As eCommerce volumes surge due to the pandemic, logistics companies are struggling to find ways to cope with the changes in consumer behavior. According to Anyline’s report, 53% of consumers reported receiving damaged packages in 2020, and 43% had packages lost in transit.
Interestingly, before the pandemic, many last-mile startups spent huge amounts of resources to educate their customers that fast home delivery is a good idea. As the pandemic hit, more and more consumers were scrambling for grocery delivery services. Customer education was no longer needed.
The increasing demand for faster, more efficient, contactless, and same-day delivery has put huge pressure on last-mile fulfillment. Logistics providers are facing complexities — higher delivery costs for customers, slower delivery times, adverse impact on the environment, and more. This last leg of transport is the most time-consuming and the most expensive part of the entire supply chain — according to Business Insider, it accounts for 53% of a business’s overall shipping costs.
So how can logistics players address these challenges and capture more value in this 12-billion opportunity? In this article, we discuss the challenges of last-mile delivery that keep C-level executives and their customers up at night and identify different ways technology can help companies solve these complexities and increase their competitiveness. At the end of the day, the companies that overcome these difficulties stand to gain the most.
Challenge #1: A Lack Of Visibility Breaks The Customer Experience
There’s one thing that’s going to be a huge differentiator in the logistics space moving forward — visibility. The worry that an order has got lost in transit causes more stress for customers than knowing their package is delayed. Without knowing the current status of their delivery, customers will contact customer service, creating a conundrum and frustration on both sides.
A missed delivery appointment, a wet package, or even a cold pizza can crush customer satisfaction. Tech-savvy customers want additional features that would allow them to track deliveries in real-time and even communicate directly with drivers. This is why retailers have turned to technologies as a key battleground to enhance visibility in the last mile and differentiate from the competition by offering a single source of truth.
Solution: Creating a Single Source of Truth
Retailers will be searching for last-mile carriers that leverage the power of AI, Machine Learning, IoT and Blockchain to build solutions that can provide real-time tracking, dynamic routing, warehouse optimization, and more. This way, they build a single source of truth for managers, dispatchers, drivers, and customers, preventing scenarios where dispatchers and customer service teams are saying something completely different to customers. Moreover, the aggregated data from multiple relevant sources in the supply chain allows retailers to get insight into what worked or not and improve. Plus, this allows customers to track packages on their own without having to contact customer service.
We at HTEC are currently working on creating the largest eCommerce platform in the Balkans, called Ananas, also known as the “Serbian Amazon”. The ultimate aim is to provide customers with an unprecedented shopping experience allowing them to have complete visibility into the current status of their order. Ananas’s last-mile delivery will introduce its own fleet and offer a brand new experience to customers. We are confident that this endeavor will reimagine the shopping experience in the local region and globally, allowing customers to enjoy their shopping experience from ordering to returns and claims.
Challenge #2: High Cost and Opaque Pricing
One of the most common problems retailers and logistics companies face is the extremely high cost of last-mile delivery. Given that the last-mile delivery market size is projected to reach $55.2B (The Market Reports) by the end of 2025, companies need to find ways to optimize the last mile and improve efficiency. The cost of the congestion, traffic accidents, and pollution caused by thousands of delivery vehicles on the streets of the biggest cities in the world is getting bigger each day. Furthermore, as “free shipping” becomes almost a norm, customers are less willing to pay for a delivery fee, which further puts pressure on retailers and logistics partners forcing them to shoulder the cost. As such, it’s become imperative for companies to implement new technologies and drive process improvements. Finally, since customers want their parcels to arrive in a specific time window, delivery organizations need to look for ways to optimize the vehicle’s capacity and routes to be able to deliver the order at the designated time and place. This increases the complexity of last-mile delivery logistics, which has a bad effect on customer satisfaction.
Solution: Route Optimization and Autonomous Vehicles
Using advanced dispatching and route optimization, companies can automatically optimize their final-mile route sequences to help increase efficiencies. Logistics companies are starting to explore multiple sources of data and leverage ETL to optimize their delivery routes to reduce transportation costs and meet customer expectations. This provides them with data about the optimal number of vehicles required and the shortest routes they need to take to deliver the packages within the customer’s delivery time window. Also, this way, the system can refine itself to meet maximum delivery windows and optimize the transportation costs.
One of HTEC’s partners, Leaf Logistics, is the perfect example of a logistics company that leveraged technologies to optimize route management, save costs and enhance customer satisfaction at all levels. Leaf offers access to high-quality freight, organized into efficient plans and routes like circuits and continuous moves to increase utilization. Leaf Dashboard, for instance, combines all system data into the denormalized database and allows easy and dynamic reporting for the shippers and carriers’ customer experience teams. By utilizing this information, they can analyze the data and easily understand benefits, savings, and the empty miles they’ve avoided using the Leaf platform. This also helps in driver satisfaction by increasing their total loaded time with repeatable schedules for weeks or months at a time.
