Delivering the Goods

December 14, 2015

Consumers’ online shopping experience is only as good as the speed of the delivery and returns process which, thankfully, is now the focus for innovation. But there’s no time to waste for retailers and their distribution partners:  any delay in their own efforts could see them quickly lose ground to disrupters like Uber, Instacart and Bridj, warns Jason Searcy, manager of supply chain technologies at Capgemini.

Two decades on from the birth of online retail, new growth opportunities are being hampered by an inconsistent and often frustrating delivery and returns experience. The possibility of having to chase goods that have been rerouted back to the depot is a barrier to shopping online. Market analysts believe that until the industry can remove the final friction from last-mile services, online retail will fail to reach its full potential.

UPS’s latest annual Pulse of the Online Shopper study in the US found a rise in consumers’ interest in deliveries to destinations other than their home. So far this trend has led to an expansion of local collection points, and curb-side retrieval services, but even these have only limited appeal as most consumers don’t want to have to go somewhere special to receive an item that was supposed to be delivered into their hands.

Further challenges include making online sales viable for local stores, and making person-to-person shipments less onerous (eg as the ‘sharing economy’ expands).

All of this requires a much slicker, more dynamic logistics process. It can’t be more expensive, as customers already expect the cost of delivery and returns to be absorbed by suppliers. It needs to be coordinated in real-time too, because customer preferences change all the time, and the market is already moving towards same-day deliveries and collections, as well as options to divert parcels already in transit.

If existing logistics businesses don’t respond quickly enough, entrepreneurs will enter the market with their own unofficial services – for example where they go into stores, pick products from the shelves to order, and provide their own local delivery service. Instacart in the US has been doing this for three years now, providing a same-day delivery service for customers at retailers such as Costco, PetCo and Whole Foods, with great success – all managed via a smartphone app.

Social and mobile capabilities have become key differentiators for forward-thinking organisations now, to the point that the level of social media integration into core activity has become a reflection of overall company branding. As one executive in the hospitality industry put it, “There’s no point deploying transportation systems if they don’t support the digital experience.” The days of the standalone business application with no social/digital components are numbered.

Funding innovation

Last-mile costs are increasing, as distribution models deviate from the familiar economies of consolidated storage and shipments towards more spontaneous and personalised deliveries. To support new service options in a more commercially sustainable way, logistics companies need to drive efficiency improvements elsewhere in their operations, and harness new partnerships – enabled by the latest technology.

In Germany, logistics giant DHL is rolling out all sorts of ambitious pilot initiatives in an attempt to meet consumers’ growing expectations and stay ahead of the curve. In one trial, DHL Parcel has joined forces with Amazon and Audi to enable items to be delivered securely to the trunks ofcustomers’ cars. The idea is that this will allow consumers to more fully exploit mobile commerce and avoid having to wait until they get home to receive goods.

New services like this will need to be funded by savings generated elsewhere in the goods-handling process: another DHL pilot has highlighted the potential for a 25% time saving through the use of head-mounted displays and augmented reality technology to accelerate order picking.

Smarter services

Smart mailbox solutions (with built-in sensors and Internet connections) are attracting a lot of attention too – giving consumers more remote control as well as real-time information about deliveries made to their homes. The initial motivation has been to increase delivery success rates, by allowing households to receive goods securely when there is no one present. But what’s more interesting about the facilities is the scope for new value-added services, once the right partnerships are in place.

Karl Wills, CEO of Pelipod in the UK, which markets its own variation on the smart mailbox, sees two potential areas for new forms of collaboration using the receptacles.

The first is in an internal business context. With the right supply relationships in place, field-based engineers (eg carrying out boiler repairs) could receive spare parts straight to their secure storage box, Wills says. “If you’ve got an engineer charging £40 an hour, who’s currently losing half an hour three times a week driving to a central depot to collect parts, that’s an opportunity to save £8,500 over three years,” he notes. “Multiply that by 100 engineers and the numbers are significant.”

Pelipod is already talking to utility companies about the opportunity, which also promises higher service levels to customers – eg. if parts can be dropped off locally the same day instead of overnight to the depot, allowing jobs to be completed sooner. (The Pelipod reads the code number of the incoming parcels, automatically notifying the engineer when a specific part has been shipped.)

