The Last Mile: Get ahead of the pack —or pack it in

Changes in consumer behavior and demands coupled with e-commerce battles are transforming retailer supply chains dramatically. There must be corresponding changes in logistics and delivery capabilities either internally or through an ecosystem of partners to position retailers to win the last mile.

We surveyed 11,000 consumers from 10 countries to understand the e-commerce trends shaping the delivery industry. What we found makes it clear: fast and free delivery is here to stay.

• Eighty-six percent of survey respondents say free shipping is important when deciding where to shop online.
• Nearly half of respondents said they are more likely to shop online if same-day delivery is an option.

Not only do consumers want speed when it comes to their deliveries, but they behave differently as a result. Fast and free shipping now affects the most important metrics for retailers, including customer loyalty, share of wallet, basket size and the most important: growth.

This has led to a race to the top as retailers seek to gain an advantage by creating faster offerings. Of course, while offering fast, free shipping is critically important, it’s also difficult and costly to offer, and it’s leading e-commerce companies to shift to a third-party sales model that radically reshapes the economics of inventory localization.

By spreading the cost of inventory across third parties, they can focus on building out the infrastructure for local inventory, in turn enabling fast and free shipping from closer, local fulfilment centers, which make those deliveries far more cost-effective. This has shifted the race for e-commerce dominance to the last mile.

At the same time, brick-and-mortar retailers are answering by using their existing infrastructure to put inventory close to the consumer. Driven by five main trends, retailers are reshaping supply chains for a unified commerce future that:

• boosts inventory accuracy;
• optimizes fulfillment through distributed order management;
• enables fulfillment from small, urban spaces;
• leverages automation to reshape the economics of fulfillment; and
• uses Big Data and artificial intelligence to optimize inventory.

So, as these trends upend supply chains and where inventory is located, the question becomes: how will these new capabilities best be utilized to deliver new and differentiated delivery experiences?

While retailers are rapidly transforming their networks to compete with e-commerce, traditional delivery organizations have been slow to react. The retailers that have been investing in localizing their inventories for speed and cost are now looking to partner with new delivery companies that capitalize on those investments.

This puts parcel organizations at risk of losing business from retailers, who are instead turning to startups with new technologies, as well as to their own solutions, to solve the last-mile challenge but typically at a higher cost.

Simply put, it is a matter of survival that delivery organizations act now to avoid losing valuable market share to new entrants by enacting three key recommendations:

• localize the delivery depots;
• achieve continuous delivery capabilities with dynamic routing; and
• redefine their role in the ecosystem.

The good news is that established postal and parcel organizations are best positioned to offer much of the new solutions that retailers are looking for—and take advantage of this incredible growth opportunity.

Due to existing density and local infrastructure, these organizations need only crack the code for dynamic routing and dispatch leveraging their existing delivery resources to meet faster delivery requirements and greater consumer flexibility while delivering a lower overall cost to retailers.

Dynamic routing differs from the traditional route definition by focusing on how to best incorporate unknown demand into already existing routes during the day. Continuous delivery capabilities would enable the assignment of new activity to the route dynamically, thus improving efficiency compared to having to dispatch a separate driver.

This capability is required in a delivery partner for retailers to enable new customer experiences like same-day delivery, guaranteed delivery and appointment windows, change of delivery location, and others.

By focusing on making their last-mile offering more frictionless and dynamic, parcel organizations have an opportunity to win the last-mile and redefine their role in the delivery ecosystem to compete with the startup delivery services on speed and flexibility. Similarly, retailers must first lay the unified commerce groundwork to take advantage of new speed and flexibility from their partners.

Done well, joining the race to the top will create remarkable growth and the foundation for sustained success. Done poorly, it will make retailers and parcel organizations less relevant in the market and potentially out of business. The choice is truly that stark.