By Mario Toneguzzi
Last-mile delivery is the most inefficient process for more than half of North American Transportation & Logistics companies, says a new global report commissioned by SOTI in partnership with Arlington Research.
STAKES HAVE NEVER BEEN HIGHER FOR TRANSPORTATION AND LOGISTICS COMPANIES AS CONSUMER HABITS SHIFT
In an era where e-commerce is exploding and consumers are expecting rapid, often same-day deliveries, the report titled The Last Mile Sprint: State of Mobility in Transportation and Logistics, said 78 percent of companies in Canada in Transportation & Logistics say last-mile delivery is the most inefficient process of the entire supply chain. In comparison, 59 percent of those companies in the U.S. felt that way.
“The stakes have never been higher for transportation and logistics companies in North America as consumers increasingly embrace a delivery culture,” said Shash Anand, Vice President of Product Strategy, SOTI, the world’s most trusted provider of mobile and IoT management solutions, with more than 17,000 enterprise customers and millions of devices managed worldwide.
“By implementing a robust mobile-first strategy, companies will not only be able to provide better customer experiences, but will increase speed, minimize costs, ensure transparency in the delivery channel for the customer and end consumer, and edge out the competition.
“Ensuring your technology is constantly updated and having an integrated mobility and IoT management platform in place is an effective operations strategy that helps minimize disruptions to your business and maintain high levels of customer satisfaction.”
Gary Newbury, a retail supply chain strategist and serial transformation executive, said he agreed with the survey’s main point; the last-mile delivery is the most inefficient process in the retail supply chain. And Canadians tended to be much more aware of the gaps.
“The volume of online versus total retail in Canada has historically been below five percent (up to COVID-19). Much of the approach retailers have taken has been focused on the ‘marketing’ side of the digital business stream. As a result the assumption for many retailers has been ‘it’s just a small change and so we can bolt it onto our existing distribution network’,” he said. “And to a degree, they were able to think this is all they needed to do with relatively low/incidental volumes. Retailers brought in digital marketing experts, but not digital fulfillment experts. To cover for this knowledge gap they tended to either try and ‘skunk work’, a fulfillment process internally (bending process and systems to accommodate), or relied on a third party logistics provider to do the heavy lifting, relying on their tech platform for ‘visibility’ of shipping through to the doorstep. Often, the retailer may have found their tech platform was more geared towards B2B tracking, rather than B2C.
“Approaching a key future line of revenue in this ad hoc way has exposed many retailers to an unprofitable business stream, and as they attempted to scale this, the losses just got worse, the customer service often suffered, through lack of transparency of where their order was in the fulfillment process. For many consumers, up to COVID-19, it has been a hit and miss process.
“The reason why I think they got this wrong is retailers’ distribution networks are designed to move mass merchandising from Point A (a supplier) to Point B (a store) via a distribution centre. Typically, the lowest unit that is shipped in this way is a case. Online is very different, it is all about individual pieces, and often a localized mixed, being ordered electronically, with an expectation of speed, to either the store (for pick up) or to a point of convenience (such as a residential address).”
COVID—19 HAS EXPOSED THE RETAILERS WHO WERE SLEEPING ON INITIATIVES SUCH AS CLICK AND COLLECT
Newbury said, “the eComm supply chain design, for many retailers, needs a deep rethink. COVID-19 has exposed many retailers — missing the boat by not having a click and collect or home delivery service, or having services which did not scale, and where they did, caused the retailer to lose more money than staying shut”.
“It is the most labour intensive and resource consumptive part of their proposition, but rather than just have small cube, high margin products online with a scheduled service for their delivery (and restricted geographical coverage), many retailers, being under-informed about the cost profile of fulfillment of online orders, unfortunately followed the trend of other retailers and felt it was something they had to do to keep their proposition competitive,” he said.
“The rethink is to look at the stores as potential inventory distribution points, consider automation, and, currently, look into using Micro Fulfillment Centre methodology. This is not the end game, but it’s a start to bring control and predictability to the outrageous costs of manual picking in the DC and the costs of shipping lots of small individually packed orders across Canada, of often low margin products.
“The rethink must return to a re-evaluation of the retailing proposition and what is required to be presented in store and that which is presented online. Often retailers, desperate for extra sales extend the online assortment which serves to compound complexity and drive high costs in serving customers.”
Newbury said there are five or six key areas for retailers to address before they can turn a profit on online orders:
- Financial record-keeping can hide the end to end costs of fulfilling online orders – when there is a spike in demand, extra costs are surfaced in fulfilling demand;
- SKU (Stock Keeping Unit) proliferation – retailers must look carefully at what their overall proposition is and how this is presented “in store” and online. Often online (extended aisles) can cause significant complexity and cost. Consumers are very savvy and, within a click, they can pick off all the low margin items and switch to other retailers (i.e. they will split their baskets to maximize their shopping dollars/value);
- High customer acquisition costs compared to life-time value (e.g. Wayfair);
- On demand fulfillment versus scheduled fulfillment – the choice of strategy can have a big impact on capacity, customer satisfaction and costs – retailers need to think carefully how best to structure their fulfillment processes to best optimize their proposition;
- Free delivery, porch piracy and “hassle free” returns – there’s not such a thing as a free lunch in business, nor is there in the virtual world; and
- “I mindfully add a sixth component in the sense that retailers know stores, what they know less of is digital. Approaching online as a bolt on is the worst of all worlds. Using a case/pallet distribution network for singles fulfillment will stop retailers growing online business, profitably. It looks good on paper, but the execution can be seriously profit draining.”
Some other key findings from the SOTI research include:
- 82 percent of respondents in the U.S. and 88 percent in Canada agreed that it is critical for T&L companies to ensure a mobile-first strategy around last-mile delivery. A mobile-first strategy is defined as viewing smartphones, tablets and task-specific apps as the primary tools for getting work done;
- Companies know that a mobile-first strategy for last-mile delivery can transform their business operations. 74 percent in the U.S. and 80 percent in Canada agree that their organization would benefit, or have already benefited, from an effective mobile-first strategy for last-mile delivery. 49 percent of respondents in North America with a mobile-first strategy in place for last-mile delivery said that it has effectively reduced their operational costs;
- In North America, more than half (58 percent) of T&L professionals said a mobile-first strategy has enabled them to gain visibility into critical aspects of their supply chain; and
- 49 percent of T&L companies globally said their technology is outdated. In Canada, nearly 68 percent of T&L companies indicated their technology is outdated, and 41 percent in the U.S.