Challenges of the Last Mile Delivery in Serving E-Commerce Business

The “Last-Mile” element of the home-delivery model represents more than 50 per cent of the total logistics cost and is fraught with challenges. Traffic congestion in urban areas and the tyranny of distance in remote areas both add time and cost, negatively impacting the economics. Further compounded by practical issues such as invalid or incorrect address details, hard to locate locations, no-one home so cannot accept delivery, buyer remorse – no longer wants the delivery, lack of nearby parking, elevators out of service and many other hurdles, all add cost, time and inconvenience to an already marginal activity.

However, this last mile delivery is frequently the only link in the e-commerce supply chain that directly touches the customer in a face-to-face scenario – typically on the door step with the interaction between delivery person and the consumer. This can often be that critical moment-of-truth that represents your company, your brand and your reputation – and the lasting memory that stays with the consumer reflecting their overall experience with the whole online purchase transaction, and on which they judge the company and inevitably discuss online through social media networks with their fellow digital consumers.

Alternatives to Home Delivery

The introduction of ‘Click and Collect’ options overcomes many of the challenges with home delivery and offers retailers, consumers and logistics service providers a Win-Win solution for all stakeholders.

By offering the buyer the option to collect merchandise from within a bricks and mortar retail store or from other convenient locations such as post offices, networks of convenience stores such as Seven-Eleven, smaller shops or gas stations, retailers can ship multiple individual orders in bulk to a single delivery point, thus reducing much of the cost and avoiding many of the drawbacks of the last mile element of home delivery.

Many consumers prefer this method of collection because they can pick up their merchandise at a time that suits them, perhaps on their way to or from work, without having to be at home for a prescribed period – typically two or four hours – to receive and sign for their delivery – a process that typically takes less than five minutes. Thus, in addition to more efficient and cost effective logistics, this provides greater consumer convenience.

The collect-from-store options offered by large retailers, such as Walmart and Tesco, have become popular and cost effective alternatives to home delivery and - whilst having some implications on store layout and service personnel - can also provide incremental revenue opportunities for the retailers, in that many customers, whilst collecting their online orders, will also make additional purchases within the store.

As a variation on the Click and Collect theme, many companies are starting to adopt Smart Lockers – typically un-manned installations of steel locker boxes that offer a self-pick-up solution in the form of intelligent high-tech parcel delivery lockers – creating market opportunities for new entrants.

Rows of technology enabled smart lockers are located at convenient public locations such as car parks, railway offices or subway stations and - having had the deliveries placed securely inside the various boxes - are accessed by the consumer using a unique collection code, digitally transmitted to their mobile device and providing one-time access to electronically ‘open the box’.

The logistics service provider can thus make multiple deliveries, simultaneously to the same single location, resulting in much more effective and efficient last mile solutions; for example imagine the efficiencies of delivering twenty individual packages to one smart locker location as opposed to delivering them individually to twenty different residential addresses.

Implications for supply chain management

Whilst the retail sector has made massive progress in adapting and adjusting to the new world order of e-commerce and online shopping, even the industry leaders recognise that they have a long way to go.

A 2014 survey concluded that only 24 per cent of companies believe they have an agile supply chain adequate to serve the online world, and a huge 81 per cent admitted their supply chain is not fit for purpose for serving the Omni-Channel.

These shifts in the retail landscape combined with digital consumers’ shopping preferences will continue to have profound supply chain implications, particularly for traditional distribution operations and established logistics networks.

These challenges present a window of opportunity for new entrants who can design and build business models and logistics operations from scratch, leveraging leading-edge cloud based technologies to rapidly implement made to measure e-commerce solutions, whilst the traditional service providers struggle to adapt and keep up with the pace of change.

The boundaries are becoming increasingly blurred – the previously clearly segregated roles undertaken by retailers, internet companies and logistics service providers are converging - with many exciting opportunities ahead in serving Omni-Channel supply chains.