profitably.
Owning the entire supply chain is not a viable option for most businesses, and there is no one solution to cut costs for last mile deliveries. However, proper planning, and optimizing your supply chain through technology can go a long way to reducing some of these expenses.
The bottom line: efficient operations is a must for meeting demand
Growing demand should be a blessing for any business. But while the rise in eCommerce is a welcome transition for many online sellers, scaling up delivery services efficiently and quickly can be daunting.
Without an efficient supply chain and operations system in place, businesses will find themselves wasting money and resources in trying to reach new demand. In terms of logistics, hiring more drivers and contracting new fleets may also be wasteful if done without a plan and to ensure maximum efficiency.
Ship from store
With store foot traffic in decline, now is the time for retailers to restructure some stores as MFCs – micro fulfillment centers – effectively ‘dark’ stores’. When operated efficiently, these stores turn into hyperlocal fulfillment centers for multiple fulfillment models, including curbside or click and collect, and in store returns. Turning stores into MFCs is often a pivotal part of guaranteeing same-day fulfillment in urban areas, as service providers can pick up orders and deliver them within hours.
If retailers want to ship from retail stores as well as from distribution centers, they will need to rethink everything from the layout of the staging area, to picking and order prep, and how these steps will impact their store staff’s efficiency and performance across other tasks. Logistics providers may have to restructure their operations in order to offer ship-from-store services in urban areas.