Capping IT Off

Capping IT Off

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Strategies for success in the last mile

Category : Digital Strategies

A couple of months back, I bought a study table from an online retailer. The table, when it arrived, was stunning. In fact, it looked even better than it did on the site. There was just one small problem—a broken handle on one of the drawers. No big deal—the delivery person who came in and assembled it assured me that they would get it fixed within the next two days.

Within the hour, I got a call from their customer service department. Profusely apologetic, the service representative at the other end assured me that they would source a replacement handle and get it fixed as soon as possible. I got a call the very next day and another profusely apologetic customer service associate informed me that they were unable to source a handle of the same type and that they would compensate me (rather handsomely) for the broken part. Again I assured her that I did not want the money but would she please try a little harder, since I was willing to wait?

To cut a long story short, we went through the same motions a couple of times with different people (always concerned and apologetic) calling me up and discussing the handle which had broken during delivery. Apparently, they did not have any spares close at hand nor did they have that part in their factory. I finally decided to settle for the monetary compensation. That was not what I wanted though. I had paid a premium price for a beautiful study table, which I intended to use for the next twenty years.

Don’t get me wrong, this table is all that and more. I wish I could describe it to you: it’s sleek and sturdy with lovely curves, a deep rich color and a wonderful wood grain. It will last for twenty years. It may even make it through to forty years. But it’s not perfect, and I am not happy. One small handle (out of six) is broken, and that has just ruined it for me. Even worse, the whole back-and-forth experience with trying to get it fixed has made this flaw stick even more in my head.

The point I am trying to make is that this company did not meet my expectations and this left a bitter taste in my mouth. Someone else might have been very satisfied with the amount of money that the company refunded, but not me. It was not what I wanted. That’s how it is with consumers today.

New social, local and mobile solutions (SOLOMO) have become a part of our lives. We are used to higher standards of innovation, service and convenience which, in turn, fuels our expectations of retail and consumer product companies. Increased competition among retailers and logistics companies to “go one better” than their rivals has also left consumers spoiled for choice. The net result of all these factors is that consumers today demand more when it comes to availability, convenience, and choice. There is also an increasing demand for personalized experiences and services.

This is exactly what the online retailer I bought the table from was not able to deliver, in my case. One small flaw soured the entire relationship for me. This is nothing new. According to the Capgemini whitepaper, Making the Last Mile Pay, these services (delivery, returns and associated services) are today “so pivotal to the customer experience that they are determining brand choices as never before”.

Companies are simply not able to match up to these high expectations, either due to the heavy costs involved or due to operational difficulties. So what must they do to succeed when it comes to the last mile? Here are some key strategies for success:

  • Build Holistic Solutions: Not only are consumers’ expectations rising, but different consumers also want different things. Consumers today expect to switch seamlessly between physical stores and online/mobile shopping and to be given the choice to receive delivery or return items in the ways they want (at home, in a mailbox, scheduled for a particular time or picked up from convenient external locations). Basically, they want be able to choose from a whole host of options and expect that companies will provide them these options.

Retail and consumer product companies have to deliver on these expectations to build customer loyalty and the only way to be agile enough to quickly meet consumer demands is by building a holistic end-to-end solution. 

A good example in international logistics is SingPost (the Singapore postal service), which provides end-to-end regional and cross-border ecommerce logistics. Their services cover everything from creation of web store fronts and order management systems, to complete freight and customs solutions, warehouse management and shipping. Whatever a company needs when it comes to the shipping of packages, they offer a solution.

  • Omni-channel is the only way: As already pointed out, consumers want to be able to seamlessly switch between physical stores and online/mobile shopping and be offered the same products, inventory visibility, services and offers, regardless of how they shop. Retailers need to make sure that no matter the channel, the customer receives a consistent experience and maximum choice.

This omni-channel approach needs to be present not only on the customer side but on the operations side as well. Traditional retailers who have built separate supply chain operations and distribution centers for their store and online fulfillment are not able to cope with the demands being put on them as these separate silos prevent agility, cross-channel inventory visibility and also drive up costs. A coordinated, omni-channel approach will create a more integrated, agile supply chain network and enable you to reap a number of efficiencies.

The UK department store chain John Lewis is a good example of this approach. Over the years, it has built up a seamless online and store-based fulfillment solution from a single distribution unit. This single distribution center serves all its channels. With the help of IT and automation, the company has optimized its processes to the extent that all its store replenishments happen directly from the distribution center to the shop floor (rather than inventory being held in in-store stock rooms).

