In 2020, the last mile evolved. A lot has changed in the way retail works. Several traditional retail chains went bankrupt or reduced their operations, and e-commerce sales exceeded forecasts for several years ahead.
We learned how fragile Supply Chain was. And earlier we took Supply Chains for granted. On a global scale, transport has slowed down. Whereas, on a local scale… customer expectations regarding the time and forms of delivery have reached a completely new level.
Today it is safe to say that the so-called last mile is on fire.
So what should you pay attention to when planning transport for the needs of a retail chain, online store, or more broadly, a multi-channel selling company?
Rafał Świerczyński, a Logistics manager and distribution expert by day, and a passionate member of the Last Mile Logistics Ops team at night, agreed to help me find an answer to this question.
Gig workers
— Rafał Świerczyński
“Once upon a time” becoming a courier or taxi driver was not easy. You had to run your own business, buy a car, get a recommendation from someone in the business. Taxi drivers were a hermetically sealed caste.
Drivers aspiring to this profession waited for years to get a license or paid dearly to receive it faster.
Has anything changed? Definitely yes!
The gig economy has emerged. This is an economy based on casual interactions. And with the rise of this economy, the so-called gig workers emerged. Employees of Uber, Glovo, DeliveryHero, and other platforms. On-call workers. Entirely temporary actors in the Supply Chain.
With the development of digital economy, information and communication technologies began to change the definition of work. Full-time work, associated with a number of rights, began to be replaced by freelance and contract work in some professions.
It is estimated that the number of freelance or unconventional employees is as high as 20% to 30% of the working population in the United States and Western Europe.
For some, it’s the only job that gives a lot of flexibility. For most, this is a side gig. In any case, this is a form that allows you to quickly create a distribution network in urban conditions.
The last mile has always been expensive. As Adam mentioned earlier in the article – What should the logistics costs be?
However, the use of contractor’s equipment (car, mobile phone, bicycle) limits the required investments. It eliminates a significant part of the assets that you need to have in order to run operations on a really large scale.
But is it a stable model of Logistics organization? Apart from a number of challenges related to ensuring the required quality of contractors’ work, there is also the issue of potential social tensions that may affect the company’s image.
As shown by a number of court decisions from the US and UK, gig workers do not live up to the dream of liberal Logistics, and it might be costly as Glovo learned paying almost 80 mln EUR fine. Like any organizational model, we have advantages and disadvantages. Only time will tell if the former will not overshadow the latter.
The last mile and urban warehouses
— Adam Sobolewski
The previously mentioned Glovo offers deliveries in a maximum of 30 minutes from the moment of placing the order. It has launched a new area of activity known as Q-commerce.
Quick deliveries are made in several major European cities. Starting from Barcelona, Lisbon, Madrid, through Rome, Valencia, and ending in Warsaw and Bucharest.
How does Glovo provide delivery in 30 minutes?
At this rate, the support of gig workers in the organization of transport is not enough. It is also necessary to locate the stock close enough to the delivery point to make the last mile even shorter. That is why Glovo invests in its own warehouses.
For this purpose, Glovo obtained EUR 100 million from the Stoneweg fund. Most of the funds were spent on establishing small urban storage facilities. They are described as dark stores, which I would paraphrase as shadow stores. You can find more about them in another article of mine – What does the dark store look like from the inside?
Source: Countdown to open ‘dark store’ in Wellington. Stuff
Glovo is not the only company investing in Urban Logistics. Pepsico, Nespresso, and many retail chains are moving in the same direction. For example, the Countdown store (a branch of Woolworths) visible in the photos.
In the case of retail chains, it is often a necessity resulting from long-term contracts for the rental of retail space, which must work for itself.
However, in the case of producers and Logistics operators, it is a conscious decision based on the conviction of consumer expectations. As one of the Glovo founders has said:
We believe that the third generation of commerce is already upon us […] we believe that dark stores represent the future of post-pandemic retail, and I think we’ll see a permanent shift in consumer habits towards same-day and instant delivery.
–Oscar Pierre, Co-founder and CEO of Glovo
What will the future be like? No one will will give you a clear answer. However, looking at the ever-growing e-commerce channel, I dare to make a few predictions.
