The COVID-19 pandemic has caused an important increase in online sales of products and services. In 2020, these internet sales reached €112 billion, an increase of 8.5% over one year. Due to this increase in e-commerce, home deliveries have also risen. According to many experts, these new consumer behaviors will continue for years to come. That is the reason why optimizing the last mile logistics is more than ever a priority for many retailers who want to meet consumer expectations without impacting unit margins and the environmental footprint. Here is the logistical challenge that retail businesses are facing today.
According to forecasts, one in five vehicles on the road in the Paris urban area carries parcels to final customers. This last kilometer is the most expensive, not only for the supply chains, but also for the environment with nearly 30% of polluting emissions. As online sales will represent nearly 18% of total worldwide sales by the end of 2021, experts are developing solutions to reduce the financial and ecological impact of the last mile. Today, the goal is to offer flexible, fast, and sustainable delivery.
Purchasing behaviors and consumption habits are evolving. It is now a certainty. With the development of e-commerce and the need for immediacy, consumers are placing more and more low volume orders. This new trend leads to an increase in the flow of goods with an ever-increasing number of packages to be delivered to the end customers.
Food deliveries are no exception to this trend. Consumers avoid going to the supermarkets on busy days and regularly order their groceries online. Orders are usually placed during the week for home delivery within a few days or even hours. According to ‘The last-mile delivery challenge‘ study conducted by Capgemini, 37% of French consumers order their groceries online and receive home delivery at least once a week. By 2021, this figure should reach 49%.
In recent years, we have seen an increase in urban traffic with increasingly difficult traffic and parking conditions in city centers. The negative consequences of air pollution on the health of city-dwellers is now a reality.
Therefore, many cities have decided to implement new regulations to limit access to certain urban areas. There are now traffic and access restrictions for certain categories of vehicles that are considered too polluting. In 2021, new cities will introduce low-emission mobility zones, including Aix-Marseille, Montpellier, Nice, Strasbourg and Toulouse.
Today, retailers must meet the sustained demand during certain events. For example, during sales, Black Friday or Cyber Monday, which continue to attract new online shoppers. These are now prime shopping times for consumers. In 2020, these events broke new records.
According to Criteo, sales in France increased by nearly 76% during the 2020 edition of Black Friday compared to 2019. The consequences are significant on the logistics and the management of flows to the final customer. According to a study conducted by Sendcloud, the number of packages shipped during the week of Cyber Monday 2020 reached peaks of 218% increase compared to a regular week.
The delivery of certain products requires compliance with regulatory obligations: temperature and humidity monitoring, data recording. This traceability of operations concerns particularly the health care sector with the delivery of medicines. The agri-food industry with the delivery of fresh products is also subject to these constraints. The organization of these deliveries is particularly complex for carriers who must manage conditions in which the products are stored and transported, sometimes vital for many patients.
To meet consumers’ growing expectations in terms of delivery, companies are constrained to offer more than ever innovative and faster last mile delivery services. From now, delivery methods are multiplying: at home, at a collection point, in stores, at the workplace, in secure lockers allowing to collect the parcel at any time of the day.
And to go even further, some offer collaborative delivery tools allowing customers to be delivered directly by individuals. And if delivery with robots was science fiction a few years ago, it is now a reality. Indeed, some distributors offer delivery services using air or ground drone.
Consumers are more and more demanding about the time it takes to deliver goods. Therefore, carriers need to reduce delivery times to the end customer. That is why, they now offer an express delivery service. This delivery in less than 48 hours is now a real selling point. The number of consumers choosing to this delivery option is growing. However, managing this method of delivery is often complex and the cost of transport and the environmental impact are higher.
Last-mile delivery is a high cost in the logistics supply chain. Indeed, as the goods get closer to the home, the cost of shipping increases. For example, the last mile represents 20% of the cost of transportation to the end customer. Companies usually decide to cover part of the transportation costs, as too high delivery costs can dissuade many consumers from paying for the shopping cart.
That is why managing and optimizing the last mile logistics is now a major focus for retailers. To maintain low or free shipping, companies must implement new solutions that limit the operational costs associated with last mile delivery.
Beyond the product, consumers are increasingly concerned about the delivery of the goods. Late delivery, damaged packages, merchandise errors, no delivery on D or lack of tracking information can have a major impact on end customer satisfaction. In the event of a bad delivery experience, consumers generally do not place any more orders with the distributor.
