ManufacturingDecember 2, 2019

How to excel in last mile delivery

Sixty-one percent of consumers said the availability of same-day delivery would make them more loyal to a retailer.

Sixty-one percent of consumers said the availability of same-day delivery would make them more loyal to a retailer, yet only one percent would be willing to pay for full delivery costs. Retailers are currently charging customers only 80% of the overall delivery costs, which happens to be the most expensive part of the retail supply chain.

The last mile delivery is also the one part of the supply chain with the most potential for error. Supply Chain Dive reports that the last leg of a journey can account for up to 28% of a product’s total transportation costs.

Grocery retailers that want to excel in this space — while protecting their bottom line — need to optimize their logistics planning. Here’s why:

1. A Constantly Evolving Landscape

The battleground to win shoppers has moved from in-store aisles to the digital space, where shoppers can easily search for products and compare prices. They can choose where and when they want their purchases delivered; retailers trying to outdo each other are providing shoppers with flexibility through more delivery options, faster speed and even lower prices.

Traditional players that are slow to respond to shoppers’ fast-changing demands lose market share to new players — digital disruptors — who are quick to move in and fulfill them.

In one example, Dutch startup Picnic gained a 10% market share increase in just three years after the 2015 launch of its online supermarket. Besides faster deliveries, shoppers want flexible delivery windows. Ocado, UK’s top online supermarket, offers hourly slots every day of the week.

To compete with these new players, you need an optimized planning system that will help your planners find the optimal balance between ever-changing consumer needs and operational costs.

groceries home delivery

2. Planning complexity

Moving orders from stores or distribution centers to shoppers involves a huge number of moving parts such as stocks, drivers and vehicles. Routing vehicles alone is a complex calculation of available drivers and vehicles using the shortest routes to deliver orders within the requested time windows. This complexity is beyond the capability of spreadsheet planning.

3. Fast-Changing Data

Gone were the days when decisions were set in stone. A customer may ask for the delivery location or time to be changed when the order is already out of the door. This flexibility is now expected, and smaller delivery windows require a system that supports real-time planning.

Plans are always at their best even as the optimizer continuously and automatically improves them based on the latest information (new shipments, disruptions, etc.).

4. Rising Expectations

Shoppers want a lot from retailers. On top of more delivery options, more flexibility, faster speed and cheaper (or free) delivery, they also expect retailers to be more sustainable. This puts a lot of pressure on last mile delivery one of the top contributors of urban air pollution.

Efficient routing and resource planning make operations more environmentally and socially responsible as they help reduce fuel consumption, empty miles and miles traveled. Optimization allows planning for different vehicles, including electrified ones that need constant recharging.

As more and more consumers shop online for the many conveniences it offers, grocery retailers need to pay more attention to enriching the customer experience. Learn how you can capture the heart of shoppers in the crowded retail space when you read about our solution to mastering last mile delivery.

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