Industry View Last Mile Logistics
Getting the last mile right
Stuart Higgins and Phil Streatfield, both retail partners at LCP Consulting, say consumers are demanding a shift in the last mile.
chain. However, we’re now seeing both retailers (and their logistics providers) moving even more rapidly to respond to this consumer-led demand. In particular, the last mile has become an area where services are constantly being adapted, or new ones are being launched. For instance, Royal Mail, which has been hit recently by Amazon’s decision to launch its own delivery network, is now trialling a Sunday delivery service for parcels within the M25 motorway – and will open 100 offices on a Sunday afternoon to pick up parcels.
F THREE MAJOR HURDLES
These new services should be applauded, but with total online order volumes expected to explode, there are three major hurdles for retailers as they develop their understanding of their channel profitability. First, retailers are seeing their margins erode as they try to meet pure play pricing benchmarks. Secondly, there is a higher cost of fulfilment – and as sales volumes track across from the store to online, retailer operating costs will increase and profit margins reduce. Finally, customers are also demanding higher service standards and more convenient solutions. They are more liable to return online purchases leading to even more margin erosion. With the level of returns from e-commerce reaching 40% or more, it is often cited as a retailer’s biggest (internal) supplier
68 September 2014
ew would argue against the fact that the growth of online shopping is now driving significant changes across the supply
and should be managed as such. These issues have prompted the omni- channel revolution within UK (and US) retail and, whilst the term ‘omni-channel’ is leading to some polarisation in the supply chain debate, the need for a more integrated, seamless approach to retailing is clear and is dramatically altering the retail industry – something clearly illustrated over the 2013 Christmas period, with a strong correlation between the use of this integrated model and the top performing retailers. Key to delivering an integrated approach is how retailers manage the last mile. In the UK, carriers currently offer a standardised national ‘last mile’ service which fails to differentiate at an individual customer level. As a result, retailers will consider alternative solutions. For some, the failure to differentiate service
offerings represents a threat to their brand. For others, the lack of differentiation limits innovation in the last mile. In either case this will prompt more retailers to invest in their own last mile solutions - something that is already being trialled by Amazon and John Lewis amongst others. At LCP, we believe that the last mile solutions of the future will centre on personalisation and convenience for the consumer and increasing alignment between fulfilment and returns services. Click and Collect provides arguably the most convenient solution, but the in- store experience will need to change to focus on speed of collection, and more retailers are likely to adopt House of Fraser’s concept for a pop-up collection
www.shdlogistics.com
points complete with changing rooms. UK carriers will also need to drive innovation so customers are offered more options for delivery. They will also need more convenient alternatives to ‘carded’ deliveries, for example dropping the parcel at a local collection point where the consumer can pick it up at their leisure. In the ‘omni’ world, consumers are also looking for flexible return channels. We will therefore see retailers placing an increasing emphasis on efficient and seamless returns processes - providing a selection of returns opportunities and easing the customer journey by shipping in returns ready packaging, supported by the inclusion of ready printed returns labels, without the requirement for pre-authorisation and with consumers getting credited on ‘first scan’ into the carrier network, not on final processing of the goods. Our research is very clear. Those retailers who have embraced an omni- channel approach to trading are already seeing differentiated performance. But in embracing this approach, retailers will need to control all elements of the supply chain, while understanding the entire customer journey - a balance between ‘front-of-house’ and ‘back-of-house’ while servicing the customer whatever, wherever and whenever the touch-point. Those that can balance customer
service innovation in the last mile with a close eye on channel profitability will become the sector leaders. n
www.lcpconsulting.com
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