Mastering Last Mile Logistics Remains a Challenge

Stephen DeAngelis

May 01, 2018

Logistics providers probably look longingly on the days when the last mile of the supply chain primarily meant delivering goods to the store in which they were sold. In today’s retail environment, every company wrestles with how to do what the postal service has done for centuries — reach every household. It’s ironic that Sears, once famous for its mail order business, is faltering in a business environment that, in many ways, is reminiscent of the mail order era. The biggest difference between then and now is speed of delivery. Customers used to wait patiently for items ordered through mail order catalogs; today, they often expect those items to arrive no later than the next day. Meeting those expectations is one of today’s greatest challenges. Alex Rhodeen, Director of Disruptive Solutions for GEODIS, explains, “Understanding customer expectations is a priority for businesses in all verticals and meeting (or, ideally, exceeding) those expectations is crucial to winning customer loyalty. This is true of your customers and your customers’ customers. One area receiving a lot of attention in recent years is Last Mile delivery tailored to a customer’s preference.”[1]

The Last Mile is now a racetrack

Chris H. Petersen (@IMSResultsCount), CEO of Integrated Marketing Solutions, notes that mastering last mile logistics is particularly important for any company whose primary source of revenue is a subscription model. “The ‘last mile’ to your door is paved with gold in terms of future ecommerce potential,” he writes. “Home delivery is a current customer expectation, and will prove to be a critical requirement for subscription models delivering regular replenishment orders to households.”[2] No longer are customers waiting patiently for weeks for their orders. “It will not be good enough to be able to deliver the ‘last mile’,” explains Petersen. “The future of home delivery will quickly become very FAST — hours not days. … In today’s retail, home delivery does not differentiate … it is a requirement to stay in the game.”

During the glory days of the mail order catalog business, the United States Postal Service (USPS) was the primary last mile logistics provider. Larger items required contracting with different providers; but, last mile competition was limited. Today, the last mile racetrack is filled with competitors. There are well-known providers, like the USPS, FedEx, UPS, and DHL; but, there are also a number of new providers like Darkstore, Deliv, and Postmates. Other companies, like ShipHawk, do the legwork to connect retailers with last mile parcel, less-than-truckload, and truckload carriers. All of these companies are trying to get some of the “gold” referred to by Petersen. Amazon doesn’t want to miss out on the gold either. Lara Ewen reports, “The company is reportedly readying the launch of its own shipping service, which will begin with limited pickups and deliveries in Los Angeles, but may eventually roll out to other markets. It will go a long way toward helping Amazon solve its logistics problem, improve profitability and send it miles ahead of its competition, literally. Getting the last mile right is an imperative for all retailers, big and small.”[3] As on any racetrack, however, competitors get eliminated for various reasons. One of the latest casualties is Uber-owned Rush.

Merrill Douglas notes, no matter how long the race may be, all eyes are on the finish line. He writes, “If you are an e-commerce merchant, your supply chain might stretch thousands of miles. But these days, all eyes seem to be trained on the final stretch of that journey from the point of manufacture to the customer’s hands. Retailers and their service providers are applying a range of strategies to deploy the last mile of e-commerce fulfillment to win consumers’ hearts and minds.”[4] Melissa Runge, Vice President of analytical solutions at Spend Management Experts, told Douglas, “The logistics of e-commerce, including fulfillment and delivery, has become a competitive advantage.”

But where’s the finish line?

Although I stated all eyes are on the finish line, all too often the finish line is evasive. Petersen explains, “Working customers are not home when most deliveries occur. There is often no place to deliver packages at large apartment complexes and office buildings. ‘Porch pirates’ now follow delivery trucks to steal packages from porches after delivery. Getting to your door quicker is not enough. Secure delivery INSIDE your home or locker is the next frontier.” Last fall Amazon announced a service for Prime customers called Amazon Key. Martin Armstrong explains, “Amazon Key is a type of smart lock which will grant users the ability to let people into their home when they are not there.”[5] The service is not cheap; costing nearly $250; but, it allows consumers to remotely control and monitor package deliveries. More recently, Amazon announced its expanding it in-home delivery service to customers’ cars.[6] Petersen notes UPS uses different tactics to meet customer delivery needs. “A consumer who won’t be home, and doesn’t want a package to wait unattended, can choose one of [UPS’ Access Point] delivery sites and then retrieve the package when it’s convenient. In some major cities, UPS has also started rolling out unattended UPS lockers, which a consumer unlocks with an access code. The UPS My Choice service, which sends package tracking notifications, offers further flexibility. Customers can reroute deliveries in progress — say, if they expected to be home but then need to work late.” Nick Wingfield (@nickwingfield) reports, “[A start-up called] Latch struck a deal with Jet.com, an online shopping site owned by Walmart, to jointly pay for the installation of its locks on 1,000 apartment buildings in New York City to make deliveries easier. The arrangement offers some of the security of a doorman for people who live in buildings without them.”[7] The point is, last mile providers must continue to provide a number of different finish lines to keep customers happy.

Summary

Jennifer McKevitt (@mckvt) reports a survey conducted last year found, “About 40% of 1,500 shoppers surveyed … say delivery is the most important detail in their shopping experience. … Clearly, the stakes for retailers are extraordinarily high. Based on the risk associated with lost business, sellers able to secure the most reliable shipping options would be well-advised to do so. Failing that, they might not get a second chance.”[8] Mastering the last mile is easier said than done. Burt White, Vice President at Chainalytics, told Ewen, “The last mile is the hardest to crack.” Vijay Narayanan Natarajan, Visionary Innovation Senior Research Analyst at Frost & Sullivan, asserts, “Spiraling last-mile delivery costs and changing customer demands are causing retailers to rethink their strategies and look toward new business models such as click-and-collect, locker boxes, on-demand, and autonomous solutions. Moreover, the influx of start-ups in logistics has enabled innovative solutions that not only provide value-creation customized solutions for the consumer but also tackle the inefficiencies currently witnessed.”[9] Ewen adds, “Any solutions to last-mile delivery problems need to solve issues of speed, security and most importantly, surety.” Surety, she explains, involves making sure the goods actually reach the intended consumer. There are lots of ideas on how to improve last mile delivery from drones to autonomous delivery vehicles; but, surety is the final, and most important, part of the delivery process.

Footnotes
[1] Alex Rhodeen, “Solving Final Mile Logistics and Earning Customer Loyalty,” Talking Logistics, 22 March 2018.
[2] Chris H. Petersen, “Winning the race to the home requires more than the last mile,” Customer Think, 5 March 2018.
[3] Lara Ewen, “Solving for the last mile is retail’s next big disruption,” Retail Dive, 27 February 2018.
[4] Merrill Douglas, “The Customer Experience: The Last Mile Gets the Royal Treatment,” Inbound Logistics, 15 December 2017.
[5] Martin Armstrong, “Are You Comfortable Giving Amazon Your Front Door Key For Final Delivery?Supply Chain 24/7, 26 October 2017.
[6] Daphne Howland, “Amazon wants to Key your car,” Retail Dive, 24 April 2018.
[7] Nick Wingfield, “Amazon’s Latest Way Into Your Life Is Through the Front Door,” The New York Times, 25 October 2017.
[8] Jennifer McKevitt, “Last-mile delivery could make or break retail sales this year,” Supply Chain Dive, 21 November 2017.
[9] Staff, “Last-Mile Delivery Models to Revolutionize Urban Logistics by 2025,” Material Handling & Logistics, 30 March 2018.