Even before the COVID-19 pandemic shut down non-essential retail worldwide, e-commerce was the biggest driver of growth in parcel shipping volumes. But customer expectations for quicker and cheaper deliveries have made it difficult to manage these volumes and getting last mile delivery right is one of the biggest challenges facing both online retailers as well as the carriers within their transportation networks.
Unfortunately, the stakes are high. Consumers make purchasing decisions based on the delivery experience. In fact, almost 50 percent of all online shoppers will forego a purchase if they’re dissatisfied with their delivery options, and a new study from Voxware reports that 69% of consumers “are much less or less likely to shop with a retailer in the future if an item they purchased is not delivered within two days of the date promised.”
But what makes success in the last mile so elusive? The answer lies at the intersection of cost and efficiency. According to the Supply Chain Last Mile Report 2020, supply chain executives identified transportation spend and on-time delivery as their two biggest challenges in the last mile landscape.
The Challenges of Last Mile Delivery
Last mile delivery is expensive – the most expensive portion of the end-to-end delivery equation. According to BI Intelligence, the total cost of shipping for the last mile is 53 percent of the total delivery cost. And with the ubiquity of “free shipping,” customers are unwilling to pay a delivery fee, forcing retailers to absorb the cost.
Why the high price tag? For starters, consider that in the last mile there are multiple delivery stops, each with a low number of parcels, and there’s significant manual labor involved compared to other transportation segments. In last mile delivery in a suburban or rural environment, for example, drivers go door-to-door to drop off parcels, and there might be several miles between those doors. In cities, the delivery landscape isn’t any better. What urban areas make up for in delivery stop proximity is quickly neutralized by traffic congestion and continuous delays. And if there are several delivery attempts because the recipient wasn’t home to sign, the delivery costs increase that much more.
In addition, the definition of “parcel” has changed. As e-commerce continues to boom, the products purchased online are expanding. Suddenly, shoppers are buying furniture and home appliances online, and there has been a substantial increase in “white glove” last mile delivery services, where the purchase is delivered, and then assembled and installed in the customer’s home. For manufacturers and retailers, the good news here is there’s a growing e-commerce market for their products. The challenging part for these shippers, however, is that while brick and mortar retailers have provided this service for a long time, the service usually came with a fee, set delivery days, and large time windows for delivery. But in today’s market, customers now expect these services to come with the same flexibility as their small parcel deliveries.
The Future of Last Mile Delivery
What will last mile delivery look like in the future? It’s likely Pick-up/Drop-off (PUDO) and Buy Online Pick-Up In-Store (BOPIS) options will be a popular solution. Spurred by the COVID-19 outbreak, BOPIS increased 208% April 1-20 compared to the same period a year ago and shows no signs of stopping. In fact, as restaurants and brick-and-mortar retailers experiment with different ways to connect with customers and keep team members employed, many are adding BOPIS to their distribution mix – and for good reason. BOPIS is a win-win for retailers and customers, as shoppers can get products quickly and in person, and retailers keep customers coming to their storefronts, maintaining repeat interaction with their brands.
Looking even further ahead, ground vehicles with lockers, basically roving Pick-Up/Drop-Off (PUDO) facilities, are a possibility. Bots are another. To no one’s surprise, Amazon is assuming a leadership position on this front, investing heavily in its Scout autonomous bot. Drones and other autonomous vehicles are also a consideration, though upgrading to a fleet of autonomous-delivery vehicles would be expensive, not to mention putting the necessary regulations in place and winning consumer confidence in these technologies.
The One-Two Punch of Omnichannel Distribution and Cloud Multi-Carrier Shipping Software
To overcome challenges in the last mile, retailers should utilize an omnichannel inventory approach, maximizing their number of inventory sources, including distribution centers, warehouses, and stores, so they are closer to the customer. A key component to this approach will be cloud multi-carrier shipping software, which seamlessly integrates with a retailer’s system of record to automate high volume, multi-carrier, omnichannel shipping. The software will automatically select the right carrier service for each order according to the point of origin, point of destination, carrier contracts, and business rules; create or acquire the tracking, labels, and documents; monitor delivery events and automate event exception workflows; manage the manifest and end-of-day processes; and analyze carrier performance. With the one-two punch of omnichannel distribution and cloud multi-carrier shipping software, retailers can satisfy customers’ delivery requirements and drive down the cost of shipping – transforming logistics into a profit center within the business.
Furthermore, cloud multi-carrier shipping software also ensures retailers have the right mix of last-mile carrier services in their transportation strategy from the onset. The software aggregates and normalizes shipping data across carriers, so retailers know when deliveries moving to a particular region, customer, or via a particular carrier are not meeting service levels. Retailers can hold carriers accountable for failing to meet expectations and wield hard data to support rate negotiations.
Finally, the right multi-carrier shipping solution will also have a Control Tower that allows the retailer to provide customers with visibility into their parcel’s delivery journey, including in the last mile. The system will send early warning signs when there are parcel delivery issues or “exception events,” empowering customer service teams to proactively trouble-shoot the exception event and communicate delivery updates to the customer in real time. For example, perhaps the product can be sent from a different distribution center to arrive on time. Or perhaps the customer is willing to retrieve the product from a nearby store or locker.
A Control Tower even makes it possible for retailers to provide customers with the ability to track and trace shipments on their own (not the carrier’s) website – reducing inbound calls about shipment status to customer service and increasing the customers’ browsing behavior while on the website, which (fingers crossed!) could lead to additional purchases.
Take the Lead in the Last Mile
Delivery can make or break the way customers experience a brand, and the last mile is the mile customers will remember. As a result, it’s become the first place retailers are looking to implement new technologies that drive process improvements and give them a lead over competitors.
Retailers using cloud multi-carrier shipping software are able to execute an omnichannel distribution strategy and leverage the services different carriers offer in the last mile – optimizing costs from the point of origin to the point of destination. They also have the tools to ensure their carrier transportation network can meet their delivery promise to the customer.
To learn more about how multi-carrier shipping software can help you improve delivery in the last mile, contact a Logistyx expert today.