Supply Chain Consultants Go Supply Chain Consulting look at the “last mile”, which can be a costly headache for retailers
Constantly changing online shopping habits and preferences and the growth in volumes are adding to retailers’ cost pressures. Goods must be delivered to a consumer’s home, office or designated collection point in congested urban areas, and as quickly as possible.
The “last mile”, i.e. the movement of goods between a transport hub and a delivery address is the main problem to be solved. The last mile of the logistics chain, which accounts for a large proportion of transport costs and complexity of operations, is often the most inefficient.
The variation in delivery routes and packing requirements, standing times at loading and unloading docks and low size of loads are all factors that influence both cost and speed of delivery.
Traditional retailers are embracing the opportunities offered by omni-channel trading but are struggling to manage the fulfilment process. According to a recent report by Barclays, The Last Mile, the surge in online shopping is set to generate over 1.35 billion deliveries a year by 2018. As supply chain consultants we need to ask: Are we ready for this?
E-commerce logistical challenges
Transporters, whether 3PL or in-house, are under pressure to improve load factors, while
reducing air pollution, noise emissions and congestion. There is a trend towards alternative modes of freight transport such as electric and hybrid vehicles and smaller transit vans as opposed to larger trucks, for both convenience and cost.
Collaboration with third party service providers
Omni-channel retailers will have to redefine their online strategy and boost investment in technology in the online fulfilment process to be able to keep up with competitors. The wide variety of delivery methods and routes will require retailers to develop relationships with logistics providers to provide the best solution for the end consumer. This represents an opportunity for third party (3PL) logistics companies and couriers to capitalize on the switch to smaller loads and more frequent deliveries. Supply chain consultants can help to provide the analysis to underpin these decisions and support the outsourcing process.
Consumer not at home
According to the Barclays’ study, the number one issue for logistics companies, listed by 63% of firms surveyed, is consumers not being at home to receive their delivery. This is a cause for concern, Sunday deliveries will have to become part of the mix.
By 2018, it is projected that online sales of clothes and footwear will be the leading category, making up more than 20% of all deliveries, followed by food, music and film media and then books. Although home deliveries are the preferred option by consumers, it is expected that there will be growth in click-and-collect and other types of pick-up services, improving the retailer’s margin.
Currently, most home deliveries in the UK are via Royal Mail, a large number are also managed by third party courier or 3PL companies. The Barclays report projects that by 2018 click-and-collect and secure lockers at collection points will become the leading methods of delivery despite consumers’ preference for home deliveries.
Some retailers are leading the race by providing consumers with flexible options for ordering online and picking up in store. At Argos, the household goods store, if you order online you can use special Fast Track counters to collect and pay with 7 days to collect. Halfords, retailer of car parts, camping equipment and bicycles, reported that in 2014 over 90% of its online orders were collected in store.
Other companies use couriers such as Shutl and Deliveroo that promise to deliver within 2 hours in certain urban areas using bikes and motorcycles. TNT is experimenting with a ‘mobile depot’ (a 40-tonne truck) in Brussels to improve the efficiency of its parcel delivery operations. There is much talk about the “uberization” of the last mile, but it is early days.
Lockers and click-and-collect
Click and collect is becoming increasingly popular for retailers for obvious cost reasons. Planet Retail foresees that by 2017 the number of people using click & collect service in the UK will double with many new models of pick-up services offered. Secure cold storage lockers in supermarkets like Waitrose are becoming an increasing part of our daily lives. Pay-on-collection services will make collections increasingly attractive to the consumer.
Free returns of online orders allow consumers to order and return many items without too much hassle and additional costs. However, the scale of returns is a real burden for retailers as it can be a complicated and costly process. It is estimated that around 30% of the goods ordered online in the UK are returned. Certain logistics providers have grown to specialize in handling returns. Clipper Logistics operates returns for Zara, John Lewis and Tesco.
All of these developments revolve around the final leg of the last mile. However, the consensus is that the supply chain strategy needs to be clear and the implementation of the systems and technology to support it must be robust before the last mile activities can fully support the consumer.
Click here to contact our experienced team of supply chain consultants