No one ever paid for a Pizza delivery service. It was always free. It is best kept hidden in transaction value. These days every delivery service is a ‘product’. 2 hours, 4 hours, next day, second day, standard delivery for the same stuff are functionally different products. Customers balk when they are expected to pay premium for faster delivery.
In just over a decade the B2C E-Commerce firms in India too have managed to match or exceed International delivery standards as far as last mile logistics go. Both business discipline and enabling platforms. Amazon still leads on the technology investments in this space. Others with varying motivations have their own business models. Some addressing the main pain of shippers (connecting them to freight forwarders), some of customers (not a good business idea, Doorman failed), some of the fleet owners, some of the delivery boys, some of payment collection agencies. Some leverage synergies in existing businesses in this space. Some struggle with Industry specific last mile issues e.g. replenishing gas stations (SAP Secondary Sales/).
Logistics ‘industry’ experts put last mile unit delivery costs to be roughly half of total door to door laid down costs. Which means for low cost products, free delivery simply does not make business sense. The costs depend on several factors like customer density, distance from nearest warehouse/delivery center, route options, city restrictions on certain modes of transport, acceptance time windows, product type, value, volume, weather etc. Some last mile operators also offer collections and returns service and that often means a phenomenal cost to serve. Esp. in newly pampered consumer markets, customers tend to be more demanding and often unreasonable with the level of service they expect! Someone is paying for it.
Expectations in B2B last mile are no different. Retailers of hardware, home furnishings, pharmaceuticals, Auto spares, construction supplies, bars and restaurants now routinely expect similar delivery speed and timeliness. Esp. since some start ups were funded upwards of 100mn$ in early stage. They now employ 25 yo tall, fair, handsome double masters rock stars as directors and pay them upwards of 100lpa to solve some of the most challenging problems in this space. Something that the brick and mortar empires could not. Back then they used terms like secondary and tertiary transportation when whole of the country was their fiefdom and everything was ‘under the control of a 1944 born manager. Every service provider their de-facto slave! No science. No math. No logic. Just shout.
Expectations are bound to rise and there are many finer elements to consider to achieve an ‘Optimal’ last mile delivery. Most importantly making the experience more interactive with end customers. Esp when somethings that can go wrong certainly will.
- Change of time window and/or location – How late can the customer decide to choose another time or place of delivery? Amazon still talks the language of day and date. Your order number so and so is out for delivery and you should received it on 10th of Feb, 2019.. (meanwhile 2 members in my family die.)
- Scheduling the deliveries – What sophisticated scheduling heuristics should the last mile provider run to reschedule deliveries and returns? FIFO, least cost, fastest completion, LIFO
- Consolidating Loads – How can the shipping company maximize the weight to volume ratio to reduce unit shipping costs?
- Rewards and Penalties – What metrics should make the basis of good working relationship between last mile service provider and the business?
- Integration with digital core– How to scope a program to integrate last mile delivery platforms with your fulfillment/ERP applications? What information should you capture to make meaningful conclusions about your fill rates and costs to serve?– By line, by order, by Customer, by location…
- Choosing the right last mile platform – Not everyone needs Amazon’s capabilities. Some out there are cheap for the purpose.
The author is a Business Planning Principal with Lydian Global Business Services. Lydian’s compelling combination of deep industry expertise and Solution vision wrt its ability to mix and match the right set of software design help customers derive the additional value that businesses expect from their investments in Enterprise Technologies.
