Inside Logistics

The view with Lou: Cost Concerns

Why last mile deliveries are keeping you awake at night, and what you can do about it


August 11, 2020
by Lou Smyrlis

Lou Smyrlis is managing director, Newcom Media Trucking & Supply Chain Group

Consumer reliance on e-commerce to fulfill their purchasing needs has understandably grown rapidly during the Covid-19 induced lockdowns. That’s a trend most likely to continue in the post pandemic recovery. That won’t be because “nothing will ever be the same again”, as some hastily suggest, but because growing reliance on e-commerce was a trend already showing staggering growth before the pandemic. In 2018, global last-mile delivery demand had increased 67 percent for business-to-consumer transactions over the previous 18 months, according to an Eye for Transport survey.

This growth, however, comes with its share of transportation-related issues, which can make or break a company’s reputation. Consumers using e-commerce have come to expect fast delivery and to pay nothing or next to nothing for such service.

To pull that off companies have to be extremely efficient with their delivery strategies. Yet CapGemini research shows that transporting a product from the warehouse to the customer doorthe last mile delivery as its known in industry termsaccounts for 53 percent of the total cost of shipping, and up to 41 percent of total supply chain costs.

In rural areas, like where I live in Ontario’s Kawarthas region, there is no density to create efficiency. Delivery points along routes could be many kilometres distant from each other and only one or two packages may be left at each destination. (Some rural owners even have 100-metre long, narrow and winding driveways that are pain for delivery vehicles to navigatemy sincere apologies to every delivery driver who has attempted to navigate mine).

Lest the urbanites think they’re much easier on last-mile delivery because of the close proximity of delivery points, don’t forget about the time wasted in the normal traffic delays experienced in some of our largest cities.

Is it any wonder then that last-mile delivery is the stage of the transportation process that keeps most transportation and logistics professionals awake at night? That’s according to research conducted among transportation and logistics professionals in six countries (Canada, U.S., UK, Germany, Sweden and Australia) by Arlington Research on behalf of SOTI.

More than six in 10 (61 percent) agree that the last-mile delivery process is the most inefficient process in the entire supply chain for their organization. Unsurprisingly, this figure rose when the size of the business increased; 69 percent of companies with over 1,000 global employees agreed with this statement.

Outdated technology gets a large part of the blame for the inefficiencies experienced in lastmile delivery. For example, if older technology devices stop working when the driver is on the road, they usually need to be returned to the office to get fixed.

Newer remote-control technology issues can be resolved on the road with a support call. Almost half of the survey respondents (49 percent) acknowledged their technology is outdated. The situation is much worse in Canada with 68 percent of respondents thinking their organization has outdated technology.

The research found that half of C-Suite respondents whose organizations were using outdated technology believe they would either lose customers or have already lost customers because of it.

Thankfully the research also found an answer to this problem is rather simple: Over three-quarters of respondents (76 percent) agree an effective mobile-first strategy for lastmile delivery allows for transparent customer experiences, with trackable deliveries that arrive at their destination earlier. This increased to 88 percent in Canada.

So what’s likely to prevent faster adoption of such technologies post pandemic? The reality that although new technologiessuch as hands-free barcode scanning and wearable headsets that allow users to quickly look up information or find parts completely hands freecan bring significant efficiency gains, many transportation and logistics professionals remain unaware of them.

The Covid-19 lockdowns taught us that businesses that can’t quickly transition to a fast-changing reality are extremely vulnerable. Let’s use this lesson as an opportunity to rethink our transportation strategies and ensure we have the technologies necessary to drive us in the post-pandemic world.