From Black Friday to the Boy on the Bike

Stephen DeAngelis

November 29, 2013

Today you may be one of the millions of Americans who goes shopping. You may venture out to local stores where you will bump elbows with your neighbors, jostle for sales items with other bargain hunters, and return home exhausted but satisfied knowing that most of your Christmas shopping is done. On the other hand, you may want to avoid the crowds and go shopping online. If you physically shop, you are “last mile” delivery step in an end-to-end supply chain. If you shop online, then someone else is going to fill that last mile spot. For this post, however, I don’t want to begin with the last mile step in the digital path to purchase. Products that end up under your Christmas tree begin originally as raw materials and parts. Tracking every stage of the supply chain has always been difficult; but, with so many products now containing parts from all over the world, the challenge has become daunting. Phil Lavin, Sales Manager at AEB International, reports, “End-to-end overview of all supply chain processes and events requires a powerful solution that provides transparency of all resources, capacities and inventories, and standardises and simplifies the information exchange between all parties.” [“AEB tracks the evolution of online tracking,” Supply Chain Digital, 13 November 2013] He continues:

“The overall integration of supply chain partners not only requires the connection of different IT systems, but also the close collaboration of stakeholders, project members and system users from different companies, departments, and locations. It’s crucial to include all partners in the implementation process because each business organises its logistics processes in different ways. … Unfortunately, a uniform standard for the exchange of information along the supply chain has not been enforced (yet), so proprietary and regional preferences continue to determine the individual choice. This creates another requirement for overarching visibility solutions, because the system must be capable of facilitating the different messaging options and act as ‘interpreter’ to integrate data from different sources and formats, and make it centrally available to all partners. To implement the actual tracking part of such visibility solutions, the scope of the required transparency must be determined and all relevant processes must be mapped within the software – including appropriate milestones.”

It should come as no surprise to anyone that achieving complete supply chain visibility has proven elusive. Lavin was looking at things from the business perspective. Brad Stone, on the other hand, looks at how the digital path to purchase looks from the consumer perspective. He notes that online a consumer won’t be guided by a sales representative who knows where certain items are located or where the best deals are to be found. That job is taken over by a computer. [“For E-Commerce Shoppers, There Is a Santa Claus,” Bloomberg BusinessWeek, 27 November 2013] Stone writes:

“On the Web, intuition rarely enters into the equation. The shopping process is almost entirely curated by computers. Algorithms decide what products to recommend, how to display them, what price to set, and how an order can be most expeditiously and inexpensively shipped. At mighty Amazon, the omniscient computer program that practically runs the company’s supply chain is known internally as the Mechanical Sensei. The program tracks all the items and orders coursing through Amazon’s systems. It makes millions of small decisions, such as how much of a particular product Amazon should buy, and — given the geographic dynamic of demand for that particular — where in its massive network of fulfillment centers to store it.”

Let’s assume that you are one of the millions of shoppers who will avoid today’s crowds and opt to take the digital path to purchase. You probably haven’t given much thought to the powerful computers that have helped manage the supply chain, followed your digital journey, made personalized recommendations, or will help ensure that what you buy is packaged, shipped, and tracked all the way to your doorstep. Nevertheless, they are there and they are getting better at what they do. But let’s get back to that last mile challenge. If you took the digital path to purchase, you could have opted to pick up your purchase from a local store. If you did, then, like your neighbors who fought the crowds in local stores, you become the solution to the last mile challenge. If you didn’t opt to pick up the items yourself, then someone else has to figure out how to solve that last mile challenge. More than likely, your package will be delivered by FedEx, UPS, or the United States Postal Service. However, if you live in the big city, that last mile may be covered by a boy on a bike. Hilary Stout reports, “There’s a hot new job in tech: delivery guy.” [“In War for Same-Day Delivery, Racing Madly to Go Last Mile,” New York Times, 23 November 2013] She continues:

“As the holiday shopping season gets underway, same-day delivery has become a new battleground for e-commerce. For all the sophisticated algorithms and proprietary logistics software involved, many services come down to someone like Fermin Andujar, who finds himself racing to a store, scanning the aisles for the requested items, buying them and rushing them to the customer. According to eBay’s job description, he is a ‘valet,’ dispatched on Manhattan streets as a personal shopper on a bicycle or in other cities in a car.”

Stout notes that companies employing people like Mr. Andujar are well aware that similar home delivery services failed spectacularly during the dot.com era. “Webvan, UrbanFetch and Kozmo (which was backed by a $60 million investment from Amazon) were seen as follies of the early dot-com era,” she writes, “brought down by high labor costs and unrealistic pricing.” What’s different now? Stout explains:

“Today companies are scrambling to find the right new formula. Deliv uses a crowdsourcing approach, tapping students, real estate agents, aspiring actors and others with spare time and a vehicle. EBay recently announced plans to acquire for an undisclosed price Shutl, a London company that uses technology to pair couriers at hundreds of firms with local orders for delivery. Postmates, a start-up that operates in New York, San Francisco and Seattle, has been adding 100 to 200 couriers a week, but it recently instituted ‘surge pricing,’ higher prices for customers, when demand for deliveries outstrips the supply of couriers.”

Obviously, most of us aren’t going to be in a position to use couriers and will rely on the more traditional carriers like FedEx, UPS, and the USPS. Unless you never listen to the news, you know that USPS has been struggling for years. Its attempts to match the services provided by other carriers have made up for the decrease in the use of what is often referred to as “snail mail.” If you have been following the news, you may read that “the United States Postal Service is teaming up with the world’s largest online retailer, Amazon, to deliver packages on Sunday at no extra cost to customers — just in time for the holiday season.” [“Amazon teams up with the Postal Service for Sunday delivery,” by Evan Puschak, MSNBC, 11 November 2013] Once again, however, it will be consumers living in large metropolitan areas who will benefit from these services. Nevertheless, many USPS carriers would like to see that service expanded and hope that a marriage with companies like Amazon and eBay will help bring the USPS back into the black. Speaking of black, have an enjoyable Black Friday.