Challenge #3: Doing Harm to the Environment
As more and more customers are expecting ever-swifter delivery times, last-stretch delivery systems become less efficient, causing a negative impact on the environment. Currently, there are thousands of vans crisscrossing the cities and carriers sending trucks to the same home a few times a day, thus increasing the carbon footprint and threatening the social benefits. According to the World Economic Forum, we can expect a 32% rise in carbon emissions from urban delivery traffic by 2030. But something happened during the pandemic — it accelerated local or market-based fulfillment, which has majorly influenced the supply chain to place the inventory closer to the customer than ever before. Now is the time to harness data and analytics to make the last mile greener, more efficient, and cost-effective.
Solution: Building the Ecosystem that Works Together to Incentivize More Eco-friendly Choices
By acting on real-time insights into consumer behavior and preferences regarding this last leg in transport, retailers can optimize and innovate route management and inventory to achieve a lower last-mile footprint. Additionally, the city officials should develop more environmentally friendly standards that would cover the entire delivery network, including out-of-home PUDO points (refers to any kind of designated area for consumers to receive and leave parcels, typically picking up eCommerce orders and dropping off returns). Postal and parcel companies should develop incentives to measure and predict the carbon footprint of each delivery and present that data to retailers. This would encourage consumers to make greener choices.
On top of this, by promoting greener models, logistics and retail companies would build trust with consumers more easily as they would be better informed about the consequences of each delivery option. Based on the study conducted by the World Economic Forum and McKinsey, where they explored the effectiveness of various interventions to reduce the carbon footprint in Japan, delivery robots may generate significant environmental impact, thus improving last-mile fulfillment efficiency. Also, electric vehicles, and parcel lockers, will likely continue to reduce carbon dioxide emissions. The bottom line is that only a coherent business ecosystem that would involve more economic players could be a solution to this problem.
Building intelligent routing models may also be one of the ways to tackle this challenge. One of the examples is the Stena Orbit Platform, a powerhouse that enables the digitalization of tanker shipping companies by increasing their productivity and efficiency, thus helping them build a sustainable business model. This platform provides companies with insights into location, routes, and fleets’ capacity in real-time, calculates and suggests the most efficient options to optimize routing for the lowest fuel consumption thus reducing air pollution. This kind of solution helps companies change their way of thinking and bring the decision-making process to a high level. The creators of the platform like to call this process “the building of dreams”.
To find out more about how we helped build the Stena Orbit Platform, read Next Generation Supply Chains.
Challenge #4: Quick-Order Fulfillment
Customers’ expectations have gone beyond the product category. Their expectations have become much higher. With increasing expectations for same-day and on-demand deliveries, even more pressure is put on logistics and last-mile customer experience. Consequently, customers are becoming even more frustrated with the service provided by the existing delivery carriers and increasingly turn to the big logistics players like Amazon, Deliveroo, and Uber, which can fully meet their expectations. This has had an enormous impact on retailers as well, pushing them to leverage the power of technologies to provide their customers with fast, flexible, and even free delivery.
Solution: Advanced Analytics for Better Prediction and Warehouse Automation Powered by Robotics
To develop a next-generation last-mile delivery, retailers need to leverage digital technologies and advanced analytics to better predict order demand and optimize inventory deployment. This has enabled fulfillment centers to gather valuable data and apply their insights to improve their decision-making processes. For example, to further cement their competitive advantage and enable even faster delivery, Amazon has built regional fulfillment centers to hold inventory closer to the end customer (Amazon is currently responsible for 25% of all warehouse space in the UK.) Amazon Flex, their own on-demand, crowd-sourced delivery service, and Prime Now, a service that offers one- or two-hour delivery, beat the competition by achieving higher productivity than other carriers who offer same-day delivery.
Over the years, the use of data has expanded to the integration of Artificial Intelligence into the order fulfillment process. Powered by AI, robotic warehouse systems boost the efficiency of pick/pack operations by selecting the most efficient picking routes and eliminating unnecessary routes through the warehouse. Namely, in warehouse robotics, Ocado, a leading technology business providing online grocery solutions for global retailers, can process 3.5 million items per week in highly automated warehouses that work around the clock.