  • Learn from and emulate models that work: The world of last-mile services is still evolving with different companies tackling the same challenges in different ways. Many of these approaches and models are already successful and important lessons can be learned from them. Being aware of what works and what does not can help save the cost and time that goes into re-inventing the wheel.

Don’t get me wrong. Ultimately, the strategy or model that you choose must be one that works for your particular circumstances. However, there are enough successful innovations out there for you to take some valuable cues from. You can learn from global retailers, up and coming start-ups or even companies in other industries that have been honing their last-mile advances for some time.

  • Innovate: Rapidly changing technology has dramatically increased the possibilities for innovation. For instance, think of Amazon and Walmart which have applied for permission to use drones, both to deliver goods to consumers as well as to re-supply their warehouses. Just think about how helpful such technologies can be in vast markets, dispersed rural communities and areas where transport infrastructure is underdeveloped.

Just like Amazon, Google apparently is looking at autonomous delivery options such as driverless cars. Other players are looking at the success of social networking apps to drive crowdsourced deliveries and this approach seems to be working in markets such as the US. According to IDC Worldwide Retail predictions (2015), on-demand, socially networked delivery services will account for as many as 90% of same-day deliveries by 2018.

Basically, the more traditional, linear supply chains are not going to work with new marketplace pressures and companies must look at innovating new solutions based on the possibilities created by new technologies.

  • Re-evaluate inventory’s placement within the value chain: As already mentioned, customer expectations, driven largely by SOLOMO (Social, Local and Mobile) solutions, have gotten customers used to a world of instant gratification. With short shipping windows, social media spurred shopping, online reviews and price matching, inventory placement within the value chain will become a major cost driver if not done right. Keeping inventory flexible until the actual point of need will become a strategic advantage.

For instance, Amazon, one of the giants in the field, was one of the first to understand the importance of speed and it continues to make advances in this regard. One of the first to pioneer “next day delivery”, Amazon along with others is piloting projects for same day delivery and is also experimenting with predictive shopping. This involves anticipating shoppers’ future purchases based on past behavior, with a view to holding the relevant merchandise close to customers - ready to deliver at very short notice.

Similarly, other companies are reinventing their supply chains in different ways. The John Lewis store example (given above) is one such instance.

  • Find partners: Customers want options and yet providing that level of flexibility can be quite costly for the companies concerned. It is here that finding the right partner can help. As addressed in the Rethinking the Value Chain report:

There will be an evolution across industry towards value networks that encourage collaboration to address these challenges. These networks will be made up of dynamically connected “plug and play” relationships between retailers, brand manufacturers, logistics providers, suppliers and organizations from other sectors, including government and civic bodies.”

We already see this happening across industries and even with governmental bodies. For example, The Coca-Cola Africa Foundation, The Global Fund, USAID and The Bill & Melinda Gates Foundation are collaborating on a “Project Last Mile” initiative to deliver vital medicines and medical supplies to hard-to-reach communities in Africa.

In Germany, DHL Parcel recently piloted a project where it joined forces with Amazon and Audi to deliver parcels directly to customers’ cars. Similarly, Google Shopping Express will be partnering with Uber for same-day deliveries, with Google maintaining pricing, the storefront and merchant partnerships while Uber provides the drivers through their UberRUSH offering.

These are all cases where partnering up has helped companies meet customer expectations while maintaining cost efficiencies.

  • Returns management efficiency: In a recent study by the UK’s industry association for online retail, it was found that 78% of respondents deemed the quality of the returns service an important factor when deciding who to shop with. Also, while quality of last-mile services provided by different companies has evolved, returns is an area that has lagged behind.

In this situation, any company that seeks to differentiate itself must concentrate on improving the returns experience for its customers. The returns process also needs ensure that the returned items flow smoothly back into the system. It is technology innovation and supply-chain collaboration that can help in this area.

Already, we see smart mailbox suppliers like Parcelhome offering a convenient returns service. Customers can place the items to be returned in the mailbox and let the shippers take care of it.

Conclusion:

In this blog, I have outlined some important strategies that companies need to follow in order to succeed in the field of last-mile services. In order to better understand how different companies are adopting these strategies, I would recommend taking a look at the Capgemini whitepaper ‘Making the Last Mile Pay’ as well as the Rethinking the Value Chain report for some powerful examples of innovations currently being made in this space as well as why there is a pressing need for the industry to change now. If you are interested in discussing this further, I can be reached at sundip.naik@capgemini.com

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