Download Going the extra mile to win the last mile

2015
Going the extra mile to win the last mile:
For retailers and pure-play e-tailers, last mile is about striking the not-so-simple
balance between delivery time and cost.
THE
EXTRA
MILE
In an era of rapid e-commerce innovation, the omni-channel marathon
is turning into a sprint to win the consumer over in the last mile – but
that race is far from over. Consumers are progressively adapting in
the use of apps and other shopping-preference technologies – and it
remains to be seen what price they will place on the instant
gratification of same-day delivery, or even 1-2 hour delivery service.
but also impacts e-commerce real estate decisions – and the right
strategy has a heavy impact on a company’s overall brand identity.
Shifting consumer demands and competition among retailers is
forcing systemic changes in fulfillment and distribution real estate
strategies. The intensified competition begs the question: are
retailer’s real estate assets helping or hindering their last mile
performance?
Consumers have come to expect ease, speed, reduced or free
shipping costs for many of their online purchases. Yet not every mode
or method of last mile delivery works for every organization.
For retailers and pure-play e-tailers, getting closer to the end
customer involves a heightened focus around cost and service,
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Does having a larger number of smaller fulfillment sites
always help capture consumer demand? What are the
benefits and the risks?
There are limits on the type of product purchased, the location of the
buyer, as well as the time and cost incurred to fulfill an order. In most
instances, delivery modes are fragmented and complicated. And each
requires different uses of real estate.
2015
Going the extra mile to win the last mile:
For retailers and pure-play e-tailers, last mile is about striking the not-so-simple
balance between delivery time and cost.
It is important to look each model of last mile delivery and the supply-chain strategy implications they encompass:
1 Traditional fulfillment & delivery
3 Ship from Stores / Store Fulfillment
• Using traditional parcel carriers to deliver online orders, including
companies like FedEx, UPS and DHL. Orders are picked up from
a distribution center and routed through parcel hubs and sortation
facilities which streamline the delivery process for each parcel
carrier, efficiently getting the delivery to the end consumer.
• Larger retailers the scale, system of stores and volume of SKU’s
to reach many customers throughout the country where the sameday methods in major urban areas does not pencil financially.
Effectively utilizing a retail location’s storage backroom as a
distribution center, larger retailers can leverage existing store
locations to provide additional product coverage to consumers.
• Employing a 3PL to handle fulfillment, where the 3PL will manage
the inventory, fulfillment facility and warehouse management
information technology.
• Larger e-tailers like Amazon manage the direct-to-consumer
relationship and fulfill orders from their warehouse network, using
a parcel carrier or the United States Postal Service (USPS).
2 Dense, urban CBD delivery
• Examples of this type of strategy include Amazon’s evolving
offerings, from Amazon Fresh to their Prime Now quick-delivery
service, as well as the services offered by Google Express. These
services often require fleets of vehicles to make deliveries, and
small warehouses near dense population centers to minimize
transportation costs.
• Dark stores – large retail facilities that resemble a conventional
supermarket or store, but are not open to the public, housing
goods used to fulfill orders placed online – are an emerging
concept in the United States, whereby the pick-up location
becomes the last mile.
4 Aspirational concepts
• Locker pick-up systems have been employed on a ‘trial and error’
basis with several retailers and online giants. They require heavy
infrastructure to fulfill orders quickly from stores or infill fulfillment
locations.
• Drones are a news-making delivery strategy, but have yet to pass
all regulatory and operational hurdles.
• Uber is beginning to leverage its platform of drivers to deliver
‘Essentials,’ beginning in Washington D.C. The strategy affectively
limits the company’s need to invest in a fleet of transportation
vehicles, and permits the company to add car-focused distribution
centers in urban environments.
• There are numerous variations that have met mixed success, like
eBay Now, amongst others, including local or regional courier
companies.
Kris Bjorson, SIOR
International Director
+1 773 458 1397
[email protected]
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