Capgemini’s extensive survey polled consumers as well as supply chain executives to find out more about what this means to them. The results clearly showed that the last mile will become even more crucial as online ordering of food and groceries continues to grow rapidly in the next three years. As customers increase the frequency of their orders across all temperature regimes, their expectations will grow and they will look to see more flexibility and innovation in delivery services. Using digital technologies to get it right for customers will be key to unlocking scale and building a profitable online model.
What about cost?
The costs of the last mile are significant and disproportionate, accounting for 41% of total supply chain costs, so need to be kept under tight control. End-to-end supply chain solutions will be necessary; “bolt-ons” simply won’t cut it as organisations look to scale their operations. Digital tools can be used to get the basics right around cost and execution and then subsequently help drive operational innovation. Data-driven analytical thinking, combined with the right employee skillset and culture, will be critical to ensure that the end-to-end supply chain is run as efficiently as possible (optimising handling cost and vehicle utilisation) while still delivering the service promise for consumers.
Does it matter to customers?
Getting the last mile right can have significant impacts on consumer behaviour. Customers who are satisfied with the delivery will be more loyal and are likely to adopt a number of positive behaviours for the retailer, including spending more, sharing their experience with others, greater use of subscription services, and increased frequency of purchase. Ultimately satisfied customers will spend more and, provided they get a good service, may even be willing to pay a little more for their delivery services. Truly customer-centric service offers are therefore an absolute necessity. Successful companies will use digital technologies to help tackle design new service innovations, but it will be important to focus on true customer need. For instance, our survey highlights that almost three-quarters of consumers said that receiving the delivery in a convenient time slot is more important than receiving it quickly
What is the solution?
There is no one size fits all solution. It will be exciting to see how large bricks-and-mortar retailers leverage new digital tools to take the challenge to pure play retailers. With further innovation in automated product handling, there may be more viable and profitable options for reconfiguring existing estates to deliver an enhanced and faster online proposition. Especially when coupled with Strategic Order Orchestration Tools. Smaller retailers will likely need to rely on third parties and I also look forward to seeing whether 3PLs will start to play more of a role in this space, taking more risk to leverage these new opportunities and breaking out of the commodity trap.
As new digital solutions become established to get the basic economics right, then companies can turn to innovative solutions (such as use of the gig economy, crowdsourcing, autonomous vehicles, and delivering to the car boot) feeling confident they have a sound platform on which to deliver and scale new propositions successfully.
The challenges are only going to get more interesting as volume, frequency, and responsiveness increase. Retailers should expect rapid growth in online orders and supply chain solutions that cannot scale up to deal with increased volumes will quickly become redundant.
So, start your transition to a Digital Supply Chain now or risk facing escalating costs, failed service, unhappy customers, and eventual elimination from the market.
Read our recently published report, The Last-Mile Delivery Challenge, to find out more about the challenges and where to start.