For consumer deliveries, every missed delivery that can be eliminated saves carrier companies not just the additional handling charge, but the much higher fee incurred as customers ring the call centre to arrange redelivery.

Couriers are the obvious primary target for service tie-ups, but there are other interesting potential use cases too. Some smart boxes can be assigned secure entry codes remotely, and create an audit trail of who did what, when. So parents can use them to leave keys for their children (each with their own code and time trail of when they used the box), and box owners can give codes to local stores, private sellers and lenders so they too can use the pods for any-time deliveries (or collections).

Friction-less returns

Improving the returns process is a huge area for potential improvement, and technology innovation and supply-chain collaboration promise to help here too.

IMRG’s latest study of consumer online shopping preferences (IMRG UK Consumer Home Delivery Review 2015), found that satisfaction with returns fell from 68% in 2014 to 61% in 2015 – significant given that 78% deemed the quality of the returns service an important factor when deciding who to shop with.

Removing consumer friction from this service means bringing the service to the customer, wherever they are – instead of forcing the shopper to stand in line at a post office or nominated collection point. Smart mailbox supplier Parcelhome has already extended its trials to include a returns option as part of pilot services with carriers in Belgium.

Crowd services

But it is likely that even more fluidity is needed. A new report, (developed by The Consumer Goods Forum and Capgemini working in collaboration with industry executives), Rethinking the Value Chain: New Realities in Collaborative Business, cites an Uber pilot which brought smaller businesses into the loop. With echoes of the Instacart model, the 24-hour trial in Stockholm in 2014 used Uber taxis to pick up items from small retailers and manufacturers and deliver them to customers in the metropolitan area. Just an hour elapsed from placing of the order to delivery, and participating retailers saw trade swell by 500 per cent over the period.

Enabling this type of service spontaneity are technology platforms that can dynamically bring together suppliers and delivery services to fulfil customer orders on the fly. The Uber project harnessed an ecommerce platform from Tictail.

Weengs, a new on-demand shipping app launched recently in London, UK, targets senders with an instant postage and packaging solution. (A comparable service, Shyp, operates in certain areas of the US.) The service targets people with a lot of items to send (eg online returns), as well as home businesses (eg. eBay and Etsy users).

Users simply submit a picture of the loose item they would like to send, then select the ‘Pickup Now’ button via the Weengs app. Within 15 minutes, a ‘Weengs Angel’ will arrive to collect the item and package it, before sending it out with one of its shipping partners (to date these include Royal Mail, ParcelForce, Hermes, UPS and DHL) – based on who offers the best value. The sender pays a flat fee per collection of £5, plus delivery. “Convenience is king,” says CEO Greg Zontanos.

A logical extension is the emerging ‘crowdshipping’ phenomenon, in which individuals drop packages for each other if they’re heading in the same direction, again coordinated using an app. DHL Freight Sweden began experimenting with this model two years ago.

Community services

Once there is a platform in place to support real-time collaboration between partner organisations, the scope for innovation is limited only by the industry’s vision.

In Denmark, the national post office is experimenting with a range of novel community services. Since installing digital tracking technology across its delivery fleet, Post Danmark has identified scope for partnerships with local services – for example to report potholes and other environmental issues recorded while on daily rounds. Each new value-added service is a potential new revenue stream.

Operational efficiency and environmental pressures create further reasons for logistics companies to improve their last-mile activities. The Rethinking the Value Chain report from The Consumer Goods Forum and Capgemini, references EC figures suggesting that 20 percent of all trucks in the EU currently run empty. That’s bad for business, and bad for the planet. Once vehicles can be monitored in real time, and real-time information flows freely and transparently between logistics partners, shipments and routes can be better planned and idle capacity sold – on the fly.

New market entrants may have an advantage with newer opportunities, in that they are not constrained by legacy processes and systems. But established carriers have their own advantage in their existing distribution networks and coverage. They must adapt though – moving away from linear processes to more agile arrangements, facilitated by joined-up technology and real-time data.

The key is to form new dynamic value networks, centred round the consumer and enabled by technology: multiple, diverse ‘plug and play’ relationships between retailers, brand manufacturers, logistics service providers, suppliers and organisations from other sectors (eg local government authorities and public services).

Innovation starts with new thinking. Success relies on identifying partners that can help make it happen.

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