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ACCENTURE STRATEGY


April 13, 2018
3 steps to making same-day delivery a cost reduction solution
By: Terry Steger

In the war to win consumers, there is an escalating battle around speed of delivery. It wasn’t so long ago that two-day delivery was considered fast. Now, we see same-day delivery offerings in the market tripling in the next year.1 With the wrong design, costs can double. But with the right design, Accenture Strategy found that same-day delivery can be executed in a manner that is cheaper than Next-Day Air and competitive with the cost of Second-Day air.2


Why take this seriously?

According to a study done by American Express, over 50 percent of digital buyers attribute same-day delivery to becoming a loyal customer.3 Additionally, Accenture Strategy Communications, Media & Technology Operations Research found that more than half of customers were likely to switch to ordering online if same-day delivery was an available option.4

But how is this cost savings via increased service even possible? Through three strategic steps:

  1. Adopting the right supply chain structure and supporting digital technology
    The natural inclination is to assume that same-day delivery is all about transportation and route optimization. But that is simply not true.

    When it comes to digital technology, the key is to utilize platforms that provide real-time visibility and facilitate integration and optimization. According to recent Accenture Strategy Research, not all companies are investing in technology to bring further agility and efficiency to the organization (only 13 percent are). However, those that do, are targeting new avenues, especially analytics (37 percent) followed by artificial intelligence and machine learning (22 percent), cloud (8 percent) and digitalization (5 percent).5

  2. Forming the right partnerships
    Opportunities for optimization begin during the planning and order fulfillment stages of execution. Inventory and hub optimization are the first steps in this equation. By creating efficiencies when products are shipped to distribution centers, the cycle time for processing and shipping an order may decrease.

    A capability is needed that offers the ability for customers to order through a web portal, mobile app, or via phone and creates the visibility and optimization needed to achieve same-day delivery with the right products. Without a doubt, the right digital delivery can transform companies’ impact in the market as well as consumers’ expectations.

  3. Selecting the right products
    In certain industries, inventory segmentation occurs based on velocity. For example, a company may segment their products for demand forecasting purposes, based on two groups: fast moving and slow moving. Fast moving Stock Keeping Units (SKUs) are ideal candidates for same-day delivery. By focusing on fast moving SKUs and employing inventory, hub and route optimization technology, companies can see a reduced fulfillment cost-per-order. There is also a halo effect in the sense that a corresponding decrease in customer care calls may be achieved.

Ship at scale … (Economies of scale)

With a higher volume of orders, companies can create an ecosystem of speedy delivery services that increases the number of orders that can be ordered and delivered per day. The higher volume and increased services reduce the cost-per-package, making same-day delivery even more attainable.

Accenture conducted a pilot study to analyze the impact same-day delivery can make when done right.6 With the right products, customer segments and locations, same-day delivery costs could be at parity with parcel ground shipping, while at the same time providing a superior customer experience. For our pilot methodology, we determined what products would be most suitable, who our target customers would be, and where in the United States we would deliver from. Then, we executed on same-day delivery with the help of partners. By targeting the most densely populated cities, we could help our client achieve a 50 percent same-day delivery penetration rate on overall direct-to-customer shipments. While no supply chain savings were realized with this service, our client expects that the improved customer experience and delivery optionality will enable top-line growth and improve profitability by encouraging repeat buyers and average revenue per customer growth. In time, Accenture believes that this solution will enable higher service levels and even lower delivery costs to the end customer. The pilot outcomes and assessment truly represent how the proliferation of same-day delivery can be a win for both businesses and their customers.

As consumer expectations evolve, companies that begin developing a same-day capability now will be in the best position to meet and exceed consumers’ increasing expectations at cost-competitive rates. By adopting the right technology, forming the right partnerships, and selecting the right products for same-day delivery, companies will be able to enhance their positions within the market.

RELATED CONTENT


1BRP, “Digital Commerce Survey 2017"
2 Accenture Strategy client experience
3 “Raising the Bar: How Gen Z Expectations Are Reshaping Brand Experiences”
4Accenture Strategy, Communications, Media & Technology Operations Research, Consumer Insights, 2017
5 Accenture Strategy, “Beyond the ZBB Buzz,” 2018
6Accenture Strategy client experience

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