The latest delivery battlefield – your doorstep

Last-mile delivery is critical for e-commerce success, and companies are rushing to come up with innovative solutions in the quest to win over the customer, right on the doorstep.

Manny Sears is running low on groceries – or, at least, that’s what his fridge tells him via his voice-activated digital assistant, Jenna. But that’s OK: the fridge already placed an online order with the supermarket, and Jenna says his delivery will arrive at the house at 2:50 p.m.

Manny’s at work, but that’s no problem, either. When the delivery robot arrives with his shopping it will make its way to the chilled secure box at the front of the house, access it via the cloud-based digital keypad and drop off the groceries.

This vision of the future of home delivery might be here sooner rather than we think. Smart technology and delivery are meeting on the consumer’s doorstep, algorithms and predictive analytics are combining with connected devices, automation and smart homes. And in an environment where fast isn’t fast enough, and customer loyalty can be fickle, companies are striving to innovate constantly with new gadgets and services.

Fast delivery

This battle for the doorstep is raging right now among e-commerce businesses who are vying to fulfill big demand for fast delivery as efficiently and cost-effectively as possible. The last mile is a space which is famously costly and complex, after all: software company Telogis estimates that it accounts for approximately 28 percent of the total cost of delivery.

The huge uptick in online sales is only making the challenge more acute. eMarketer estimates that global B2C e-commerce will reach $2.3 trillion by 2017. To ensure return sales, customer expectation has to be met – and then exceeded. So it seems that the fight over the last mile is being driven by what consumers want, rather than simply intense competition from e-commerce companies all trying to out-do each other.

“Actually, it’s a bit of both,” says Charles Brewer, CEO DHL e-Commerce. “Consumers do have much higher expectations today. They live in a real-time environment where they want things faster, with more visibility, more predictability, more choice and a great deal more convenience than they ever did in the past. E-tailers, meanwhile, recognize that it’s a critical part of a customer’s journey and see fulfillment and last-mile delivery as a differentiator and a driver of loyalty – and they’re looking for partners with an innovative mindset and creative solutions who can help them deliver it.”

Click & collect can help protect margins as part of a multichannel distribution strategy; but, obviously, online retailers need a physical store to be able to provide this service. And anyway, there’s no ignoring the fact, that for the time being, the majority of online customers still want items brought to their door – and for free, too.

Huge stakes

This needn’t trouble e-tailers too much, who can make their money from the last mile by building shipping costs into the price of the goods; but for logistics players, the stakes are huge. With failed deliveries adding more cost, success means being both flexible and generating a constant stream of mold-breaking delivery ideas.

Yet new delivery technologies can’t be relied on to solve the problem alone, notes Matthias Winkenbach, director of the MIT Megacity Lab at the Center for Transportation and Logistics in the U.S., in a recent article for MIT Sloan Management Review. The way companies mine and model their data is even more important.

Information businesses already have on hand – such as data on vehicle movements and product sales – can be used to improve delivery services, he argues. Take GPS data from smartphones on vehicles. This carries “a treasure trove” of locational data – but “when combined with other sources – transactional data, census and geospatial data, and information on driver activities – it is possible to build highly detailed models of urban delivery operations. Such analytics can equip managers with last-mile insights both on the strategic and day-to-day decision-making levels.”

Harnessing data

In fact, new technology in this space could change the marketplace for good by giving small businesses the ability to harness modeling data for themselves. Take Bringg, which is developing its web and mobile platform to offer services such as driver tracking, dispatching, SMS alerts and estimated time of arrival (ETAs), and allowing small and medium-sized enterprises the chance to compete with the likes of big players such as Uber and Amazon.

Crowdsourced cargo delivery – as epitomized by same-day delivery firm Deliv, which Forbes calls “the Uber of the retail world” – is another potential advance for the last mile. Customers seem to like it too. In a 2015 study of 2,000 U.S. consumers by Acquity Group, roughly 75 percent said they would be open to receiving deliveries from third parties.

Although currently in trial mode, autonomous vehicles and robots are eventually set to make an impact on the last mile, and could improve accuracy, efficiency and cost. Indeed, according to a recent study by McKinsey & Company, nearly 80 percent of parcels will be delivered in an automated way by 2025. In the U.K., food ordering service Just Eat is to trial delivery robots in London this year, while DHL will be testing autonomous vehicles concepts that work alongside couriers at its annual innovation day.

Drone launchers

Up in the sky, drones have been undergoing testing for some time. Niels Agatz, associate professor of Transportation and Logistics at the Rotterdam School of Management, Erasmus University, is aiming for a new level. “I'm working on a concept that combines a truck with multiple drones,” he says. “Maybe autonomous delivery robots could be launched from the truck, too.”

Even urban planning is in the mix. Charles Bombardier, a mechanical engineer from Quebec, Canada, and Ashish Thulkar, an industrial designer from Bangalore, India, recently unveiled a concept for “drone-ready tower blocks.”

There are big challenges to overcome with autonomous delivery, admits Agatz. “There are flying restrictions and safety issues to take into consideration with drones; and currently urban areas are the most difficult places for autonomous vehicles to operate in. But I think self-driving vehicles and drones are something we will see happen in last-mile delivery in the future.”

DHL Parcel Germany has meanwhile come up with a secure home delivery box, – and, whether parked in front of the home or office, car trunk deliveries are currently in trials both with Audi and Smart.

Flexible distribution centers

MIT Sloan’s Matthias Winkenbach also sees potential solutions in the creation of more flexible distribution centers: “Traditionally, companies have served large population centers with distribution centers located on the outskirts of the city, where space was more plentiful and land less expensive.

But this practice is no longer flexible enough to meet the varying needs of many urban markets. A multitier system that adds another layer of distribution facilities is required.”

 According to him, one such layer might be a fleet of mobile warehouses parked at strategic locations throughout the city. Another model begins with larger trucks designed for rapid ­offloading to smaller, more agile vehicles at transshipment points within the city.

Charles Brewer believes that getting the mix right is essential: “There is no disputing the fact that the consumer landscape has changed irreversibly and will continue to change at a far more rapid rate going forward.

For those of us at the forefront of this brave new world, my advice is to buckle up, enjoy the ride and push to put the smile in the last mile!” — Tony Greenway

Published: November 2016

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