Closing the distance on last-mile delivery

What constitutes the capacity of a Delivery Hub? 

Determining the capacity of a delivery hub is a complex process that requires the consideration of multiple factors. Typically, a delivery hub serves a certain radius within a city, ranging from a few localities to several kilometres based on the area’s population, housing, and office density.

The overall capacity of a delivery hub comprises several components, including storage capacity for parcels, sorting and bagging capacity, and manpower capacity needed for parcel delivery. 

Manpower is a crucial and expensive aspect of last-mile delivery and necessitates careful planning.  During the eight hours of operation, a delivery executive must report to the hub in the morning, collect the bag and route plan, travel the route, deliver the parcels, return to the hub, account for undelivered parcels, deposit cash collected from cash on delivery orders, and resolve any other issues. 

To estimate the manpower needed for a given day, first, the historical productivity of delivery executives (i.e., the number of parcels delivered in a day) is determined. Those numbers are then used to estimate the required number of personnel needed to deliver, handle returns, etc. at the desired capacity.

Demand forecasting plays a critical role in this process as delivery executive productivity depends on the parcel-carrying capacity of their vehicle. The mix of small, medium, and large parcels is also essential as it directly impacts their carrying capacity, making it a separate prediction problem. Once demand is calculated, it’s time to plan your routes. 

Route planning and bagging 

To ensure optimal productivity, a delivery executive must receive a daily route plan that takes advantage of population density. For instance, someone delivering to a large office complex can efficiently deliver all parcels in just a few hours, while someone delivering to sparsely populated residential areas may have to travel longer distances.

Delivery hubs must be intelligent enough to create daily route plans based on orders, maximizing productivity while minimizing distance travelled. 

Once the route planning is complete, picking, and bagging operations commence. The pick list must be designed intelligently to facilitate parcel bagging according to the route plan. Route planning and bagging are critical components that contribute to the productivity of a delivery executive,  i.e. the number of packets delivered by an executive per day.

While doorstep delivery is a time-consuming process, increasingly, consumers are looking for additional value in various forms. 

Value-added services 

To provide exceptional customer experience and enhance loyalty, various value-added services are included on top of the standard last-mile delivery, such as:  

• Free returns 
• Replacements 
• Exchange offers and detach options
• Open box deliveries 
• Slotted deliveries  
• Demos, and installations
• Recycle options 

These additional services are performed by the same delivery executives, but they require more time and thus reduce productivity (i.e., the number of packages delivered per day).

Moreover, options such as pre-orders, early access, and part payments add complexity to the process, and the planner must be adept at integrating these nuances into the plan to ensure that last-mile delivery is successful and timely. 

To manage these services effectively, excellent back-end technology is crucial to ensure smooth workflow. A look at the process of returns and replacements makes it clear why. 

Returns and replacements 

Returns and replacements are critical aspects of the eCommerce industry as they contribute to both higher sales and greater customer satisfaction. Typically, the return rate ranges from 20-30%, and it is the same last-mile delivery team that handles customer returns, replacements, and exchanges.

To manage these processes efficiently, planners must estimate the daily return rate and create plans to ensure sufficient delivery hub capacity to accommodate the pick-up, transportation, storage, and processing of returns. These complex processes must be supported by your back-end technology, such that every event is automatically logged into the system and shared with the appropriate people.  

One more way delivery companies manage these challenges is through the use of third parties – let’s see how that looks in practice. 

Third-party logistics 

The eCommerce industry has event-driven peak and BAU (business as usual) days every month. To manage costs, companies use hybrid models for deliveries, allocating volumes between their own capacities and 3PLs to handle peak loads while maintaining service levels. With variable pricing models and differing SLAs, the speed vs cost vs reliability equation is crucial in choosing the right 3PLs.

Technology integration is also key to seamless order flow and tracking, as well as accurate planning for offloading volumes at the source, middle-mile, or last-mile delivery hub. 

In summary 

To optimize last-mile delivery, it is essential to focus on several key areas. The first is route optimization, which involves using data and technology to identify the most efficient delivery routes to reduce travel time and distance. This can be achieved with GPS tracking, real-time traffic updates, and predictive analytics. 

Another critical area to focus on is customer communication and transparency. Customers want to know when their delivery will arrive and be able to track it in real-time. Providing accurate and timely updates can help improve customer satisfaction and reduce the number of missed deliveries. 

Furthermore, the use of alternative delivery methods, such as locker systems or drones, can help overcome the challenges of traditional last-mile delivery methods. Locker systems provide a secure and convenient location for customers to pick up their packages, while drones can deliver packages directly to customers’ doorsteps, bypassing traffic and roadblocks. 

Finally, it is crucial to prioritize sustainability in last-mile delivery. The increasing volume of deliveries has resulted in a significant increase in carbon emissions, and companies must take steps to reduce their environmental impact. This can be achieved using electric vehicles, bike couriers, and optimizing delivery routes to reduce unnecessary travel. 

Optimizing last-mile delivery is crucial to meet customer expectations, reduce costs, and reduce environmental impact. Challenges in the areas of capacity, workforce and logistics are cutting deep into retailers’ margins, but they are solvable. By focusing on route optimization, customer communication, alternative delivery methods, and sustainability, companies can create a more efficient and effective last-mile delivery process.  

A supply chain planner who possesses a deep understanding of the intricacies of last-mile delivery, and is equipped with the right tools and technologies, will play a critical role in the profitability of the entire organization. 

To learn more, strike up an exploratory conversation or share experiences and feedback, contact us at Pravin Chaudhary, Director Supply Chain, Industry Platform CPR Pravin.a.chaudhary@capgemini.com