The growth in eCommerce is driving change in transportation and delivery companies. Based on research, the eCommerce market is currently valued at $370B. Sales via eCommerce currently account for about 8.5% of total retail sales (Forrester) and revenues from eCommerce will grow to 16% of entire U.S. retail by 2022. Online shoppers increasingly expect more efficient and predictable deliveries of their vendors. In most cases, such as retailers or etailers, these growing expectations, including those for same-day delivery are being managed by logistics delivery partners. The end result is that eCommerce consumer demand is a major driver of change in the last mile logistics industry.
Last mile delivery is a transportation industry term that refers to the last part of the supply chain. In the case of a home shopper, it refers to that part of the delivery process where goods are picked up at a delivery warehouse and delivered to the person’s home. In 2016, $55 – $65B was spent on last mile delivery (ATKearney). More to this point, 50% of UPS’ $35 billion U.S. domestic parcel deliveries are direct-to-customer for eCommerce orders (McKinsey), so as you may have noticed, last mile delivery is exploding.
Last Mile Economics
Companies that use last mile logistics providers, as well as the providers themselves, are continually faced with the business challenge of providing the fastest and best possible delivery options at the best possible price. In fact, vendors such as Amazon, are using delivery as a key competitive differentiator. The depth of this challenge comes into sharper focus in light of recent research by McKinsey & Company. The firm concluded that 25% of people in America, China and Germany are willing to pay extra fees for same-day delivery while 5% would pay for predictable timed delivery. In contrast, the balance, 70% would not agree to pay more regardless of how long it took for their deliveries to arrive. As a result, the pressure is on the delivery industry to deploy innovative new technologies that lower the cost of operations and improve the customer’s delivery experience.
The logistics industry is rife with opportunities to apply new technologies in order to capitalize on eCommerce growth. One such opportunity, available today, is in applying computer software to replace manual and/or semi-automatic processes. Cloud-based logistics management tools offer many avenues to help logistics operators increase productivity, improve efficiencies and as a result, lower overall operational costs in order to respond to market demands.
Case in Point
By electronically integrating logistics management systems with the customer’s ERP systems, using industry standard API’s (Application Programming Interfaces) and then automating the distribution of delivery orders to drivers’ smartphones, a firm is able to make more deliveries sooner. Furthermore, the knock-on benefit of this was that the retailer was able to offer improved delivery options to online shoppers which in turn generated more business. Now is the time to investigate just how simple and cost-effective cloud-based systems are. Gone are the days of in-house training programs, expensive computer hardware and weeks of implementation challenges. View this short user video of a 3PL firm employing one hundred drivers whose firm was up and running on a cloud-based system in less than a week:
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