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Implementing Last-mile Delivery Technology

By June 8, 2023Uncategorized

Technology for All

In a retail era dominated by e-commerce giants, customer expectations have shifted towards instant product delivery at no cost. To meet these demands and ensure superior delivery experiences, retailers and carriers must leverage last-mile delivery technology. Previously, only large companies such as Amazon and FedEx possessed the network and scale required for cost-effective same-day and next-day shipping.

However, advancements in technology have made it possible for any company to automate and optimize their last-mile delivery operations. Yet many continue to use outdated technology and processes leading to increased costs, supply chain risks and poor customer delivery experiences overall, costing them market share in an online retail environment where market share is increasingly hard to come by.

The High Cost of Ignoring Delivery Optimization

Failing to utilize technology for optimizing delivery processes comes with a steep price. Studies show that 88% of consumers have abandoned online shopping carts due to unsatisfactory delivery terms, and 85% of customers will not shop with a retailer again after a poor delivery experience. To remain competitive, retailers and carriers must excel in the crucial last-mile delivery stage. Fortunately, last-mile delivery technology today has undergone significant advancements and is more accessible than ever.

Key Last-mile Delivery Technology Solutions

How can technology directly impact last-mile operations and improve the customer experience? We’ll explore a few general solutions offered by leading technology platforms that retailers and logistics providers alike should consider:

Carrier Allocation: Optimize cost and reduce risk by expanding partnerships with carriers and delivery service providers, improving capacity and flexibility.

Visibility & Tracking: Enable end-to-end tracking of deliveries, providing visibility to all stakeholders involved.

Route Optimization: Automate and optimize the routing of internal fleets to maximize efficiency.

Omnichannel Fulfillment: Unlock new fulfillment options to offer customers additional flexibility and speed.

Customer Experience: Enhance the customer experience with real-time order tracking, branded delivery experiences, flexible scheduling, and services like white glove and same-day delivery.

Returns: Tackle the costly challenge of returned orders by creating superior returns experiences.

Sustainability: Reduce the carbon emissions impact of last-mile operations by adopting green fleets and implementing emissions reporting.

To Build or To Buy

Companies looking to implement new or improve existing delivery technology face a crucial decision: should they build an in-house platform or buy an existing solution from a vendor? This choice is driven by several factors that need careful consideration. Does a suitable platform already exist, and can it be quickly and easily deployed? Do you have the necessary resources to develop and maintain a platform in-house? And what are the comparative costs of building versus buying?

While each company involved in last-mile delivery has its unique challenges, the advantages of buying an existing platform outweigh those of building one from scratch in the long run. Let’s explore the reasons behind this recommendation.

First and foremost, speed of deployment is a key consideration. Creating an in-house solution can be a time-consuming process, whereas existing solutions can be implemented rapidly. Companies strive to gain a competitive edge quickly, and superior technology solutions can fast-track their success.

Another crucial factor is the pace of innovation. Building an in-house solution requires continuous effort to keep it updated with evolving technology, industry trends, and company needs. This ongoing maintenance can be a long-term hassle, diverting resources away from core operations. By leveraging external software providers, companies can focus on operational development, configurability, and creative problem-solving, rather than software development.

Customization is often cited as a reason to build an in-house platform. While this is true to some extent, a poorly designed in-house solution can hinder an organization’s ability to scale and adapt. On the other hand, current last-mile technology vendors offer flexible and customizable solutions that can be tailored to a company’s unique requirements. These vendors can also adjust their offerings to accommodate dynamic and evolving consumer preferences.

Cost is an important consideration as well. While the initial purchase cost of an existing platform may appear higher, the added benefits, scalability, and efficiencies it provides ensure lower costs over the long term and higher lifetime value. By spreading out the development and maintenance costs as operating expenses, rather than a large upfront capital expense, companies can better control their expenditures and reduce risk and uncertainty.

