Thanks to the ever-burgeoning demand driven by e-commerce and convenience shopping trends, the new greatest challenge for organisations is the so called “last-mile”. The term “last-mile” has emerged as a metaphor to describe the last leg of a product's journey – from fulfilment centre to the hands of the customer. Imagine for a moment an online food delivery order placed by a customer living in a security estate. The delivery vehicle may not access the estate without authorisation, most do not offer drop off services at the gate, and even if granted access, there is no guarantee that the customer will be home when the delivery vehicle arrives. What does this mean for the food retailer? Likely repeat attempts will increase the total cost of the delivery, maintenance of product integrity within a vehicle for extended periods increase the risk of product damage, and the duplicate effort to fulfil the client's order directly impacts the efficiency of the network. The challenge lies in three fundamental points – customers want the immediacy and professionalism of traditional retail, with the convenience of home-delivery, for very little to no increase in cost.Retailers within South Africa should consider the following key elements within their “last mile”;
- Never forget what matters to your client – patterns vary widely amongst consumers depending on their perception of value with each purchase. For example – when ordering lunch for delivery, the need for immediate gratification most likely outweighs delivery cost concerns, however, when placing a basket-of-goods order a few days in advance, most consumers seek a spend threshold that would secure free delivery.
- Understanding that “last-mile” doesn’t have to be “at-my-front-door”- often consumers are willing to waive the convenience of home delivery to save the costs associated with such. Solutions such as in-store collections or centralised collection points offer a viable alternative. Perhaps the key factor here is being mindful of providing the product for sale with a variety of options that allow flexibility for both the customer and the supply chain.
- Creative transport solutions – while potentially disruptive to traditional courier models, options introduced by the likes of Mr Delivery, and Uber, delivering on demand to customers, are indeed augmenting the last-mile network. Shortly, this may also be the playing field of drones, autonomous vehicles and robotic deliveries. Such solutions, however, require smart tracking, to supply the customer with visibility into the location of their order, regardless of the mode of transport.
- Inventory management challenges – traditionally inventory management allowed organisations to hedge stock levels against demand, but with e-commerce changing purchasing dynamics, it is becoming harder and harder to predict buying patterns. The ability to keep inventory flexible up until actual need will undoubtedly be a competitive advantage. For example – if customers value rapid delivery, perhaps a mass central fulfilment centre is not the ideal and alternatives such as picking from the nearest in-store stock to rapidly fulfil a delivery may be a viable option.
- Returns are the new normal – just as a customer would put a product back on the shelf, so returns after last mile delivery need to be accepted as par for the course. Options such as a driver waiting while a customer checks a product, returning unwanted goods to store or booking a return collection shortly after receipt of the product are all viable for returns. The challenge for FMCG retailers, for example, is that in most cases, a return equates a stock loss, as the break in the cold chain damages product integrity. Furthermore, in most cases customer expectation dictates that a return is free, further impacting the cost associated to the last mile.
While an experienced last-mile delivery organisation can certainly action deliveries efficiently, the advantage of building this process into your greater supply chain strategy will go far in unlocking real supply chain value. Building an end-to-end supply chain geared to last mile fulfilment creates a chain of value through inbound logistics and warehousing, enabling successful customer deliveries. The recent purchase of Wholefoods by Amazon is likely to introduce a wealth of examples of last-mile deliveries into the supply chain lexicon; however, the South African market will continue to provide unique challenges. The demands of this new supply chain requirement can no longer be overlooked, and it will be the innovative that grasp competitive advantage in this profit-rich arena.
Read how convenience shopping is changing supply chains: Why Smart Supply Chains will Shape Convenience Shopping