A better supply chain serves us all. Let's eat.

Will the Amazon effect deliver chaos to retail's last mile? Slow down to keep up.

Posted by IFCO Systems
November 30, 2017

The year is 2020. A delivery driver has just unhitched a trailer mounted display pallet from her cargo bike and is navigating it through your store's front entrance. Meanwhile, two electric delivery vans jostle for a position beside a trailer at the back cargo bay, and the assistant manager is clarifying which one is needed first. Out front, customers weave their way among more bicycle couriers who are enjoying a chat while they wait in line to drop off their packages at the store Click and Collect desk. Courier and cargo bikes working in conjunction with parcel vans have been found to decrease the cost of last mile delivery through crowded urban streets.

 

As has been well documented, the growth of e-commerce and the ever-increasing volume of home deliveries is having significant repercussions on supply chains, especially the "last mile" of delivery. In the years since Amazon launched its same-day delivery offer in 2009, expectations about prompt delivery continue to rise. E-commerce is adding to urban congestion, resulting in the deployment of more small vehicles to get goods to where they need to go.

 

The last mile is a term that describes the final leg of the supply chain, for example, the distribution center to the store, foodservice distributor to the store, or e-commerce delivery from the depot to the customer's home. The increased frequency of small amounts of goods is not just limited to retail, however. It is affecting other industries, such as the delivery of supplies to construction building sites.

 

For example, 50% of commercial vehicle activity in Europe is in support of the construction trades, according to Dr. Walther Ploos van Amstel of the Amsterdam University of Applied Sciences. Speaking recently at the FEFPEB conference, he noted that everyone at the job site seems to have an iPhone, and it is far too convenient to order supplies or materials on an on-demand basis. The result is too many vehicles carrying too little freight, all converging at the construction location, leading to considerable inefficiency.

 

Could such a convenience trend also cause direct store delivery (DSD) and small order chaos at retail? One of most significant efficiencies of grocery retailers over the years has been a replenishment model relying on large orders from the distribution center to meet most of their needs. But as the opportunity for prompt delivery increases, will there be increased pressure to take advantage of it? Will store managers feel compelled to a place spot order in response to an empty shelf or a short notice customer request because they can? As Click and Collect expands and customer expectations for same day deliveries grow, it is easy to foresee a near future for retail that looks increasingly complex. Like the construction scenario described above, it will likely be a future with more small vehicles equipped to navigate congestion and provide prompt delivery.

 

The professor emphasized the importance of "slowing down the supply chain" and taking time to plan. While it will be tempting to source merchandise at short notice, it remains a suboptimal approach for the most part. Filling vehicles to capacity remains a crucial way to reduce the cost of final mile delivery. New alternatives such as cargo bikes, electric vans, local hub vehicles offer more promise to make parcel delivery more efficient. Such trends will present opportunities and challenges for retail, which as always, must be managed with the big picture in mind.