Retail ecommerce sales are on the rise, projected to exceed $5.5tn this year and will make up nearly a quarter of total retail sales by 2025. With this rise comes a sharp increase in parcel volumes shipped and a heightened focus on last mile delivery, writes Kushal Nahata, CEO of FarEye.
Ecommerce and the last mile
The last mile is critical as it is where ecommerce retailers and online shoppers physically meet. It is typically also the most challenging because – unlike the first and mid miles which move products between a few known locations on a cadenced basis with a few stops – the last mile involves loading vehicles across multiple nodes quickly and efficiently routing them to multiple destinations.
This makes the last mile inefficient, unsustainable, prone to risk and very costly – as the last mile is estimated to make up 53% of total supply chain costs. As if logistics complexity weren’t enough, the last mile performance is further squeezed by increasing consumer demands for fast, free, flexible and sustainable shipping.
As retailers and carriers look to gain competitive advantages through improved last-mile delivery, here are a few last-mile technology trends we expect to see companies adopt in the coming years.
Driverless vehicles are making headlines as companies like Tesla and Nvidia continue to fine-tune the technology for personal use. However, amid driver shortages and increasing labor costs, retailers and shippers are beginning to realise the implications of autonomous vehicles in their own operations. Mentions of delivery drones and robots in company earnings calls have more than doubled in recent years, and initiatives in this technology are already underway.
Kodiak Robotics and Werner Enterprises are pioneering autonomous 18-wheel trucking across the mid mile. In a test drive running 152 hours continuously between Dallas, Texas and Lake City, Florida, the semi-truck’s utilisation was more than double that of one driven by a human, who in the U.S is subject to a daily maximum of 11 hours behind the wheel.
Drones are another up-and-coming autonomous delivery technology. Wing, a sister company of Google, is testing drones that can complete a six-mile delivery in six minutes. Compare that to driving six miles in urban areas such as Sydney or San Francisco – that could take an hour. FedEx, UPS and Walmart are investing in similar initiatives. Many challenges exist with drone delivery, however, such as high initial investments and operational costs, airspace regulations and safety.
Nonetheless, autonomous delivery technology will continue to take off as the technology is fine-tuned, its cost and labor efficiencies are justified, and its safety ensured.
Mobile retail stores
As retailers continue to explore new online order fulfilment options that place inventory closer to consumers such as in-store fulfilment and micro fulfilment, an emerging fulfilment option might be the closest retailers will ever be able to bring inventory to consumers – autonomous mobile retail stores. These autonomous vehicles carry a large inventory of retail goods that can be dispatched on-demand by consumers. Upon arrival, consumers can open the vehicle and shop on the spot.
Tortoise, a U.S.-based startup, is working with a variety of retailers to launch the mobile smart store concept and will provide the robot and software to retailers for free, taking 10% of the retailer’s gross sales. The company estimates that a single robot can generate $80-100 in revenue per hour.
The general idea of mobile stores isn’t exactly new, however. Ice cream and food trucks have been bringing a store’s-worth of inventory to consumers for years. But to expand this into other sectors of retail and doing so autonomously? That is a new frontier.
Automated route optimisation
We can expect further advancements in route optimisation as software improves in the coming years. Many of the current routing software solutions available are driven by artificial intelligence and machine learning, and are able to route delivery vehicles while accounting for numerous variables such as weather, traffic, regulatory factors, driver and vehicle limitations, and service level agreements, among others.
However, according to the U.S. Department of Transportation, approximately 75% of all trucks on U.S. highways are nearly or mostly empty. Furthermore, $2.5bn is wasted annually due to routing software taking drivers to the wrong locations, and more than $600m is wasted on gas due to faulty routing.
Emerging routing technologies such as geo-location, which route vehicles based on geographic coordinates rather than numerical addresses, and loop optimisation, which can increase routing efficiency within a fleet of vehicles, are gaining traction. And as autonomous delivery vehicles begin to enter the market, the need for accurate, efficient routing solutions will become even more apparent. Expect advancements on this front.
