Consumer demands around seamless last mile delivery continue to
grow. In this QAD Precision Report, we look at challenges and
opportunities in the final mile.
Getting the last mile right is one of the biggest challenges facing
online retailers — and the delivery companies who work with them. The
Chain Last Mile Report 2020 found that controlling logistics
costs and achieving on-time delivery were the two biggest challenges
in last mile delivery.
Last mile delivery is expensive. Frost & Sullivan forecasts that
global logistics spend will reach $10.6
trillion in 2020. Transportation costs are 70 percent of this
figure, and the last mile accounts for 40 percent of overall logistics costs.
The biggest driver of parcel market growth is e-commerce,
particularly online shopping. This was true even before the global
coronavirus pandemic shut down non-essential retail around much of the
world. (For more information on this, see How
Covid-19 is Shaping E-Commerce).
Customer expectations for quicker and cheaper deliveries means that
the last mile can be a key differentiator for retailers. Delivery
options — and the reputation of a retailer’s delivery service — impact
consumer buying behavior. Around half of all online shoppers will
abandon a purchase if they are unhappy with the delivery choices.
Getting the last mile right is critical for retailers — especially
those selling products that are not exclusive to them. When shoppers
can get the same items elsewhere, but with more attractive shipping
options, that’s where they go.
What might the most successful last mile delivery providers offer in
the future? Ground vehicles with lockers — essentially roving
Pick-Up/Drop-Off (PUDO) facilities — are one answer. Bots are another.
Unsurprisingly, Amazon has made significant investments here with its
Drones and other autonomous vehicles are another. Having said that,
upgrading to a fleet of autonomous-delivery vehicles would be costly.
That’s of course if regulations allow for self-driving delivery cars
and consumer sentiment keep pace with these technologies.
Automation could also increase efficiency. The cost, number and
availability of employees all impact last mile delivery. Warehouse
robots, delivery drones and driverless cars can work 24/7.
It will be a few years before self-driving vehicles and drone
deliveries become widespread. Electric vehicles, on the other hand,
may soon be standard.
All the global carriers have been greening their fleets. These
include e-cargo bikes, electric vehicles, and hybrid trucks. Most last
mile deliveries take place in urban areas. Adding electric vehicles to
their fleets will allow carriers to address the impact e-commerce
makes on noise and air pollution.
Most online shoppers want home delivery — or at least the option of
it. Home deliveries are supposed to be easy and convenient. But that’s
not always the case. Most deliveries occur during business hours — the
very same time customers are at work, collecting and ferrying
children, or running errands.
Leaving a delivery on a porch is not ideal. Weather damage and “porch
pirates” who follow delivery vans and steal packages are both risks.
In addition to these issues, delivery drivers may not be able to gain
access to apartment complexes to drop packages unless the customer is
home. Finding ways around these factors can be challenging.
PUDO, Buy Online Pick-Up In-Store (BOPIS) facilities and curbside
pick-up options are part of the solution. But this requires a
willingness on the part of the customer to make a trip. For some, this
negates a large part of the convenience expected from the online
Technology can also be leveraged here. Better track-and-trace
software will allow delivery companies to offer consumers accurate
delivery windows. In addition, systems that offer consumers the
flexibility to re-route deliveries while they are in-transit could
address some of these issues.
We are likely to see a future where products ordered on a smart
device no longer require customers to enter their location details.
Instead the retailer will simply confirm your current location,
provide a time estimate and bring your order to you.
In the future, drones and autonomous vehicles may help online
shoppers get their purchases quicker. However, completely driverless
carrier fleets are unlikely. Shoppers are increasingly buying
furniture and home appliances online. As a result, many require “white
glove” last mile delivery services to assemble or install these purchases.
As customers become more demanding, retailers who offer valued-added
delivery options are likely to win their business. Low cost and fast
deliveries may be generally expected, but consumers are also willing
to pay extra for assembly and installation. Offering these services
can make or break an online sale.
White glove delivery may also increase consumer confidence in making
large purchases online. If you are buying, for example, a washing
machine, a retailer who is willing to make sure it is correctly
installed seems a safer bet than one who is only prepared to drop it
at the front door.
For online shoppers, delivery is their experience with your brand.
Because of this, the last mile is the one your customers remember.
Consumers blame the retailer, not the carrier, for poor delivery performance.
Over three quarters of consumers view the delivery experience as a
true test of how much a retailer values them. Furthermore, 39
percent of consumers who have had a bad delivery experience will
take their business elsewhere next time.
Retailers already need to offer a variety of delivery services.
Technology and consumer spending habits will almost certainly mean
that their current offerings will need to expand.
For some retailers, drone deliveries may be the answer. For others,
white glove services could be key. To ensure that they stay on top of
changing customer expectations, retailers will need a
multi carrier shipping strategy.
Carriers continue to make significant investment in their services
too. That may be autonomous vehicles, track-and-trace technology,
expanding their fleets or staff numbers, white glove services or a
combination of the above.
Retailers using multi carrier shipping are able to leverage the
investments and upgrades different carriers make and offer these extra
services to their customers. They also ensure that their carrier
transportation network can meet their delivery promise, even if one
carrier is experiencing a delay or outage.
Conversely, those using a single carrier may find themselves unable
to meet customer expectations. Delivery service is a major deciding
factor for consumers — and customers demands are changing. A multi
carrier strategy allows retailers to future-proof the last mile by
ensuring they can respond quickly as customer demands change and new
technologies become available.
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QAD Precision, a division of QAD Inc., provides industry-leading global
trade compliance, and multi carrier transportation
execution solutions from a single, integrated platform. An
ISO-certified company, QAD Precision assists companies to streamline
and transportation operations, optimize deliveries, and increase
logistics ROI. QAD Precision’s scalable and extensible solution easily
integrates with existing ERP and WMS solutions. Industry leaders in
every region of the world rely on QAD Precision’s global support
centers to leverage thousands of carrier services and manage millions
of global trade and shipping transactions every day. For more
information about QAD Precision, visit www.qadprecision.com.