‘Last mile’, a major logistics challenge to face in e-commerce

 

last-mile-ignasi-sayol (1)The phrase ‘Last mile’ or last kilometer is now fully integrated in the logistics field, but it does not originally come from the logistics sector. In fact, the term originated in the field of telecommunications and it refers to the final section in the supply chain, which actually provides service to the user. Eventually, the term has extended beyond its original sector and it is now fully accepted in the field of logistics.

E-commerce has been growing exponentially in recent years, whereby the problem of the last mile is becoming a serious one, both for logistics operators and for distribution companies (retailers). Today it is a major logistics challenge to overcome the many difficulties in the chain of distribution or delivery to the final customer: traffic jams, difficulties to park when making deliveries, or the impossibility to deliver in the absence of the customer. We need to take into account that end users do not want to pay for the delivery of the product. They want the product at the best price and with a zero delivery cost if possible.

It is true that the space-time distance between the place and time of production of goods or services and the demand centres has been generally settled thanks to improved infrastructures and transport systems. However, the problem of the final step in the supply chain to the end-customer remains unsolved. This is where the ‘last mile’ challenge comes in, because of the large-scale problems it entails. The first and most important: unsatisfied customers.

Customers are increasingly demanding a fast and comfortable delivery service, regarding it a key differentiator. The problem is that this demand by customers and companies engaged in e-commerce is not entirely solved. Besides, it involves high additional costs for logistics operators.

The issue affects not only cities or towns. If we talk about isolated regions or localities with access or transport infrastructure difficulties, for example, the problem is much bigger and so is the challenge. Here we no longer talk about customer dissatisfaction, but about their lack of access to goods and services and the limitations to which they are consequently subjected.

Another direct consequence is that many companies have to face the inaccessibility to markets that could be very interesting.

What measures are being taken?

Firstly, we have worked on the flexibility in the distribution, achieving a faster service and an improved tracking of orders, but the delivery process is still unsatisfactory. The classical model of express parcel delivery by van is reaching its cost limit, since the cost of delivering 50 packages to the same destination is much lower than that of delivering 50 packages to 50 different recipients.

Among the measures taken to tackle the problem, besides the possibility to pick up the package in person at the nearest courier office, are to include a second delivery attempt at the address after communicating directly with the customer, usually by phone.

The service of package delivery and return at Delivery Points (shops near the address) is increasingly more common as an alternative to home delivery. Thus, customers can pick up their package with the advantage of being able to do so during opening hours.

In any case and despite the efforts, the solutions are not fully satisfactory. There is still a long way ahead that requires the reinvention of logistics business models and a great deal of innovation so as to find efficient solutions that enable customers to receive their orders easily.

The search for alternatives has not ceased, and the giant Amazon, for example, in addition to trying (without much success) installing lockers in locations with heavy traffic, recently surprised us with the use of drones (still in experimentation).

These are just some Interesting proposals that still have not proved a practical and effective solution in a war where the winner will be the one winning the battle of the ‘last mile’.

As I see it, and following the example of the telecommunications sector, the ‘last mille’ issue needs to be solved as it was in this sector, adding levels of service. There is no other option than to segment the market and provide differentiated services to customers. Most likely, if we want to have the maximum comfort with the delivery place and time, we will have to pay a higher price than if we agree to collect the package at the nearby florist during their opening hours.

Today no operator is thoroughly working in this direction and, thus, we are witnessing a real price war coupled with the exponential growth of e-commerce, which is becoming an explosive cocktail for many companies.

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