Personalised delivery experiences
Today, consumers have little choice in their online order delivery experience. Typically, an online consumer has only a handful of delivery options that aim to balance speed and cost, with the fastest delivery options taking a few days. Advancements in delivery technology are giving consumers more choice in their delivery experiences, and are already being used by some companies.
As consumers demand faster deliveries, same-day delivery has become a hot topic in logistics. Retailers have begun partnering with outsourced carriers and gig-fleets such as Shipt (now owned by Target) and DoorDash to make deliveries more quickly. But speed isn’t always the most important delivery criteria for consumers.
In many cases, consumers may prefer the ability to select specific delivery windows by the hour at the expense of speed, especially for deliveries where the consumer would like to be home when the delivery arrives – like for large-size orders such as furniture or appliances that require delivery personnel to enter a consumer’s home.
Like time, another variable that consumers would like to decrease is the carbon footprint of their online delivery. Technology platforms are improving abilities to calculate the environmental impact of a specific delivery, considering vehicle, speed and routing. In doing so, retailers and carriers can give consumers visibility into the carbon emissions impact of each delivery option, providing them with more information and choice.
Lastly, we can expect further use of branded customer communications platforms that allow retailers to communicate directly with consumers, even when a third-party carrier is completing the order. Such platforms can provide consumers with real-time order status updates, two-way communications between consumers and drivers, and allow retailers to personalise the delivery experience.
Last mile delivery platforms will enable more personalised delivery options, giving consumers more choice, flexibility and reason to shop with a retailer again.
The complexity and high cost of last-mile delivery is caused by routing and delivering multiple parcels to multiple home addresses. An efficient way around this conundrum lies in parcel lockers. Parcel lockers are more economically efficient because they can deliver many parcels to a single location, removing the complexity, cost and risk while only mildly inconveniencing consumers by making them travel a short distance to retrieve their order. On the flip side, parcel lockers ensure parcel security for consumers, something that does not always exist on a doorstep.
Amazon has already implemented a wide network of parcel lockers, with thousands of parcel lockers across hundreds of U.S. cities alone. U.S.-based Bell and Howell have a network of grocery delivery parcel lockers. Their automated and temperature controlled-pickup solution guarantees consumers fresh and quality grocery delivery while reducing fuel consumption and traffic congestion.
Parcel lockers not only improve forward logistics, but benefit reverse logistics as well. Shippers and carriers can pick up online returns from a single location in bulk, saving both time and money on an already very costly returns process.
Amid rising fuel prices and demands from consumers, governments and investors for carbon-free business operations, retailers and carriers are being pressured from all sides to reduce their carbon footprints in the last mile. And according to a report from McKinsey, a typical consumer company’s supply chain accounts for more than 80% percent of greenhouse-gas emissions. The supply chain, and the last mile specifically, offer companies the greatest opportunity for more environmentally friendly operations.
Electric vehicles (EVs) are just one of many sustainability efforts retailers and carriers are beginning to employ. Amazon recently announced an order of 100,000 custom electric delivery vehicles as part of their Climate Pledge, aiming to have zero net carbon by 2040. Similarly, Unilever added its first 44-ton electric truck to its fleet, which can travel up to 300 km on a single charge. Battery life is the main barrier to full adoption of EVs but as their life improves, we can expect wider adoption.
Manual and electric cargo bikes are also becoming more widespread, and their use in urban areas is highly efficient. In a study conducted by the University of Westminster, it was found that electric bikes can deliver about 60% faster in urban areas than vans can. Moreover, The Guardian recently reported that 51% of all deliveries in city centers in Europe can be replaced by bikes.
The key to sustainable vehicle adoption will come from companies’ ability to integrate these vehicles into their current delivery networks, which requires nuanced fulfillment, routing and scheduling technologies.
Thankfully, these technologies are already here.
Kushal Nahata, CEO of FarEye