We at HTEC believe that digital technologies like robotics will drive the future of eCommerce, more specifically warehouse management and, therefore, last-mile delivery, by bringing the wave of automation. But, the biggest challenge with warehouse robotics is that these robots cannot deal with sensitive products (if they squeeze a bag of tomatoes too hard, we’ll get tomato juice instead). Our soft-grab robotic hand is specifically designed for automated warehouse management and enables faster pick/pack operations. The sensors at its fingertips offer precise grasp control and provide feedback about the contact force and its location, which gives robots information on whether they have grasped the object properly to safely manipulate it in the environment.
Namely, in a production line with different objects, a tool of this kind would be able to handle each object adequately — if a company is manufacturing metal parts of various sizes and shapes, all of them could be manipulated using only one tool, i.e., the hand. This would easily increase the level of automation in the production process, speed up production and the entire order fulfillment.
To learn more about our Soft-Grab Robotic Hand, read The Rise of the Robotic Hand: The Story Behind.
Challenge #5: Shoppers Want Control over Their Package Delivery
Visibility alone is not enough to satisfy online shoppers. Since a new digital consumer is mostly on the go, they might not be available to receive their package at a particular time. Now, as the pandemic has caused many people to shop from the comfort of their homes, they are becoming even more demanding and starting to search for actionable choices so that they can be in control of when, where, and how they get their packages. Based on PwC findings, 41% of consumers ranked fast/reliable delivery (e.g., same-day delivery, BOPIS options, visibility for their package/order throughout the delivery process) as one of their top considerations when shopping online. Another interesting study by Invest states that 56% of shoppers aged 18-34 expect same-day delivery. The bottom line is that your customers don’t want to call you for support. And, this is where the last mile can make a difference between good and bad customer experience. Put simply, how dynamic, flexible, and transparent the last-mile fulfillment is can be the differentiator between two competitors.
Solution: Personalized Delivery Options
Besides the quality and the price of the products and services, customer experience has become a crucial brand differentiator. Based on the RedPoint Global survey, 63% of customers expect personalization as a standard offering. Personalized delivery options help customers acquire their purchase when and where they want, allowing them to experience the utmost security, control, and comfort. Take Wolt, for example. The secret of their stellar success is in the “logistics optimization first” approach. They needed to build an “optimization-heavy logistics setup for last-mile delivery,” which allowed them to operate even in small cities with limited population and high labor costs”. Wolt app provides users with real-time data, including every step of the last-mile fulfillment from the moment the food is ordered to the moment it is being delivered to the customer’s door.
Having complete control over the delivery operations can help logistics companies overcome different delivery-related challenges. By using GPS, RFID tags, retailers can track the shipment movement and get over the challenges in this last leg of the order journey, such as same-day delivery, manual route optimization, thus bringing transparency among the operations. This also provides an opportunity to devise a more efficient delivery system that gives consumers convenient out-of-home pickup options. Plus, parcel companies can analyze historical orders and receiver preference data to offer flexible delivery options, including where and when a package is dropped off. For example, a parcel company could use a receiver’s order history to suggest delivering a package to their office or a secure package locker during work hours or to their home during evenings or weekends. Carriers such as UPS, DHL, and Hermes already offer such personalized service. For instance, one of the features of our Ananas Solution is the PUDO channel that allows customers to pick up their orders in a local restaurant, coffee bar, shop, or some other local designated area. This way, they can pick up their packages where and when they find it convenient.
Reinvent the Future of Your Last-Mile Delivery
Demand for last-mile delivery is soaring. World Economic Forum predicts that it will grow by 78% globally by 2030. We see four main capabilities that should help retail and logistics companies reimagine their last-mile delivery.
Route Optimization — By analyzing the gathered system data (driver status, new or updated orders, weather, traffic) logistics companies can easily understand the empty miles and optimize drivers’ routes, organize repeatable schedules for the upcoming period, save on fuel, and do less harm to the environment.
Advanced Analytics for Better Prediction — The analysis of the historical data allows organizations to reduce the delivery window and make more precise estimates about when the deliveries are going to arrive at their destination. This will also help improve route efficiency.
Warehouse Automation Powered by Robotics — Our soft-grab robotic hand is specifically designed for automated warehouse management — it has sensors at each fingertip allowing it to safely manipulate objects in the environment. This will solve issues in warehouse logistics by making object handling feasible for robots operating alongside human coworkers (or completely free human hands from menial tasks) thus speeding up processes that will enable faster last-mile delivery.
Real-Time Tracking — A real-time tracking solution (by using RFID and GPS tags) offers an accurate estimated time of arrival (ETA) and provides customers with real-time updates should there be any unexpected delays in the delivery. This also provides an opportunity to devise a more efficient delivery system that gives consumers convenient out-of-home pickup options.
The demand for precise last-mile delivery has never been greater. Something needs to happen — so far, so clear. Ready to make the next step? Contact us to learn how we can help you win your last-mile.