Elly Yates-Roberts |
This article was originally published in the Winter 2018 issue of The Record. Subscribe for FREE here to get the next issue delivered directly to your inbox.
Getting goods into consumers’ hands where and when they want them is a game-changer for retailers – but they need to address complex challenges to make sure they can keep their promises
In a customer-centric, omnichannel retail world, consumers expect a seamless and convenient end-to-end experience. Consumers have grown used to next-day and same-day deliveries from companies like Amazon, and they expect the same convenience from any other retailer. They want to choose a convenient delivery time with a narrow delivery window, to be able to reroute their delivery on the fly if they can’t be at the original address and, whatever happens, to receive their order on time. The last mile is a crucial component in that journey, but it presents an increasingly complex challenge for retailers.
For example, supermarket chains in the UK and Europe tell us they struggle to profit from offering home delivery, but that they would lose more money – and customers – if they didn’t offer it. Customers’ expectations for one-hour delivery slots – with peaks in demand for evening deliveries and few people opting for weekday lunchtime slots – make resource management increasingly complex. And while supermarkets can improve cost control by steering customers towards less favoured delivery slots at lower prices, they still face the challenge of knowing how best to price different slots in a way that is attractive to customers.
While the problem is continually evolving, the solution is quite simple. Take a typical online retail scenario where a customer orders several items – let’s say a jacket, a pair of shoes and a t-shirt – on an online platform. Traditionally, the retailer then picks all those items at one location, packs them and gives them to the driver to deliver to the customer. That can work for two- or three-day delivery, but if the online retailer wants to offer same-day, or even one- or two-hour delivery, they need to hold huge amounts of stock in their warehouse with no visibility over who will order it, or when – a costly exercise that makes no business sense.
If, on the other hand, the online retailer can see the inventories of different brick-and-mortar stores in the city for certain products, it can use these to quickly source everything for the customer while the store makes an effortless sale. It’s a win-win situation.
In this scenario, the online retailer might know the jacket is in stock at department stores in the north and south of the city, while the shoes and t-shirt are in its own warehouse. To bring those items together, the retailer needs to decide how to transport the products and whether to source them from its own warehouse, from store A in the north or store B in the south. This could involve the truck visiting a big department store to collect the jacket and deliver it with the other items. Or two trucks could meet at a certain point, one bringing the jacket to add to the order the other is carrying. If there’s a traffic jam en route to the chosen store, it may need to change those decisions and reroute to a different store for the jacket. This involves an extremely complex network of decisions – but this is the future.
Importantly, the technology is available to help retailers handle this level of complexity. Quintiq’s technology is already used widely by postal companies to solve their last mile and by retailers to solve their home delivery puzzles, including challenges like last-minute changes to the time or place of express deliveries. As consumers expect increasingly short delivery times, retailers need to act – and they can implement the solution that works for their business step by step.
Optimising the last mile of retail is about much more than delivering goods on time – it has become critical to competitive performance. With software that can process orders, decide where to source the individual products and plan which truck or driver is doing what over the next few hours, and by partnering with logistics providers that are flexible enough to deliver, retailers can solve the last-mile delivery puzzle and create new opportunities with the customer at the centre. At the same time, they will enable a smart, more efficient supply chain that drives sustainability in their operations.
Tobias Schulz is senior pre-sales consultant at Quintiq, a Dassault Systèmes company and provider of advanced supply chain planning and optimisation solutions. For more information, visit quintiq.com