[Episode Highlight] Finding the Right Balance in Last-Mile Delivery

In the not too distant past, before the rise of e-commerce, “Please allow 4-6 weeks for delivery” was the standard lead time for just about anything you ordered via mail or telephone. Even a book or clothing item could take that long to deliver. A lot has changed since then. Today, last-mile delivery is one of the hottest segments in the supply chain. Why is it in the spotlight? What is the biggest challenge companies face with last-mile delivery? How can technology help companies achieve the right balance between cost and customer experience? Those are the main questions I discussed with Walter Heil, Senior Vice President of Business Americas at Locus.sh, during a recent episode of Talking Logistics.  

Why is Last-Mile Delivery Critical Today?

Since over a century ago when customers first ordered products from a Sears catalogue, home deliveries have been part of the supply chain process. So, why has last-mile delivery suddenly become critical to supply chain success? Walter explains that the difference is that in the past, supply chain was all about pushing products to consumers, primarily through stores. Consumers really weren’t involved until they went to the store to make a purchase.

“Today, the consumer is part of the supply chain, pulling demand through the supply chain,” says Walter. “The supply chain, thus, becomes an integral part of your brand. This means you can no longer control your supply chain from the back office. It’s a paradigm shift. It requires a ton of investment so that nothing damages the brand.”

Balancing Costs with Customer Expectations

In a survey we conducted with our Indago supply chain research community, we asked our members, “What do you view as the top challenges associated with last-mile delivery today?” By a large margin, the top response was “Controlling costs of last-mile delivery as customer expectations become more stringent.” I asked Walter if this result surprised him and why balancing last-mile delivery costs with meeting customer expectations is so challenging.

Walter notes that meeting customer expectations for on-time, as ordered, frictionless deliveries without damage puts constraints on supply chain processes, and as constraints mount, so do costs.

Walter draws the comparison to the broad delivery time windows consumers are given waiting for the cable company or an appliance delivery. It’s not a good experience for the consumer. “What technology enables companies to do,” says Walter, “is give consumers the ability to pick very discrete delivery times and then the system can look at all of these delivery times and dynamically optimize them to provide consumers with a premium service, such as same-day delivery, without having to charge them extra for it. This creates a competitive advantage.” 

The Benefits of Technology

Using technology to keep costs in check is a well-known practice. But what other benefits can technology offer in last-mile delivery? Walter mentions that, “You no longer can meet customer expectations today without giving them full transparency to their orders in the supply chain. You need to give them proactive information about the status of their order on the device of their choice, typically their phone, in real time. If something goes wrong or there is a disruption in the supply chain, if I can push an alert to the customer and give them a new delivery estimate, they may not be happy, but it reduces the risk of losing that customer.”

Walter notes that another benefit of technology is flexibility. He notes that in order to fully control the customer experience, many companies will employ a private fleet. “It becomes an extension of, and a billboard for, your business,” he says.

“But if your competitor can use third-party providers to deliver a similar customer experience, they will have a cost advantage. If they can use the flexibility of technology to balance and optimize third-party deliveries while maintaining the customer experience, especially when dealing with delays and disruptions, they will have a competitive advantage.”

Mistakes, Misconceptions and Measurement

With the critical nature of last-mile delivery to the brand experience, I asked Walter what the biggest mistake or misconception companies have about this process. Walter comments that he believes the shift to the consumer being part of, and in control of, the supply chain is equivalent in importance to what containerization was 50 years ago. But many companies think the current emphasis on last-mile delivery is only a temporary trend due to the pandemic. They fail to recognize the permanent changes this requires of supply chain networks and processes.

This leads to a lot of questions about how companies should assess themselves and their processes, as well as what questions companies should ask potential technology partners. Walter shared a lot of insights and advice on these important questions. Therefore, I recommend that you watch the full episode for all the details. Then post a comment and share your own thoughts and experiences on this topic.