Logistics and Supply Chain E-Planning: Last Mile Delivery Strategy

Last mile delivery services can mean different things to organizations depending on the key revenue driving marketplaces. In some organizations last mile can be US domestic only, for some it could expand across all of Americas and others it can cover a global marketplace. This article focuses on steps organizations can take to resolve last mile delivery challenges in North America with current service providers constantly competing and changing their service levels.

  1. How To Manage Conflicting Priorities For Different Business Units?

 Business units within organizations have metrics tied to either cost or revenue, while all teams are working towards the company’s common goal. Generally, for most retailers, and consumer goods companies these common goals revolve around providing customers with the best service, while growing the company’s market share at the lowest cost. As such, when e-commerce expansion the impact of last mile delivery costs become significant in strategic decisions such as: inventory optimization at different location and site optimization through a well-developed distribution and logistics network. Supply chain leaders must really understand where their inventory is located and how this empowers the business to interact better with customers. Offering ground delivery services with 5 business days in transit is not optima- the customer is waiting longer for the product and the company is paying more for ground or expedited delivery.

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These factors can meaningfully impact the costs of last mile delivery and the service levels delivered to end consumers- both of which are important attributes.1. How Do

2. Last Mile Delivery Costs Affect Sales And Growth?

 When a business has a clear consumer- centric strategy around increasing its e-commerce footprint, the first question that needs to be clarified is around shipping costs. Will these be covered by the business or passed on to the customer?

According to leading e-commerce fulfillment service Flexe, shipping fees are the number 1 reason for cart abandonment in the US.

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Some questions to ask prior to forming a strategy include: will free shipping apply to all orders, all zip codes, even international? Is there an order minimum- will this encourage customers to add more items to their cart, or will it cause more cart abandonment? Is the shipping service level the determining factor for consumer shipping costs?

From the UPS “2017 UPS Pulse of the Online Shopper” report:

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  • 74% of consumers said options for free shipping were the most important part of checking out online
  • 94% of shoppers have taken action to qualify for free shipping

 

 

 

3. Supply Chain Factors To Consider For A New Strategy?

There are numerous factors to consider when reviewing the company’s logistics network and last mile delivery, cost should not be the only input. Is the company’s goal to lower the time in transit to the end consumer? If so- then the best solution for the logistics network might be a multi-node location which both optimizes last mile delivery costs and time in transit, however this does not come without challenges on the inbound side. Depending on where the company’s products are manufactures, assembled and where they enter the American market some of the below considerations are of utmost importance:

  1. Production consolidation
  2. Order frequency
  3. Inbound/ Outbound transportation costs
  4. Risk of damage
  5. Number of touches and varying labor costs
  6. Holding costs
  7. Customer service

Improving last mile delivery metrics is a balancing act with competing goals across internal business units. A deep data dive into marketplace information and a stable logistics partner are crucial to successful change. The below diagram was presented by Expeditors Logistics and I have always found it to be a very useful visual for this ongoing balance:

44. Long Term Vision

Understand where the company’s current consumer base and forecast for future growth. Given current market trends and the impact of e-commerce organizations should consider supply chain planning- location and inventory optimization- as e-planning and account for all available and real time inputs such as click, views, product reviews to help predict future demand and trends. Leaders in future markets will be the companies who can see, interpret, and act on data the most efficiently on a global scale.

Supply chain and operations changes are costly, risky and take a long time to implement. Organizations must understand and have a clear vision for future marketplace development prior to adjusting for last mile delivery improvements and supply chain flexibility.

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Using current sales data and partnering with a leading service provider who can assist in conducting a thorough supply chain gravity analysis can help ensure that the company’s long term operational strategy will support the organization’s growth and expansion goals.

5. Immediate actions

Key drivers of success are data and technology. Organizations might supply a different product to consumers but at the core of success lies the ability to gather all pertinent data and translate the story it is telling. First and foremost, organizations should invest in the right technology to get as close to the information generated by end consumers as possible, then consider the above outlined goals.

 

 

SOLAS

Maritime safety for workers and marine life is important. Businesses have a large footprint on the environment and ocean transportation still lies at the heart of global organizations.

New regulations on weight declaration is meant to create more transparency in the transportation and logistics industry.

How will this change the current structure of the logistics market? We have seen major consolidation and M&A in the market in the past three years, more regulation will help weed out the remaining week links and leave maybe five major shipping lines ruling the oceans.

How will SOLAS affect wholesale businesses, small and large distributors, and will this regulation also create a urgent need for upgrades at manufacturing facilities around the world?

General – SOLAS Container Weight Verification 1604

Coming to a port near you July 1st, 2016. Stay informed!