Consumers have several expectations in terms of delivery:
Fast and efficient last-mile delivery not only improves customer loyalty, but also encourages customers to spend more. In addition, a satisfied customer is likely to share the positive experience with others. Therefore, it is important for retailers to focus on the customer experience when delivering the last mile.
Why provide a quality delivery experience:
Due to the global warming, consumers are according more and more importance to the sustainable approach of retailers. Therefore, retail companies, which are responsible for a major part of polluting emissions in urban areas, are now focusing on their environmental performance.
In addition, measures to restrict access to polluting vehicles in city centers have been implemented. These measures concern in particular vehicles used for parcel delivery, which are currently responsible for 30% of greenhouse gas emissions. The introduction of low-emission zones in many French cities should encourage suppliers to adopt a more sustainable approach.
Today, many tools (Odoo, Zoho, etc.) allow online sales companies to automate inventory management: tracking of sold items, control of stock levels, faster order preparation. In concrete terms, these solutions enable real-time updating of the quantities of goods available and trigger restocking as soon as stocks are too low. What is the objective? Avoid a dangerous and feared stockout.
Four necessary functions for optimal inventory management:
It is not only about delivery costs anymore. Consumers now value the ability to choose a delivery location and time slot. Indeed, they want to control the reception of their goods and make sure they do not miss the delivery man. Therefore, it is essential to allow consumers to determine a delivery location: at home, at the office, in a store, in a relay point or in secure lockers. This new trend is expected to be a permanent feature of the future of e-commerce.
To reduce delivery time and associated operational costs, retailers must be able to plan delivery operations smartly. Trying to plan manually these delivery routes can be a real headache.
Software solutions have been developed to automate the planning and construction of delivery plans. These tools offer customers the possibility to choose a time slot. This reduces the number of costly failed delivery attempts. In addition, defining more flexible time slots and feasible transportation plans provides a safety margin in case of delays. This makes it easier for delivery drivers to meet their original delivery deadlines.
The presence of API Rest allows carriers to interface these tools with their own order making system or merchandise labeling systems. In addition, some tools have integrations with order management solutions (Odoo, Zoho, etc.) or e-commerce site creation (WooCommerce, Prestashop, etc.). This is notably the case with the AntsRoute route optimization software.
More than 50% of delivery vehicles travel only half loaded. This phenomenon has a significant impact on the environment and continues to get worse with the development of 24-hour deliveries. Therefore, some companies have had the idea to propose co-transportation solutions.
In concrete terms, the pooling of freight allows several online sellers to group deliveries in a distribution center. Then, vehicles are in charge of dispatching the different parcels to the customers. These deliveries made on behalf of others allow retailers to minimize their expenses by ensuring a better vehicle filling rate. In the years to come, this initiative should be widely adopted in urban areas.
While home delivery remains the most popular choice, retailers should increasingly encourage consumers to choose delivery at a relay point. This method of delivery is now one of the most ecological solutions.
The delivery in relay point allows to reduce the number of stops made by the deliverymen and thus to limit miles travelled. Thus, the fuel consumption of the vehicles decreases, and the unit cost of the deliveries is lower. In addition, this delivery method helps to reduce greenhouse gas emissions and noise pollution in urban areas. Delivery to relay points also allows delivery drivers to avoid finding closed doors.
Last-mile logistics also involves managing the information flow associated with deliveries. Distributors must allow consumers to track the delivery of their goods. There are systems making possible to send automated SMS and email notifications at each stage of the delivery process. A final message can be sent to communicate an estimated time of arrival (ETA) and thus ensure the successful reception of the goods.
To limit environmental impact, retailers can replace their diesel vehicles with cleaner engines, such as electric or NGV (natural gas vehicle). These low-emission vehicles allow delivery drivers to access city centers, even in Low Emission Zones.
What about the next few years? To reduce delivery times and associated costs, new delivery methods should be developed. Some companies are already offering alternatives to delivery via road infrastructures. For example, the last mile delivery by air. Indeed, it is now possible to deliver parcels using drone in areas that are more difficult to access.
In conclusion, retailers must focus on optimizing last mile logistics. As the volume of packages to be delivered continues to increase, companies must focus on implementing solutions that meet consumer expectations without impacting their environmental performance.