The Last Mile Trouble

 

Surviving and thriving within the highly competitive landscape of consumer retail is not easy, particularly for brick-and-mortar retailers who formerly relied on in-store shoppers as their primary source of business. Over the past 10 years pure online retailers like Amazon and online grocer Big basket have set the new standard for shopping with just a few clicks and a quick delivery right to customer’s homes.

Today traditional companies have been forced to play catch-up often. These companies have adopted an omni-channel retail model which integrates their physical stores with online fulfilment operations. But providing that kind of convenience can come at a cost to operational efficiency, this is particularly true when it comes to last mile delivery.

Last mile delivery is very challenging because of its complexity. Older models relied on economies of scale resulting from distribution centers shipping in bulk to various stores. Now retailers that want to deliver directly to individuals are facing a brand-new set of problems like small quantity purchases, irregular purchasing patterns and miss delivery of packages. All these factors can affect revenue to continue operations and maintain delivery efficiency. Companies need to carefully consider their last mile supply network as the network that would best suit the business would keep varying according to the business.

Last mile networks can be categorized broadly according to two key dimensions, one being delivery responsiveness and the other being product variety. Delivery responsiveness is important when customers need their orders fulfilled quickly like same day and on demand options that are becoming popular for grocery delivery. Product variety plays a role in the type of fulfilment that will be possible, for example companies with high product variety may not be able to maintain a complete inventory. Instead these companies will stock a core product range and source the remaining products from other suppliers including third-party sellers. If customers aren't in a rush to get their orders and we stock a very specific type of product, then we can use a simple supply network with centralized logistics and timed home delivery windows.

If customers don't need their orders right away but expect a large variety of products, we can use a one-stop supply network much like Amazon does. Logistically this will be more complex because it will rely on a variety of suppliers. Inventory and logistics won't be nearly as centralized. When customers expect to get their orders quickly and expect a large variety of products, one will need to decentralize and go local. This often means building a portal that can facilitate crowdsource deliveries. It is clear that today's customers expect convenience and consistency across many channels. Solving the last mile problem will be challenging but is also one of the most important ways that a brand can engage with customers and establish a reputation for great service you.