Building Sustainable Supply Chains: Procurement

Screen Shot 2015-07-30 at 11.52.42Imagine the complex the life-cycle of a simple white t-shirt and the impact it has on the communities along its supply chain. From the farmers growing the cotton, the factory workers weaving the fabric, cutting and sowing of the end product, along with the transportation of materials at various stages , these processes have tremendous impact on the environment and the finite natural resources we depend on. Organizations have numerous opportunities to improve sustainable practices along the supply chain from product design, to procurement, logistics, sales and reverse logistics.

The apparel industry offers multiple examples of opportunities to improve overall practices, lower impact and grow as a market leader. Companies such as Reformation and Levi Strauss, among few, have proven that being sustainable is a good business and profit model. The apparel industry has not changed its procurement and manufacturing practices for decades, as exemplified by the deadly disaster at Triangle Shirtwaist Factory in New York in 1911, and more recently we’ve seen similar stories happening in developing nations . Buyers constantly push for lower costs, which continues to shift manufacturing to developing nations. Too often we hear the horror stories of factories burning down in Bangladesh or Pakistan, and the number of avoidable deaths.

Procurement strategies lie at the heart of international supply chains and offer an array of opportunities to improve on sustainability practices while creating value. Sustainable procurement practices are directly linked to stable supplier relations, efficiency, transparency and accountability. Companies that implement innovative sustainable procurement strategies see the immediate top and bottom line benefits; improved quality of goods and services procured, and increased trust. Below are 3 top procurement strategies that international organizations can depend on to build a more sustainable supply chain:

  1. Engage your suppliers & collaborate

Meet your suppliers, visit their suppliers and conduct performance assessments to identify high-risk and non-compliant suppliers. Ask to meet the producers at the bottom of the pyramid and work closely to ensure that value is being built throughout the supply chain. Organizations should want to know the total cost and impact of sold goods, by working closely with downstream supplies they can better measure these indicators.

Rapidly changing weather patterns, like the current El Nino , significantly affect international supply chains, particularly for food and apparel. Working closely with suppliers allows companies to formulate strategies to protect their production during these times. Furthermore, having the information of all that is required to deliver the end product also allows organizations to measure and mitigate their impact on local societies and the environment.

  1. Partner with NGOs & be creative

The United Nations Capital Development Fund (UNCDF) supports programs that aim at reducing poverty through inclusive and equitable local development. A huge pillar of this outreach is the program’s ability to bridge the gap between the private and public sectors. The program works closely with international organizations to develop stable procurement programs in indigenous localities from where they can source goods directly from small producers. Organizations such as Oxfam or The Fairtrade Foundation work closely with members of developing communities around the world, understand how to position and operate in those environments, and can prove to be valuable partners when diversifying international supply chains. Companies should also take advantage of the data these NGOs have gathered from various locations to help guide them when forming supplier partnerships. Partnerships can stretch across the globe and aim to reach multiple communities in need, or stay local and manage the impact of programs in their own communities.

Some organizations have already seen the proven benefits from similar partnerships. Reformation is anScreen Shot 2015-07-29 at 15.52.48 apparel company headquartered in Los Angeles, California. The company proudly boasts on its website “We make killer clothes that don’t kill the environment” and they have the facility and data to back that up. But efforts do not stop there, they have recently launched a program through which they actually help people recycle their old, used and unwanted clothes by offering a free shipping service to their warehouse for such items. The items received are sorted to determine if they can be reused or recycled. If they determine that the materials are useful than that becomes part of their production.

  1. Take a 360 view of supply chain operations & use data

New data and integrated business management systems can help companies have better transparency in their supply chains. Competitive advantage lies in a company’s ability to break out of silo management styles and bring members from across the organization to supply chain task teams. For years marketing managers have made great use of customer related data, from structured sources such as POS systems, and other types of transactional information. Today, marketing departments are at the forefront of big-data management by blending traditional structured data with unstructured sources such as social media, email or videos.

Data use in supply chain is still at an infant stage, managers are still only making use of transactional data, often looking at inventory, order fulfillment and forecasted demand. Seldom do companies formulate a broad data strategy where all departments are utilizing the same knowledge to ensure that their goals are aligned with those of the overall organization.

Why is this important?

  1. The price of raw materials is volatile due to environmental degradation and increased competition. This volatility creates uncertainty in supply chains, which can have significant cost implications on inventory and operations.
  2. Studies show that 60% of consumers a company’s environmental record, sourcing and employment policies affect their purchasing decision. Building sustainable practices into supply chain strategy can help strengthen stakeholder relations.
  3. Supply chains are exposed to multiple risks and stronger supplier relations help companies develop strategies to mitigate risk and make forecasting projections that will meet changing customer demand.