Last Mile Delivery Excellence – Part Two: Simplicity, Efficiency, Profitability

Perfecting the customer’s last mile delivery experience, as described in Part One, requires companies to take steps to reduce logistics complexity and increase efficiency. Here in Part Two, we explore those changes.

Streamlining Delivery Flows

Reducing dwell times, product handling, and the number of legs in the end-to-end journey can all contribute to reducing complexity and delivery times, as well as making ETAs more predictable and reliable. Shifting from traditional warehouse (putaway/pick-pack) to crossdocking/flow-through models reduces end-to-end delivery times for items that are not stocked locally. Hybrid warehouses can accommodate mixed flows (putaway for some items, flow-through for others). Store replenishment cross-docking can be enabled by having suppliers or a central DC build store-specific rainbow pallets.^[1] Drop shipping from suppliers directly to the customer further reduces steps in the end-to-end flow and reduces the amount of inventory needed in distribution centers and stores. Drop-ship programs require close coordination and quality control with suppliers and may not work for orders requiring ultra-fast delivery (e.g., same-day, 1-hour, or 2-hour delivery).

Mode Flexibility

Cross-domain optimization (described in Part One) requires underlying mode flexibility—the ability to utilize the most optimal mode for last mile delivery. This requires not only the resources (e.g., private fleet vehicles) and commercial relationships (e.g., parcel contracts) for each of those modes, but also an optimization system that has the flexibility to handle any mode, including emerging crowdsourced delivery services. This enables the ability to handle peak loads cost-effectively by onboarding freelance drivers and other delivery services on demand.

Automation and AI

Automation and AI can help last mile delivery planners, dispatchers, and drivers make smarter, faster decisions. These technologies can automate mundane, redundant, low-value tasks and filter out low-priority exceptions, drawing attention to and providing the data for people to focus on higher-level decisions requiring human judgment. Human planners can focus on making business judgment calls such as considering tradeoffs for different route optimization alternatives. Dispatchers can spend less time monitoring every little detail of who is running on schedule vs. behind schedule and more time-solving problems that arise when there are delays. The system gathers relevant data to help them solve those problems. Automation of drivers’ administrative tasks lets the drivers focus more on making the delivery and providing great customer service.

Dynamic Route Optimization

Dynamic dispatching and routing capabilities (described in Part One) require systems and processes that can continually adjust and make optimal changes on the fly. This includes things like the ability to transfer products between trucks in the field, mixing of same-day and next-day deliveries, dynamically updating network-wide optimization based on unexpected changes to traffic conditions (including having less congestion than expected in certain periods and areas), and reoptimizing or adjusting plans to account for unexpected service times (longer or shorter than planned).

Driver Workflow Simplification

Drivers are at the core of last mile delivery services. They are the face of your company to the customer, representing your brand. As such, tools and methods that make drivers’ work simpler, less prone to mistakes, and that free up their attention to focus on ensuring top-quality customer service are of high value. This includes technology-enabled processes such as simplified semi-automated checklists for vehicle inspection, state-of-the-art navigation software, site-specific delivery instructions, and visuals,^[2] and systems and processes to automatically double-check that the correct package is being delivered. For example, the Intelligent Customer Experience solution from FarEye provides these kinds of simplifying and safety-enhancing capabilities for drivers, as well as improving customer experience in other ways, such as flexible slot booking, ordering trace and track, and proof-of-delivery. Besides implementing technology, driver workflow simplification should include process improvements, such as improving how parcels are loaded into trucks, to enable better optimized, more error-free deliveries.

Maximizing the Bottom Line

When perfecting the customer experience, costs need to be controlled simultaneously to maintain and improve profitability. Many of the capabilities described above can help to reduce costs and maximize profit in a number of different ways, such as:

• Automated, customizable, workflows—help businesses automate their unique processes, reduce service variation and errors, while institutionalizing best practices.
• Dynamic route optimization—increases vehicle utilization, driver productivity (deliveries per hour), while reducing fuel consumption.
• Mode Flexibility—The ability to optimize across modes lowers overall delivery costs, reduces capital expenses (by right-sizing private fleets), and maximizes surge capabilities to meet peak demand without additional hiring.
• Reverse logistics integration—Integrating returns and reverse logistics into order delivery can improve vehicle and driver utilization.
• Visibility and transparency—Providing better visibility, transparency, and customer communications helps maximize first-attempt delivery rates (FADR), reduces customer disputes and chargebacks, and enables clean and final invoices to be issued as soon as items are delivered, thereby accelerating receivables collections.

Carrier and Driver Continual Improvement Programs

Initiatives to continually improve driver and carrier performance can be built on the capabilities described above. Improvements can be driven by a scorecard of KPIs for drivers and carriers, such as measuring on-time delivery rates, FADR, damage rates, and so forth. Organization-wide, regional, and individual goals for improvement should be established and monitored as part of continual improvement programs, with regular reporting to management. Improvements can be measured for specific initiatives such as driver training and providing drivers with tools to improve efficiency.

Other metrics can be used to measure the effectiveness of adding new capabilities, such as what effect implementation of a dynamic route optimization system has on utilization, delivery rates, fuel consumption, and other metrics. Conversely, specific goals, such as reducing fuel consumption, can be tracked to see the impact of various programs and actions, such as training drivers not to do hard acceleration and braking, or using equipment inspection to ensure properly inflated tires and a well-maintained fleet. Similarly, safety programs should include tracking traffic violations and incidents/accidents. More granular data from ELDs can be used to identify drivers who have dangerous driving habits and should receive additional training and guidance. Programs to reduce damages and claims can identify carriers and drivers with above-normal damage rates to focus improvement efforts on those individuals. Programs to proactively solicit customer feedback can be invaluable in identifying which service improvements are needed, and guide efforts to increase customer satisfaction.

Figure 1 – Example Carrier Scorecard

Achieving Near-term Benefits and Long-term Progress

By combining the elements described above, businesses can survive and thrive in the face of disruptions that require them to pivot and adjust. Retailers and third-party logistics companies can achieve last mile delivery excellence in a way that pays for itself. Some elements provide rapid payback, such as implementing dynamic route optimization. These can be implemented first and used to fund further improvements to make progress over the long term. FarEye’s last mile delivery solution is a good example of the type of platform that can help provide these benefits. Over the long run, investments in new systems and processes to achieve last mile delivery excellence can create a culture of excellence and growth that helps a company achieve success for years and decades to come.