The Last Mile of Delivery: Getting Shorter and Ever More Important

You order something online, as we do. And come home to a package waiting for you on the front doorstep. Even if you get a notification that the package has been delivered, it’s a great feeling—mini gifts and tidbits we send ourselves throughout the year (even when it’s toilet paper).

There’s a sense of satisfaction in clicking to confirm an order and having it arrive on time. Shipping accuracy is now a critical part of the buying experience for shoppers.

IBM published a report stating post-purchase experience, or the delivery promise, has the power to make or break a consumer’s relationship with a brand. Late deliveries are frustrating and increasing customer expectations aren’t helping soften the blow when a package is delayed.

For eCommerce, retailers’ delivery promises need to evolve into faster, more affordable options and the logistics behind them have to match.

That’s why a lot of eCommerce retailers are looking at new solutions to expand fulfillment networks and improve the last mile of delivery.  

The New Last Mile

The last mile of delivery refers to the final leg in the supply chain to get items delivered. For physical stores, the last mile was the linear movement of goods from local distribution centers to the store to the shelf. For eCommerce, it’s a bit more complicated.

A consumer could be shopping from their computer, tablet, or smartphone, and depending on the home address and delivery promise, a retailer’s system has to track down the product in one of its facilities, set it up for pick and pack, and get it out the door.

Just a few years ago, this was easier because delivery promises were longer. With a delivery promise of 3-to-5 days, the process to locate products and get them on the road to customers could take longer. Packages could travel farther distances because there was time.

But customer expectations have changed. In some cases, even two-day shipping is too long. Same- and next-day are quickly becoming the new normal, which requires a new last mile of delivery and operations to manage it.

The Last Mile of Delivery Is Agile

A recent CBRE report revealed that the new last mile of delivery—the distance between final fulfillment center and front door—is between 6-to-9 miles from the populations they serve. That’s short. Especially when you consider the average American commutes approximately 15 miles one way every day.

Shortening the last mile means more locations. It’s no longer sufficient enough to have a massive distribution center in the middle of nowhere servicing a wide region of customers. That model was designed for bulk fulfillment to retail stores and worked when longer ship times for eCommerce orders was the norm.

Now, customers want fast, affordable delivery. It’s no longer good enough to offer fast shipping at high costs or free shipping for longer ship times. Customers want both. To do that cost-effectively, retailers need inherent agility in the last leg of delivery.

The CBRE report corroborates how fulfillment networks and logistics are changing. In order to truly optimize the last leg of delivery, retailers must get products closer to customers, in more facilities, so they can deliver products with the most cost-effective method of transportation, ground delivery.

However, creating a larger fulfillment network with fixed real estate is expensive. Creating an agile last leg of delivery isn’t supported by traditional supply chain solutions. It requires new solutions that are just as agile. Larger fulfillment footprints comprised of smaller warehouse spaces that accommodate decentralized inventory, inventory management systems that help predict demand patterns for inventory allocation planning, and transportation methods that are flexible and continuous. These are just a few of the components creating nimbler supply chains.

Walmart Is Doing It

It’s hard to compete with Amazon’s inimitable distribution network and delivery promise, but retailers aren’t giving up. More retailers are figuring out ways to compete. Including Walmart.

Walmart continues to innovate its eCommerce and logistics strategy. It’s made a series of smart acquisitions to grow market share and reach new audiences, and recently, it acquired Parcel, a technology-based, same-day and last-mile delivery company based in New York City.

Today, Parcel only operates within New York City. It receives packages at its warehouse in Brooklyn and uses routing algorithms, a fleet of leased trucks, and employee-based workforce to sort and load packages for delivery.

According to Nate Faust, senior vice president, Walmart U.S. eCommerce Supply Chain, “Parcel has developed unique expertise delivering to customers in a distinctly challenging and essential market. This acquisition allows us to continue testing ways to offer fast delivery while lowering our operating costs.”

And that’s the key. Data-driven solutions like Parcel, that are (potentially) scalable and can be continually tested, enable Walmart to experiment and refine its eCommerce delivery strategy with low risk.

And Walmart isn’t the only one. Last summer, Target acquired Grand Junction, a last-mile delivery service—demonstrating how important the last mile of delivery is to the shopping experience and how retailers can continually improve in these areas.

The Long Game for the Last Mile

The supply chain is changing. Never before has it been so closely tied to customer satisfaction. It’s a competitive advantage.

Creating an agile last mile of delivery requires transforming distribution networks and operations. On-demand warehousing and fulfillment services allow for a larger fulfillment footprint without the traditional fixed costs of leasing warehouse space. Retailers can add more fulfillment locations, as needed, to extend reach and shorten the last mile. It’s a scalable solution that allows retailers to test, learn, and adapt their network as they grow.

Similarly, new transportation services like Parcel and Grand Junction, can elevate delivery promise and make that final leg of transportation faster and more affordable—for both customers and retailers.

The supply chain will continue to transform. The last mile of delivery will continue to gain more importance. Forward-thinking retailers are already considering how to optimize operations to deliver products faster and, in turn, improve customer satisfaction and retention. Are you one of them?

Ready, set, go.

 

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// from Jordan Furdock at Net-Results