THE LAST MILE OF DISTRIBUTION Retailers focus on the final leg of a product’s journey to deliver improved customer value
The distance between the retailer and consumers’ hands is a rich source of engagement and the focus of intense competition as both online and brick-and-mortar merchants work to deliver the experience consumers want.
The ‘last mile’ of distribution – the journey of products from the retailer to customers’ hands – holds a number of challenges and opportunities for retailers. “Consumers increasingly want to choose their own scenarios when it comes to online ordering, in-store experience, home delivery and click-and- collect services,” according to the authors of “Rethinking the Value Chain,” a report produced by Capgemini and the Consumer Goods Forum. “Meanwhile, alternative distribution models are rapidly emerging. Companies such as Amazon are forcing the industry to rethink the last mile distribution model.”
Retailers need to consider factors such as local culture, geography, climate and tariffs to find the optimal way to deliver purchases and satisfy each consumer’s requirements. For example, while cost is the main challenge when it comes to last mile deliveries in the US, issues such as infrastructure and postal services are key concerns in other parts of the world, according to Chris Cunnane, a senior analyst in the supply chain and logistics team at ARC Advisory Group, a global technology research and advisory firm headquartered in the US . “In India … the difficult part is figuring out the infrastructure to make home deliveries viable,” Cunnane wrote on ARC’s Logistics Viewpoints blog. "Trucks have a difficult time navigating the crowded streets and the postal service is notoriously slow. One new option in India is the use of couriers to deliver goods purchased from Flipkart, Snapdeal and Amazon India.”
Cost is a key concern for retailers and consumers, especially when there is a lot of distance to cover. “The last mile on average makes up nearly 30% of transportation costs, and it is very hard to bring down,” said Brittain Ladd, a supply chain consultant.
Retailers are responding to the challenges with flexible distribution models that can shorten the last mile and improve efficiency while enhancing the consumer experience. Local warehouses, combined with innovative technologies, are helping to optimize journey planning, while a range of purchasing and collection choices offer convenient options for consumers.
For example, Peapod, an online grocery delivery service that operates in 24 regions of the US Midwest and East Coast, operates three different warehouse formats depending on local market size and density. Consumers can purchase their goods at virtual grocery stores in locations including commuter rail stations. As well as delivering to homes and businesses, Peapod also provides pick-up points in convenient locations.
Retail organizations are using innovative technology to optimize the last mile by combining incisive planning with the flexibility to respond quickly to changing demands. One supermarket chain in India, for example, offers free delivery to consumers for orders costing more than a certain amount, with delivery service outsourced to a third-party courier. By dedicating a floor at one of its distribution centers as a logistics center, the company has been able to double its product lines. It also has implemented an e-commerce system to enable real-time inventory status and efficient pickup, helping to ensure that both the availability and delivery of goods will meet consumers’ expectations.
Waitrose, the food division of UK retailer and cooperative of the John Lewis Partnership, implemented digital supply chain planning and optimization software to enable centralized transport planning, dispatch and yard management across its distribution centers and branches. In addition, a workforce planning solution allows branches to interact with the central system and allocate man hours so planners can try different scenarios and ‘what-if’ proposals to maximize opportunities at the local level.
The last mile of transit can be subject to unexpected and unavoidable delays that cause frustration for consumers. While vehicle or driver technology provides a cost-effective way to generate GPS-enabled messages when a truck is within a set distance of its destination, this is not always put to best use.
“All too often, customers can track their package to the delivery depot, but they lose sight of it during its journey from the depot to the delivery address,” said Nizam Sacranie, owner of a chain of discount stores in Leicestershire, UK, who is exploring home delivery options for his business. “Communicating with customers during that last stage of the journey will not only keep them informed about any delays; it will also mean they’re less likely to nip out or do something that means they don’t hear the doorbell when their delivery arrives.”
In today’s digitally connected world, retailers have increased opportunities to add value through communications in the last mile of the supply chain. RFID labels can enable the packages themselves to communicate through Wi-Fi and mobile towers, and an omni-channel approach can direct communication to the specific channel favored by each consumer.
“THE LAST MILE ON AVERAGE MAKES UP NEARLY 30% OF TRANSPORTATION COSTS.”SUPPLY CHAIN CONSULTANT
For example, companies like UPS in the US and DHL in Germany enable customers to change their minds about delivery times and locations while packages are in transit, online or with a mobile app. “Consumers don’t want rigid delivery times and options,” according to the report “Omni-channel Logistics”, jointly published by German logistics company DHL Consumer Solutions & Innovation and IDC Manufacturing Insights, a global IT research provider headquartered in the US. “Consumers also demand flexibility in the communication channels beyond the web and mobile apps. They demand the same logistics access and interaction via WhatsApp, Vchat and other unstructured channels. For logistics providers and retailers, the challenge is to create and maintain a single view of all customer service channels to enable seamless and streamlined communication.”
Ultimately, the last mile of distribution encompasses much more than a distance for goods to travel. As competition intensifies, new distribution models and innovative technologies are enabling greater insight and planning to optimize fulfillment, staffing and transportation. The ideal solution will differ for each retailer and market, but those that get it right will deliver true value into consumers’ hands. ◆Back to top