Optimizing last-mile delivery
March 29, 2018
Last-mile delivery, a strain on your company? Not if you understand where the burden lies and what your options are. Explore which key actions companies should undertake to address these issues. Be prepared to move ahead, be ready to optimize your last-mile delivery.
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Customer expectations of online delivery options are rising unstoppably. Real-time tracking of orders, same-day and free delivery are only a few of the demands on the list of the so-called ‘last-mile’ expectations of the consumer of today. The result? Increasing cost levels, growing service requirements and even greater supply chain complexity.
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Online sales growth has been tremendous and shows no sign of slowing down. However, neither do consumers' expectations of delivery services. The 'last mile' offering is transforming delivery models. The result? Complex supply chains and greater costs. Discover how to address them.Read more
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To address the increasing cost levels, service requirements and supply chain complexity, we see the following key actions for companies: an integrated network design, rigorous cost management and enhanced management of their network partners.
Optimizing last-mile deliveries starts with designing a fit-for-purpose fulfillment network. This network should be based on relevant service requirements that have an impact on the online conversion. As such, it is essential that the design will be an integrated effort of both category management and supply chain management to balance the needs and the possibilities.
Since not all customers and products are created in identical manners, customers and assortment should be classified as segments based on distinctive delivery requirements such as lead-time, willingness to pay and shopping basket composition. For each of these segments, last-mile options should be identified and assessed on their attractiveness and their ability to meet customer and business requirements. Typically, the fit of a last-mile configuration can be weighed by its lead-time, cost-to-serve, technology complexity and supply-chain control. For example, low-value convenience products may not require same-day delivery, while high-value products might actually do.
What happens next? Once the viable last-mile options have been identified, the right partners should be selected to operate the network. Whereas traditional logistics service providers are more commoditized and evaluations are based on rates, the partners for executing the last-mile delivery network should also be assessed on capabilities to generate value and serve the customers. These capabilities could include, for instance:
What should you keep in mind when selecting your network partners? As a starting point, the network design should be based on the right balance between service requirements and service costs. This means that full transparency of service costs is necessary, and regular reviews on whether the offered service levels per customer and assortment segment are still balanced. We see this as a recurring challenge for quite a few companies. Typically, either there are limitations to the available data or analysis capabilities, or not all relevant cost elements are properly considered.
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The network design should be based on the right balance between service requirements and service costs
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For effective cost control and management, the e-commerce margin should be based on all relevant e-commerce cost to serve, the eCTS:
These eCTS insights enable:
Improving the eCTS can be realized throughout various levers, and can result in a 10-25 percent gain.
With a growing number of partners operating the last-mile network - and consumers expecting a seamless shopping experience – it is becoming more important to have strict control and monitoring of third-party performance installed. Even though we’re still a few years removed from a ‘logistics plug-and-play network,’ where logistics partners are continuously alternated based on available supply and offered service levels, we already see a larger number of logistics partners rotating with more frequency. This is illustrated by various local same-day crowdsourcing delivery specialists that can be used on a flexible basis.
The growing number of partners requires companies to re-think their operating model for logistics and take on more of an orchestrator role for their fulfillment function. For effective third-party performance management, it’s therefore instrumental to have enabling technology in place and the right set of KPIs and SLAs with the logistics partners.
Key aspects of enabling technology include:
The last-mile offering is increasingly becoming an enabler for growth and a competitive differentiator. However, to address the challenges that arise alongside, companies will have to focus on:
But which direction to go? Many retail and consumer goods clients struggle with their e-com supply chain challenges. From omnichannel logistics strategy development to implementation, there are many directions to take. Explore how you can optimize your last-mile delivery. Combine the expertise of Accenture Strategy, Javelin Group and Total Logistics Mobilize your company and your supply chain. Be a first mover.