The “Last-Mile Pile” is here to stay, even as we move out of pandemic-led survival mode and logistics leaders revamp to a more strategic approach to distribution operations.
Consumer confidence will inevitably return in 2021 as the COVID-19 vaccine becomes as common as the flu shot at the local pharmacy. With that renewed confidence will come renewed spending, driven by what has often been referred to as “revenge shopping.” Suppressed demand with an expanding demographic (older consumers are now comfortable with online purchasing, joining the younger set) will finally have a green light to be released.
No going back
The next normal is already significantly different from pre-COVID 2019, and it will surely not mean going back to how we operated our fulfillment and distribution operations. The expected resurgence of last-mile volume will also mean a year of transformation for last-mile operations. Businesses and society will be focused on resetting for the future rather than the “let’s just get through 2020” mindset. This is an undeniably transformational shift in retail commerce, and the last-mile evolution is the poster child for that movement.
Last-mile practitioners need to accept and act on that transformational reality. Higher parcel package counts, erratic lead-time demands and disparate destinations will remain the new normal of fulfillment operations. Add in consumer buying behavioral changes, specifically the permanent shift in shopping via online, curbside and pickup in store versus a trip to the mall, and you get significantly more complicated logistics fulfillment operations as a result. Old ways (read: 2019) are exactly that — old. The focus must be to change and adapt processes, technology and perspective to survive.
What is ‘last mile’ again?
To begin the reset, we need to redefine the definition of “last mile.” That is a challenge in itself, as there are just as many definitions in the industry as there are package types. For this conversation, last-mile order fulfillment is defined as the process by which a consumer and the products they order come together. That includes customer collection, delivery options and customer expectations regarding service and experience.
Using that definition, last-mile fulfillment is obviously more than just transportation. It includes activities such as packaging, order pickup, product availability, digital interactions, fulfillment options and cost to customers. Logistics leaders need to view and structure last-mile operations as a micro end-to-end supply chain process that is responsible for the success or failure of their customer service experience.
Packaging, you say?
What headwinds do retailers see within last-mile execution? They are not the traditional components like tracking and shipping costs, as you might expect. They have flipped to a more customer focused set of challenges. In a 2020 Gartner survey on last-mile strategies among 407 retailer respondents, 44% of them listed “Product and Packaging Suitability for Last-Mile Delivery” in their top three constraints (15% ranking this as No. 1) hindering their organization’s last-mile success:
It’s not just product-specific packaging for ease of and damage-free delivery. It’s also how efficiently multiple items are packed in an appropriately sized box that minimizes “shipping air” and the environmental impact of wasted corrugated, plastic and other materials used in packaging. Who would have thought a consumer cared enough about how many packages you use to fulfill their order to look for an alternative vendor? And it’s not just sustainable packaging that’s influencing buying behavior. Preferences in delivery speed are also evolving.
Who wants next-day service anyway?
Until the COVID-19 pandemic, shipping sustainability was not considered by most organizations as a real driver of buying behavior. Sustainability has now come to the forefront as a major consumer concern, as seen in Gartner survey results:
The Amazon standard for next-day delivery is not as coveted by consumers as widely assumed. In fact, there is a movement by the consumer to slower, cheaper and consolidated fulfillment processes that address their sustainability preferences.
Although there will always be a place for next-day delivery in retail, logistics practitioners should not build their last-mile model on a concept that has been assumed necessary for all deliveries. The use of advanced analytics, customer data and third-party resources should be used to determine your market’s real preference for speed. From that knowledge pool you can build last-mile capabilities to meet the services demands that your customer — not other industries or platforms — dictates.
The evolution of last-mile people
Given the mission-critical role that last mile plays in the success of the customer experience, the talent required to design and run such operations has elevated itself out of necessity and driven by its complexity. Leaders in last-mile management are coming out of IT, operations, inventory planning, transportation and even finance. The successful execution of last mile has become reliant on disparate knowledge areas like advanced analytics, sustainability, network design, inventory management in stores used for fulfillment, reverse logistics and digital ecommerce platforms. The list continues to grow as we watch 2021 evolving into the current versus future state.
Suddenly, teams of specialists are needed to rationalize and support all the critical last-mile components — the role can no longer function as a one-person operation. The demand for cross-functional leadership in logistics has never been more prevalent than the new last-mile function, and companies must recruit, develop and employ that talent quickly, or risk losing customers and market share.
Last mile has certainly jumped to the forefront of logistics operations in retail. You would be hard pressed to find anyone in the retail business, including store staff, that at a minimum knows the term and most certainly is aware of its importance in delivering the customer experience successfully. The time is now — 2021— to reset your last-mile strategies, build agility in your distribution network and embrace the definition of success in delivering exceptional service.
Gartner Supply Chain