Simon Mardle, principal consultant at Capgemini, discusses some key strategies for cutting costs and boosting service in the last mile.
For retailers, the “last-mile” of delivery for online purchases has been a key battleground for some time. Capgemini’s extensive survey, ‘The Last Mile Delivery Challenge’ polled consumers, as well as supply chain executives to find out more about what this means to them. It clearly showed that the last mile will become even more crucial as online ordering continues to grow rapidly in the next three years. In food and grocery for example, as customers increase the frequency of their orders across all temperature regimes, their expectations will grow and they will look to see more flexibility and innovation in delivery services. Using digital technologies to get it right for customers will be key to unlocking scale and building a profitable online model that is more automated and can foster innovation.
Customers that are satisfied with their delivery will be more loyal and are likely to adopt a number of positive behaviours for the retailer: sharing their experience with others, greater use of subscription services and increased frequency of purchase. Ultimately, satisfied customers will spend more and, provided they get a good service, may even be willing to pay a little more for their delivery services. This requires an unparalleled understanding of customer needs. For instance, our survey highlights that almost three quarters of consumers (73%) said that receiving the delivery in a convenient time slot is more important than receiving it quickly.
The costs of the last mile are significant and disproportionate, accounting for 41% of total supply chain costs, so need to be kept under tight control. End-to-end, frictionless supply chain solutions will be necessary; “bolt-ons” simply won’t cut it as organisations scale their operations. Digital supply chain solutions (providing order orchestration, end to end visibility, real time control, decision support, advanced analytics, event prediction, collaboration tools etc.) can be used to get the basics right around cost and execution and then subsequently help drive operational innovation. They can also provide more detail to customers ever more conscious of product provenance and environmental impacts. Data-driven analytical thinking combined with the right employee skillset and culture will be critical to ensure that the end-to-end supply chain is run as efficiently as possible (optimising handling cost and vehicle utilisation) while still delivering the service promise for consumers.
Invest in automation
It will be exciting to see how bricks and mortar retailers leverage new opportunities to take the challenge to pure play retailers. With recent innovations in automated product handling, there are viable and cost-effective options for reconfiguring existing estates to deliver an enhanced and faster online proposition. Especially when coupled with the latest Strategic Order Orchestration tools.
Investing in automation for operational activities, will not only help to reduce costs, they will also speed up operations by significantly cutting down on the time it takes to pick, pack and ship orders. This gives added flexibility in the last mile operation in extending cut-off times. In the longer term, autonomous vehicles in selected areas will reduce the high costs associated with current logistics resourcing models.
Innovation creates opportunities
Digital supply chain solutions are a key foundation that allow companies to develop innovative solutions, feeling confident they have a sound platform on which to deliver and scale new propositions successfully. Collaboration both vertically and horizontally is a good example of this, working closely with other parts of the supply chain and with similar businesses or competitors.
This may mean working with other fulfilment businesses to enhance their delivery capabilities without significant capital investment. For example, the increased popularity of the gig economy with dynamic technology solutions and a flexible workforce may offer an opportunity to reduce cost in urban areas, offer additional flexibility during peak times and respond to rapid customer demand. This type of collaboration could also help support a rolling order cut-off for retailers and enable same-day delivery capabilities. In using alternative networks, parcel carriers can also take advantage of enhanced technological platforms for customers without having to make significant investment themselves.
Smaller retailers will likely need to rely more heavily on third-party logistics providers and some are now starting to play a more innovative role, taking more risk to leverage these new opportunities using networked solutions across multiple customers.
The challenges are only going to get more interesting as volume, frequency and responsiveness increase. Retailers should expect rapid growth in online orders and will require solutions that can seamlessly scale up to deal with increased volumes. Investing in digital supply chain solutions will underpin a transition to a frictionless, customer-focused supply chain operation that is more automated, competitive, cost effective and fit for innovation, both now and for the future.