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.

Foodman - The Postman of Food

 

Pizza Hut & Dominos are the two names that brings a smile to anyone’s face. There will hardly be anyone reading this article who is unfamiliar with these names. Domino’s entered the Indian market place in the year 1995; as Jubilant Foodworks Limited company. The company captured the market by analyzing that people don’t want to travel distances to just have Pizzas, hence started the home delivery service of Pizzas. It penetrated the market by introducing the 30 minutes or free delivery scheme which instantly caught the attention of the people. This scheme was pretty much similar to their scheme in the USA; but seeing the infrastructural differences between USA and India, it was difficult for Domino’s to offer the same value to its Indian customers.

Hence, it came up with a policy that ensures, that the outlet promises the scheme only if certain conditions are met and also, weather conditions must be suitable. As far as I remember this was the starting of home delivery of cooked food items on a large scale in India. Pizza Hut also went ahead and offered home delivery to its customers but didn’t offer something like Domino’s and hence Domino’s market share grew manifolds.

This was done by Domino’s in the early 2000s, and for almost 15 years, there was no competition in the market place, but then around 2015/16; Zomato and Swiggy kind of adapted the same business model but went a level deeper in offering the choices and a level shallower in terms of employing their fixed capital.

Unlike Domino’s, Zomato and Swiggy do not have their own restaurants, rather they started a service of collecting the orders from restaurants in the city and deliver it anywhere in the city limits. While Domino’s offered only Pizzas, Zomato and Swiggy offered a whole variety of food and that too from one’s favorite restaurant. They offered the similar value as Domino’s in terms of delivery and became quite popular within a short span of time. This was like creating a new supply chain of food. While Domino’s placed a few restrictions in terms of location, Zomato and Swiggy didn’t put any such restrictions. They even offered food from Domino’s. One interesting thing to notice here is that, all the deliveries were done by using two wheelers only and not any huge delivery vans, this gave an advantage of quicker delivery to the customers. Also, the delivery people collected the orders from the restaurants and delivered them to the point of consumption and on their way back, they did not come back empty handed, rather picked up another order which was to be delivered at some other location and was ordered from this point.

All this said, all the three companies in discussion above, planned their city logistics in a very efficient manner. It requires a lot of planning, implementing and controlling the efficient flow of finished goods and related information from point of origin to consumption with a view to providing satisfaction to the customers. City logistics is a part of logistics, that deals with eliminating the distances between the service provider and the customer. It deals only within the city limits and this is what the three companies created and strengthened in order to offer the unique value proposition to their customers.