Last Mile battlefield hots up at The Delivery Conference

Activity in Last Mile Logistics has increased rapidly in recent years, responding to the eCommerce boom and the mass of home deliveries now required. As delivery speed and personalisation increases, so does the cost of logistics, building up pressure. This has been a constant – yes, consumers can have ever faster and more convenient deliveries but it comes at a cost. Think warehouse workers on longer shifts and vans making ever more urban deliveries. 

But Brody Butler, global MD, post and parcel at Accenture Consulting spoke at The Delivery Conference, saying how this upward cost curve may be obsolete. He predicts that improvements in technology could allow the eCommerce delivery model to continue to grow, while also cutting logistics costs.

“Artificial Intelligence has the potential to shift the delivery reality of increasing cost. As we talk to startups about their AI engines, they universally say ‘we can do this’. AI powered optimisation has the potential to eliminate non-value add activity, it learns and improves rapidly. Micro hub ‘orchestrations’ create continuous delivery models.”

In essence, this means start-ups can use existing assets such as stores as pick-ups points and make the last mile delivery quickly after the consumer orders, often using self-employed couriers in their own vehicles.

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The increasing complexity and cost of delivery has been mirrored by a big leap in venture capital investment in supply chain and logistics, from $266 million in 2013 to $1,753m in the first quarter of 2016, according to Accenture. Incumbents are also increasing investment, and with Singles Day in China recording the movement of 580m parcels, when an average day has 57m, it is hardly surprising.

This makes the Last Mile a key battlefield and Butler sees three participants battling for supremacy.

“There are three parties moving into this space. The retailers, who know a lot about the customer; the traditional couriers, who are increasing density and using their hard assets; and the start-ups, who are asset light and information rich.”

For more detail on how a company deploying AI and not relying on hard assets such as depots and vans plans to deliver, see our interview with start-up Stuart Delivery.

Is there a technology fix for containing rapidly increasing delivery costs? We will see in the coming years how robust and scalable the technology and business model is.

But it will be tested, as consumer demand for eCommerce shows no sign of abating.

Brody continued: “Consumers are changing with smartphone adoption and instant access to data. There has been a tenfold increase in mobile shopping this year. Distance between advert and purchase is shrinking, and today is measured in seconds.”

Click & Collect

The ability of the logistics industry to deliver the consumer’s eCommerce demands would have been surpassed a few years ago, had it not been for the emergence of Click & Collect.

The Delivery Conference also showed how Click & Collect is also moving fast, with a number of eye catching developments. The most interesting of these is from Wickes. The building products supplier has started offering Wickes Daily – a same day or nominated hour delivery service, with City Sprint-owned On the dot as courier.

Wickes supply chain director Duncan Kendal explains: “The courier picks up from the nearest store using our Click & Collect method effectively and delivers to the end user. We have 7,000 of our 10,000 SKUs available through the service. It includes goods up to one metre cubed. The key is utilising the assets we have. 

“We started the service before Christmas, and people are prepared to pay. One great example, was a £2,000 order, for 4 days hence, so it is not just about speed, it is about precision. This tradesmen will receive the delivery at exactly the hour they need it for their project. After all, time is money and the £9.95 delivery charge is no big deal in this instance.”

Kendal identified a number of key building blocks that were essential for this kind of precise delivery.

“You need nationwide coverage; defined ranges; accurate inventory, this is the holy grail; and mindset – the store teams need to feel they are not just running a shop, they are running a multichannel fulfilment centre.”

Mindset

The need to change they way employees see their role also came through loud and clear from the presentation of Richard Pugh, head of logistics at M&S.com.

M&S faced a steep learning curve when it took online retail in-house in 2014, but the retail giant now has a 900,000 sq ft DC dedicated to its parcels business, both UK and international. It carries out Click & Collect at 700 stores with order cut off now at 20:00 for next day collection in store.

Pugh says: “The despatch volumes were up 6% last year on the previous year and at the same time we’ve achieved a 50% increase in availability and a 40% reduction in final mile failures.

“But just when you feel you’ve cracked it, the demands of customers change, and we need to be able to respond quickly as a logistics operation. We’ve turned logistics to face the Omnichannel customer and become more of a service function, rather than back office.”

M&S uses its customer insight unit, not simply to promote sales, but also to drive performance in logistics. 

“Returns are increasingly important,” explains Pugh. “This has a big impact on full price sales, so we have to move items back through the network quickly. Also the image the consumer has of our brand is linked to the efficiency and convenience of returns operations. One of our objectives is make all M&S stores able to handle the return of parcels and the digital mindset required represents a cultural shift within the company.”

We will conclude on a lighter note. Paddy Earnshaw, chief customer officer at Doddle took a 'bio-chemical' approach to Omnichannel Retail in his presentation. 

He explained: “Dopamine is released by the brain in anticipation of delivery and oxytocin is released when delivery is made. Dopamine is also release during foreplay, while oxytocin is released during orgasm. This can be used by delivery companies, but it must lead to satisfaction, it can’t be all build up!”

It certainly brings new meaning to the word fulfillment.

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