Access to carrier networks is another advantage of buying an existing solution. Established last-mile software providers typically offer access to large carrier networks, eliminating the need for companies to contact multiple carriers individually and integrate with each of them. This simplifies and expedites the process of growing a global delivery footprint, extending reach, and serving new customers in new locations.

Generally, companies that purchase last-mile delivery solutions align with the following criteria:

Building software is not a core part of their business.
Solutions addressing relevant business challenges are available in the market.
Internal resources are limited, and focusing on core competencies takes precedence over software development.
Fast deployment is prioritized over a fully customized product.

Purchasing technology from a vendor can be a complex task, especially when it comes to estimating costs. Various factors, including industry, region, transaction amount, delivery model, customization, support, and modules purchased, all contribute to determining the cost to your business. This article explores different pricing models and the integration process, highlighting key considerations and potential challenges.

Evaluating Pricing Models

When it comes to pricing models, businesses should consider their budgeting needs, cost analysis, customization requirements, and alignment with long-term goals. Here are three typical pricing models to consider:

Flat Rate: This model provides ease of budgeting and internal communication. However, it lacks proportional cost benefits based on service consumption and does not incentivize increased usage.

Price per Transaction: With this model, cost is tied directly to volume. It is beneficial for cost and bill of material analysis but can be challenging to budget for.

Price per Module with Transaction Volumes: This model offers the advantage of customization and financial incentives through bundling modules. It provides transparency in module-wise pricing and aligns costs with evolving business goals.

Businesses can seek favorable terms when negotiating pricing with vendors. Consider the following strategies:

Commitments: Begin with a lower commitment in the first year and increase it in subsequent years to secure better pricing.

Price Bands: Look for tier-based pricing that rewards higher consumption, providing financial incentives.

Contract Durations: Long-term contracts often come with financial incentives, offering stability and cost advantages.

Billing: Explore advance billing options that offer additional incentives and potential freebies.

Ensuring Smooth Implementation

Integrating purchased technology with your existing processes and systems is crucial for seamless operations. This involves establishing connections or APIs between your business and the vendor’s platform. However, it can be a time-consuming process, particularly for smaller companies with limited resources. Fast integration is vital to achieving speed-to-market and gaining a competitive edge. Integration timelines can vary from a few days to several months.

Understanding the integration process and its associated timelines is crucial when selecting a vendor. Consider the following factors:

Data Integrity: Poor and inconsistent data, along with failure to map data correctly, can lead to integration delays. Ensure your vendor has robust data management practices in place.

Internal Resources: Insufficient tools, lack of capabilities, and limited resource bandwidth can impede the integration process. Assess your own internal capabilities and engage in discussions with vendors to address potential resource constraints.

Taking a step further, it is also important to assess whether new technology can integrate with existing technologies. If you have a warehouse management system (WMS), transportation management system (TMS) or other similar platform, be sure that the new technology not only integrates well with your company’s data, but the technology already in place.

Looking Ahead

Last-mile delivery will likely reach a point where customers can order anything from anywhere and have it delivered instantly with minimal impact on the environment. When this will happen is anyone’s guess, but the world is moving toward this goal at a swift pace. The companies that can reach this goal ahead of their competitors will most likely find success in the long run. Technology can help.

Jorge Lopera has over 15 years of global logistics experience in senior roles encompassing customer growth, product management, and strategy. As Vice President, LATAM & Industry at FarEye, Jorge is responsible for the company’s expansion into the LATAM region, overseeing commercial and operational activities including sales, account management and channel & ecosystem partners.  Jorge serves as FarEye’s industry expert, contributing to major publications and supporting analyst relations.

Prior to FarEye, Jorge was VP of Customer Growth at Bringg. Before Bringg, Jorge led the DHL e-commerce product development team and was instrumental in introducing a technology-first approach to a last mile service offering in the Americas and Asia-Pacific. Previously, Jorge worked in private equity, responsible for financial and business analysis for key strategic growth opportunities. He holds a BS in finance and real estate from DePaul University.

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