To the finishing line: tackling last mile delivery
Gone are the days when one would step out to buy the latest pair of shoes or to test out an expensive make-up palette. Today, the world is at the consumer’s fingertips, literally. One click, and you enter the Internet which holds all that which you require—from groceries, to clothes, electronics, books, baby-care products—you name it, and the website has it, all accessible while you rest on your easy-chair. The entire process is conducted online, save for the final leg of the journey where a human—for now, before the robots and droids take over—delivers the package to the consumer. This leg is known as last mile delivery.
“This was tougher than I thought!”
As the shift from brick and mortar to online retail continues, the difficulties of managing last mile delivery grows. New customer expectations regarding time to delivery, overall delivery experience, and open communication have forced online retailers to invest in new technological solutions to manage their delivery operations.
Nour Suliman, CEO of DHL Express Middle East and North Africa, comments: “Last mile delivery has significant impact on the final price paid by the end consumer. Many of the challenges do come with this last leg and can amount to as much as 30% of the total delivery costs. This can be detrimental to eCommerce players in the rise of a more price-conscious customer segment.”
Increasing competition in the realm of eCommerce ensures that every portal out there has to be quicker than the next. Data from studies conducted by McKinsey & Company showed that nearly a quarter (23%) of consumers are willing to pay extra for same-day delivery. Taarek Hinedi, vice president of FedEx Express Middle East and Africa Operations, comments: “eCommerce customers want delivery options that suit their needs, whether that be super-fast delivery or nominated day delivery, or even flexible signatory options. Faster fulfilment and flexible shipping options are requirements for e-commerce businesses to successfully gain and retain customers. This is particularly the case amongst millennials, as revealed by stats from McKinsey & Company, 30% of whom are willing to pay a premium for same-day delivery.”
“Where do we go?”
Kushal Nahata, CEO and co-founder of Indian startup FarEye highlights the key issue faced by logistics providers in the region—a coordinated address system.
He explains: “With over 30 million online buyers and one of the highest per capita income in the world, the Middle East region has tremendous growth opportunity. However, eCommerce in the region has not flourished as rapidly as it should have. One of the key reasons for this is the challenges involved with last mile delivery. While 63% customers in UAE and 54% customers in Saudi Arabia would pay more for same-day delivery, the ‘unclear’ addresses make it extremely difficult for carriers to ensure timely, accurate and cost-effective deliveries. The legacy delivery systems also do not provide the precise information about orders to the buyers.”
FarEye offers a digital logistics platform which utilises geo-intelligence and FarEye’s personal database of more than 1 billion stored addresses to provide better vehicle routing and scheduling than many address-mapping companies.
“Another layer of intelligence is further applied to convert the text-based addresses to geo-pins on map for optimal routing,” explains Nahata, “saving a substantial share of the ‘last-mile’ cost that constitutes about 28%-32% of the total logistics costs, thus reducing miles per delivery. It also empowers customers with real-time visibility by providing live tracking links and zero-error ETA.”
Middle East based companies like fetchr and One Click too have risen to the challenge to make the task of last mile deliveries easier. fetchr operates across two main categories of products, B2C (for businesses) and C2C (for individuals and small-to-mid-sized businesses), offering services that include last mile delivery, international services, warehousing, fulfilment, COD, CCOD, bullet service (30 minutes delivery), etc.
Idriss Al Rifai, co-founder and CEO, fetchr, remarks: “We consider ourselves a technology company that enables logistics, and not the other way around. Technology cuts across all of our operations and interactions with our clients. Our patented smartphone technology allows us to deliver to a mobile phone, so we’re no longer restricted to a physical address. This is a unique differentiator in emerging markets where the lack of street addresses makes delivering for all businesses a nightmare. We also employ route optimisation and dynamic dispatching as part of our daily operations.”
One Click works along similar lines. CEO and co-founder Hassan Hallas explains: “Technology enables our services to continuously get smarter by proper use of data as a compass tool to fixing the unorganised addressing system within the region, operational and load route management/optimisation, and most importantly allowing the end consumer the full visibility and live tracking throughout the shopping experience.” Middle East Venture Partners (MEVP) recently made an undisclosed investment in One Click, which Hallas remarks will be used to accelerate their growth plans, team, and technology.
“Is technology impacting the game?”
The McKinsey &Company report predicts that driven by consumer preferences and drop density (for example, longer distances in rural areas greatly increase last-mile costs), three consumer delivery models—also known as X2C, or some form of goods delivered to consumers—are likely to dominate the last mile in the future: autonomous ground vehicles with parcel lockers, drones, and bike couriers.
Fetchr is conducting applied research with planned incremental roll-outs leveraging UxV’s (Unmanned Aerial/Ground Vehicles) to help with the last mile delivery process using a hierarchical fleet system.
“This may involve using trucks, motorbikes, then UGV’s to complete a given delivery cycle,” explains Rifai. “The purpose would be to improve efficiency with minimal human intervention throughout the last mile process thereby reducing per unit operational costs.” Rifai also believes that last mile costs represent a big portion of an e-commerce business costs, sometimes exceeding 50% of the costs. He says: “As the logistics market continues to be disrupted through the power of technology, we’re seeing that cost going down. This enables e-commerce businesses to drop their prices and reach a wider segment of customers who want to buy products from the local or international markets while enjoying a good customer experience.”
Industry experts like FedEx and DHL have had their own share of the technology pie. FedEx offers an interactive e-commerce delivery solution, FedEx Delivery Manager, which provides customers extra flexibility by allowing recipients to customise the timing and location of their deliveries at no extra cost. Recipients expecting deliveries to their residence will receive a notification by email from FedEx when their package is shipped. The recipient can choose to change the delivery instructions as per their convenience in a few simple steps via a secured website, and have the shipment delivered to their office instead.
Hinedi adds: “FedEx also offers a smart tracking device called SenseAware, which provides customers and retailers with to-the-minute updates on their shipment, including details such as location alongside temperature, humidity, shock and more.”
Suliman remarks: “At DHL, we are constantly seeing new advanced methods taking shape in the last-mile space, in the likes of autonomous vehicles and drones already being used commercially in Europe and the US, and now delivery bots are being trialed in the last mile. DHL Lockers, secure delivery boxes, in-car deliveries, click and collect and automated door openers meet the needs of the consumer for convenience and choice whilst Geo-coding, GPS positioning, and location mapping increase accuracy of delivery, speed, and lower costs. The options are endless, and it is a very exciting journey ahead.”
Spanning the supply chain
Specialised local companies are sprouting out to grab a piece of the last mile delivery business. This is in turn also fueling the development of last mile technology and new infrastructure solutions. SPAN Group is one such company, whose technology development team is embracing these changes and revamping existing IT solutions to be ready to interact and collect data from a range of various input devices or equipment that were not part of the intralogistics business just a few months ago.
As an intralogistics integrator, SPAN provides complete e-commerce solutions to fulfilment centres. They ensure that their e-commerce customers enable their supply chains to meet the challenges of today, and tomorrow. For example, SPAN provides route sorters equipped with weighing, dimensioning, and route validation options to help customers achieve a more efficient operation. Efficiency and accuracy gains within the warehouse help last mile providers to differentiate themselves and provide a faster and more accurate delivery.