The slippery slope of last mile delivery : Advanced solutions for emerging challenges
Disruptions in industry are often the outcomes of demands arising out of evolving needs and new problems. A McKinsey study reported that the costs towards global parcel delivery were a staggering €70 billion with three locations accounting for €28 billion – the U.S in the West, Germany in Europe and China in the East.
New expectations of customers
The narrative gets interesting when this statistic is read along with the other studies that clearly highlight a shift in preferences. Markets are evolving, and consumers who have latched onto online shopping models, are now looking at better options. Price discounts, offers, and inventories which have been the standard differentiators are now making space for another demand. This new expectation is in the post-purchase space.
Customers who have for long been accustomed to the habit of possessing a product immediately after purchase had traded that ‘gratification’ for other factors – more choice, slashed costs and convenience of shopping from home. The expectations of consumers is to narrow the gap between an in-store purchase and an online purchase. In other words, customers expect the products to be delivered at the earliest. With the possible exception of individuals who order gifts (which could be at a date much later than the date of placing the order), all online shoppers expect to have the products delivered at the earliest.
McKinsey again reports that one out of four customers are ready to pay a premium to receive products on the same day, or for instant delivery. This is the fillip for last-mile logistics, creating a ready-made need for disruptions in the manner products are shipped and delivered to customers.
Challenges in last mile delivery
Common challenges that loom large for stakeholders of all sizes include issues that will remain unchanged in the near future.
Poor road conditions and lack of traffic management
The condition of roads and poor traffic management are woes that are unlikely to be resolved in the near future. When issues are resolved through additional infrastructure, the problem is most likely to have become bigger, rendering the stop-gap arrangement and solutions ineffective. Snarling traffic jams and poor road infrastructure seriously dent the economics of delivery.
Issues during actual delivery
Issues plague e-commerce right at the finish line. Customers often end up sharing incorrect addresses, or may not be available to take delivery. This gets compounded further when the locations do not have parking facilities or if the customer is not inclined to receive the order. This brings great stress on the delivery schedules, in addition to adversely impacting the costs of delivery.
Real-time updates of shipment status
In a data-driven world where information is available instantly, e-commerce players often fail to meet the expectations of customers. Customers who place orders expect to receive updates on the status of their orders. A clear and unambiguous tracking option is a strong desire of clients who wish to know more about the time the order will be delivered.
Rising fuel costs
Fuel costs are not likely to reduce, with every round of fluctuations only contributing to a marginal rise after a period of declining fuel costs. This adds to the burden of e-commerce players who presently shell out as much as 28% of total delivery costs towards the last mile of delivery. While the operations in hubs and other facilities can be streamlined, with more cost-cutting measures, the costs of last mile delivery is only bound to increase with rising fuel costs.
Transport Management System – The silver bullet of last mile logistics
An advanced TMS app can offer overarching benefits to e-commerce players. The advantages will not be limited to last mile delivery, but will extend throughout the supply chain. Across inbound and outbound movements, a robust and advanced TMS adds value, streamlining processes and improving efficiency. Standout advantages include :
- Intuitive solutions that offer inputs on probable variables in a given situation.
- Improves visibility of shipments.
- Optimize route management.
- Offers simplified metrics of measurement, enabling businesses to track efficiency.
- Cloud-based solution offers continuous access to stakeholders
Imperatives that need to be identified and incorporated
There are strong imperatives that will drive the success of a TMS solution.
The drawing board
A proper evaluation needs to be carried out of existing solutions, common problems, anticipated problems, the “need to have” features, and the “nice to have” features.
Zeroing in on the technology stack
The longevity of technology is shrinking. And technological advances make it necessary to choose a technology stack that is open-ended. This will permit the use of future technologies to add incremental value to the product.
In a data-driven world, it is absolutely necessary to leverage the power of data to understand where operations routinely hit a roadblock and what needs to be done in an operational context to ensure that the implementation of the solution results in a successful transition. In other words, you need to prepare the operations to accept the new solution.
Feel the pulse of the customers
Reports indicate that customers are willing to spend more for deliveries that are assured on the same day. An e-commerce player needs to take a leaf out of Amazon and understand how the giant has a finger on the pulse of consumers, by rolling out new options the moment they learn of expectations.
Disruptive solutions do not add to the story, they re-write the story
A business that intends to add value to the shopping experience needs to come up with solutions that are innovative. Shoppers are more often likely to behave as a cohort when it comes to having expectations.
Multiple options to customers to receive delivery
Customers who receive flexible options for delivery of a product will find the experience more satisfactory. A pickup location for instance that is dangled as a quicker way for delivery will certainly make a customer look at the option more favourably. This will also cut costs significantly. For instance, a customer who needs an urgent delivery can be offered the flexible option of picking it up from a nearby location, rather than wait for the delivery the following day.
Aggregator services and the pathfinders to success
It is hard to imagine the growth of aggregators without the cloud or the right technology. The concept hinges on the capabilities of the cloud and the advanced software. The use of telematics for tracking the movement of consignments, the use of high speed, low latency networks and solutions to transmit the same information on a real-time basis to consumers makes it possible to offer updates on demand or event-based updates that keep the user informed at all times.
Features that will enhance last mile deliveries and slash costs
To gain a toehold in a highly competitive world, it is necessary to incorporate features that will win the game. With the giants of e-commerce rolling out value additions at a high pace, it is necessary that organizations stay nimble and incorporate features faster to steal a march and stay relevant. Mandatory features need to include :
#1. Delivery metrics – Solutions need to record on time and delayed deliveries automatically. This needs to be embedded
#2. Track costs –With multiple factors determining the costs, it is necessary to isolate every contributing factor in a measurable manner. This effectively means that components of costs, such as fuel, need to be tracked and recorded for deliveries.
#3. Optimized capacity utilization – Operations are profitable when capacity utilization is optimized. The app needs to record the capacity utilization, which will help back end analytics to work out route management better for improved capacity utilization.
#4. Route planning – At the heart of a TMS is the need for a strong route planning function, which will help managers to seamlessly assign routes and maximise efficiency without burdening man or machine.
#5. Productivity/utilization of personnel – The run time of vehicles will give an idea of the productivity and help in cost-cutting measures. Vehicles that are assigned and drivers assigned to vehicles need to be logged in automatically to generate data on productivity and utilization of resources.
#6. Average time to deliver – Calculating the average time taken to deliver a package will effectively be a complex algorithm. Various factors and nuances determine the time taken for delivery of packages from a single location. Dashboards or other data visualizations of the average time taken to deliver a package needs to be worked out on the basis of relative averages and standardization. This will help to fix a value that can be used to refer to the average time for delivery in terms of specific units of time that are measurable, and which can be used for all deliveries without errors.