Imagine that the share of e-commerce sales will be greater than sales in traditional stores. In such a situation there will be more parcels than couriers who could deliver them. Sounds like a fantasy?
Already in 2021, China crossed the “magic” barrier of 50% of the share of e-commerce in total retail. In China, more people make purchases every day using a computer, tablet, or mobile phone than walking into a store.
From the customer’s perspective, this is convenient. From the perspective of any organization selling online, this means a high share of transportation costs.
Last-mile Logistics can account for up to 60% of the distribution costs of most goods. You will find out more about different types of costs in logistics in the article – How much logistics costs you? So does that mean that not only there are not enough hands to work, but it will also become more and more expensive? Not necessarily.
In recent years, the technology of autonomous vehicles, robots, and aerial drones has been dynamically improved. Hundreds of millions, if not billions, of dollars are invested in the development of these technologies. Everything to avoid the approaching problem of lack of hands for work.
Today, you can watch the above video as an exotic curiosity. How would such a robot manage on our European pavements, curbs, and roads in winter?
Today you are right. However, technology is evolving. The road and urban infrastructure are developing. So is there anyone who will bet on the increase in the importance of human work in handling the last mile? I doubt it.
Autonomous technologies can help make last-mile work safer and more productive. Certainly, this is something we will see on the streets of our cities. The only question is who will be first and when is it worth switching to autonomous deliveries.
Visibility, traceability, meaning what?
— Adam Sobolewski
The times when the customer was satisfied with the text message “Your parcel will be delivered today between 8:00 and 18:00” are gone.
Full transparency, information about the location of the shipment, and detailed delivery time. All these last-mile features will be in the spotlight of retailers.
Gartner predicts that 50% of global companies will soon invest in real-time Supply Chain visibility platforms. But what is this mysterious visibility and traceability?
Last-mile visibility in Logistics today means instant access to real-time shipment location information for customers. For carriers, it means transparency of routes, locations, and status of all orders.
Finally, for drivers, it means that instructions are updated in real time for all assigned deliveries. As a result, it allows to manage the pickup point dynamically.
Redirecting the delivery from home to a PUDO (PickUp DropOff Point) or even a designated location where the customer plans to be at a specific time.
On the other hand, traceability in the Supply Chain is the ability to trace the origin and route of the products sold. From the producer, and even from the supplier of raw materials, through distributors, to the end customer.
This is particularly important in the food and pharmaceutical industries, where full traceability is sought. In the past, unique product codes and multiple scans were used at different stages of delivery for that purpose.
Today, it is performed through the coupling of Radio Frequency Identification (RFID) technology and decentralized, one-way, coded registers (the so-called Blockchain). Alternatively, photos as a confirmation of the completed action.
And this does not only apply to expensive or legally regulated products. Also Subway uses blockchain to track deliveries of ingredients for their sandwiches.
Delivery time!
–Rafał Świerczyński
Delivery time is important but not crucial. Adam already wrote about it in the article – Delilvery time and conversion. Is Europe in need of speed? The last mile may look different in each case. It all depends on the product and the needs of the consumer. Poczta Kwiatowa (Flower Post), an online store offering same-day delivery, has been operating in Poland for years.
But is time really that important in any other product category?
Some time ago, RTV Euro AGD offered same-day delivery. Also Media Markt offers same-day delivery. However, in both cases, they provide this service only in selected locations.
Organizing last-mile distribution is therefore not a simple matter. Certainly, it can also increase the costs of running a business above what Adam wrote earlier in the article – What should be the costs of logistics?
Andrzej Bagiński from Ziticity argues that with the appropriate volume of shipments already declared by some online stores, the same-day delivery service may be similar in cost to the popular next-day delivery.
Proper preparation, supported by an analysis of different scenarios, allows you to choose the right option, set milestones, and understand the relationships. I have shown it myself by creating a delivery model from the Allegro Fulfillment Center.
If you want to learn more about how the last mile can look in the distribution of an online store, sign up for the Simply Logistics newsletter. You will always be up to date with business and Logistics information and you will receive the full version of the mentioned model.
Until the next post!
