Year over year, more markets are shifting towards an on-demand model. First it was transportation (Uber, Lyft) now it is groceries (Instacart, Shipt). Furthermore, the recent COVID-19 pandemic has exploded these markets. Whether your company outsources or insources last-mile delivery, now is the time to take a hard look at how you do it now and how you can do it better, at a lower cost. Explore the strategies outlined herein with your planning team when looking to reduce costs and maintain service levels.
5 Tips to Slash Costs on Last-Mile Delivery
1. Tailor Strategies to Different Locations
It’s important to recognize that different cities and geographic locations require much different approaches. Key variables like local laws, average weather conditions, and topography are often overlooked but can have a significant impact on which delivery strategies and structures work and which don’t. When developing a last-mile delivery strategy, take a deep dive into the specific challenges at each location and look closely at what makes each area unique. What are the key factors that will drive cost up and challenge end-customer service level, and how can you mitigate these impacts? Answer these questions on a regional basis to develop a more robust last-mile delivery strategy.
2. Use Flexible Distribution Points
When developing a last mile delivery strategy, it’s easy to look at the steady state, a snapshot of the average. Traditional methodology will prescribe you to design solutions for the average market state and ride out the rest, which can work, but will leave you vulnerable to costs and will likely negatively affect the service level. To avoid these concerns, it’s important to understand that market demand is locally dynamic, making it critical to implement a distribution strategy that’s flexible enough to service a large resource need in one area and one in another the next week. A great way to achieve this is developing flexible distribution points. This can be achieved through pop-up warehouses, which could be a network of large trucks strategically placed based on real-time market information, or brick-and-mortar warehouses with flexible storage space. Explore these options to ensure there’s enough flexibility in your strategy to meet the ever-changing demand.
3. Focus on the End Customer
Traditional wisdom preaches that the customer is always right. While this might not be true at the core, a disgruntled customer (right or wrong) can significantly drive public opinion and hurt your business. These days this can happen through a single Tweet so it’s crucial to listen and adapt to the evolving needs of the customer. Listen to their needs and tailor your last-mile delivery strategy to them. Ask questions like:
- How do customers want to be communicated with during the delivery process?
- Do customers need a high level of human interaction or can they be services through a phone app?
- How do customers expect transactions to be completed?
In today’s on-demand society, customers require high service levels with little interaction. Be sure to account for this in your last-mile strategy.
4. Control Entire Last-Mile Delivery Process, End to End
With customers demanding higher and higher service levels at the lowest costs possible it puts a strain on what’s really achievable. These demands are pushing companies to develop solutions to control the entire end-to-end supply chain. No longer can you afford to throw delivery responsibilities over the fence to a contractor, and when things go poorly lay fault at their feet. Today’s customers expect that if they purchase something from you, you’re responsible for everything. To achieve this, you must oversee all aspects of your last-mile supply chain. It’s not uncommon to outsource some of the required functions. Think Uber Eats (food delivery), or Instacart (grocery delivery). While these companies are independent to the business, they rely heavily on each other’s collaboration and data sharing to meet the needs of the end customer.
5. Measure Performance and Incentivize
As outlined above, controlling the last-mile delivery from beginning to end is critical to reducing cost and ensuring high service levels. This can be done by utilizing internal and external resources; however, to be truly successful it’s important to measure and incentivize the performance of all parties involved. Set stretch goals and reward your team when these goals are reached. Rewards can be financial or even as simple as throwing a company-sponsored happy hour. The key is to listen to what each stakeholder values and develop incentives that provide opportunity to maximize the benefit through performance.
As high-quality, last-mile delivery becomes more of an expectation than exceptional customer service, it’s more important than ever to develop a holistic strategy that not only reduces costs, but also improves service levels. Thoroughly evaluate these five areas with your team before launching or updating your new last-mile delivery strategy.