Why e-commerce companies should rethink their last-mile delivery

06 August 2020 Consultancy.eu 3 min. read

Ecommerce companies want to get things as quick as they can to customers, under the belief that they value speed above all else. But this comes with a price tag, with the strain being placed on the logistics leaving little room for process optimisation. Fortunately, changing customer demand is opening up avenues for a rethink of delivery strategies.

According to M3 Consultancy partner Martin Mommersteeg, ecommerce players greatly over-value speed, while customers are really keen to see service improve in other ways. Consumers crave predictability, for example, and are in fact happy to wait longer if it means there is greater certainty about the delivery day and time.

“It appears predictability and fewer delivery moments are highly valued,” says Mommersteeg. “And, now that the corona crisis is forcing most people to work from home, this development seems to be a structural one; predictable delivery times are even more appealing.”

As things stand now, however, this need is being neglected, because in the race to serve customers as quick as they can, ecommerce companies and transporters are being sloppy in their planning. For the ecommerce sector, a simple shift of tact here could represent a major win. By sorting and grouping deliveries to customers, they could optimise delivery capacity along logical routes, reducing costs, and taking pressure off the environment as a welcome side-effect.

Last-mile delivery: speed versus the rest

Several large ecommerce companies in Europe seem to be developing solutions along these lines. In the Netherlands, for example, grocery store Picnic allows it customers to pick from two-to-three standard delivery times per week; and they seem to like it. The service is very popular, as is the case with an innovative postal company in Germany, which is winning market share from industry incumbents with the same offering.

“The immense volumes which e-commerce companies process every day provide room to digitally sort and bundle orders in a smart way before they’re transferred to the warehouse to be picked,” Mommersteeg explains. “Based on this digital sorting, orders for a single van’s delivery area can be grouped and picked together. After that, it’s possible to put them into one container that is ready to be taken to delivery van. The container will continue its way through the parcel company’s logistics system as one ‘bundle’, eliminating the need for physical sorting.”

Letting go of pure focus on speed means planners can regroup their delivery strategy. By better bundling deliveries to different locations, delivery van capacity can be improved. This also makes sorting in the warehouse easier and less time sensitive, which in turn enables the optimisation of resourcing. With more relaxed planning constraints, ecommerce companies can then consider introducing more automation to further improve processes.

Mommersteeg adds, “With this approach, it’s only necessary to cross-dock at the parcel companies’ central or city hubs. Pressure on capacity and costs is reduced, while the 24-hour delivery promise is maintained. Along these lines, it's also possible to compile containers allocated to one city hub, in which case the first sorting round – the biggest capacity constraint – can still be skipped.”

This process sees the bundled packages incorporated into the package stream at city hubs, followed by the conventional route of physical sorting. The number of routes and vans used in the final delivery system remain unchanged – but part of the load has reached the van in a simpler, more cost-effective way.

“Now is the time for e-commerce companies to rethink their last-mile delivery,” Mommersteeg concludes.