Data Capture and the Race to Shorten the Last Mile

Forget sensors and RFID to track packages. The next milestone in e-commerce delivery could be real-time vehicle tracking to provide customers with more precise delivery times.

Editor’s Note: E-commerce is fundamentally altering the way supply chain managers fill and ship orders. Solving the problem of “last mile delivery” is a particular challenge, especially for retailers and distributors promising same day and next day delivery. In the first of two posts, Richa Gupta, a senior analyst with VDC Research, looks at ways data capture technologies can shorten the last mile and provide customers with a better delivery experience. Tomorrow, Gupta will explain why she believes vision technologies, such as Google Glass, will lead to more efficient distribution and logistics operations.

By Richa Gupta, senior analyst, VDC Research

August 27, 2014

With an ever-growing volume of e-commerce sales consumers, retailers, and parcel service providers have all come to realize the glaring inefficiencies in the so-called “last mile”, the last leg of a package’s journey from the distribution hub to the customer. Hermes Europe, a multinational group providing full-service supply chain management solutions headquartered in Germany, published an article on last mile delivery in the first issue of their company magazine, Hermes Wing, which piqued our interest.

According to the article, at least 50% of a parcel service provider’s total costs occur during this part of the delivery process. The article reveals that the main reason for these high costs is that only about half of all packages shipped reach the recipient’s residence on the first attempted delivery. Not only do these inefficiencies lead to unnecessary shipping costs, but the wasted time and increased consumer frustration reflects poorly on sellers. Shifting global population trends will only magnify the inadequacies of traditional delivery processes. With 60% of the world’s population expected to be living in urban areas by 2030, new methods are being developed and employed to more efficiently serve these large population centers.

The article states that in the Netherlands, for instance, a new method is being used where retail purchases are delivered to central distribution warehouses in eleven city centers across the country. In Paris, Hermes has begun using tricycles capable of carrying 180 kilograms of cargo – or just under 400 pounds, while in Austria over 5000 “pick-up” boxes belonging to the Austrian post office are being used to ensure that packages are not sent back to distribution hubs. These new methods of shortening the last mile will require significant upfront investments in infrastructure and equipment, and there will certainly be a rise in demand for and deployments of data capture devices to facilitate tracking. It is also important to recognize that the vast majority of consumers are not looking for “same day delivery” and a sharp increase in the overall speed of the delivery process. In fact only 1.6% of consumers surveyed by ECC Cologne and the EHI Retail Institute cared about same-day delivery. However, 75% of those surveyed wanted to be able to track their packages live.

While data capture technologies are already well-entrenched in the supply chain, and widely used to allow consumers to check on the status of their package at a series of check-points during the delivery process, it would be an added bonus to enable package tracking in real time. AutoID solutions, including barcode scanners, RFID readers, and mobile devices, are already able to capture information when packages are transferred from trucks to distribution hubs and vice-versa. In lieu of taking on the cost of tagging individual packages with real-time location sensors, retailers and their logistics partners will benefit from enabling customers to track delivery vehicles carrying their packages, especially after they have left the final distribution center. Allowing consumers to know the exact arrival time of their package would effectively shorten the last mile, thereby reducing costs and frustration for sellers, service providers, and consumers.

Over the past couple of years, we have seen retailers embrace the omnichannel retailing paradigm, making their brand and product available to the target consumer base across a wide range of avenues – both online and offline. We have also seen how retailers that cannot or are unwilling to support and facilitate customer engagement through more than one medium are at a significant disadvantage compared to the competition. Tackling the potential logistical nightmare of “last mile delivery”, particularly in peak shopping seasons, via enhanced customer interaction during the delivery process – facilitated by data capture solutions – could well usher a new age of retailing and overall customer contentment.