Last mile: We need a plan, but where should we start?

  • July 16, 2019
Factory building or warehouse building with concrete floor for industry background

Ecommerce, omnichannel, last mile, direct-to-consumer (D2C) — pick your favorite term, but they all refer to the same consumer-driven phenomenon. It’s complicated, and it’s only going to get more complicated (faster than most business leaders can even imagine).

How did we get here?

Until now, it’s been easy to ignore and considered an afterthought at best. In your defense, it still kinda is. Reports like this one and this one still only show the percentage of retail ecommerce sales hovering in the low-to-mid teens through 2022, with annual percentage increases only jumping by an average of 2% year-over-year (YoY). It’s easy to gloss over these single-digit numbers and think, “it’s not a big impact.” Why? Because we sometimes fail to read between the lines and forget how a 1–2% increase equals billions of dollars. Yes, billions.

Think back 25 years. We had a rebounding economy. A decent percentage of the population still drove stick shifts. And the internet was something you accessed thanks to an AOL disk you got in the mail that offered thousands of free hours of a service you didn’t quite know how to use. “No one use the phone! I’m trying to connect to check this electronic mail stuff!” Aah, memory lane seems like such simpler times.

Not like today. Our nostalgic selves didn’t anticipate how big the internet would become (although David Bowie did … RIP Ziggy Stardust). Nor did we consider that it would bring about smartphones, WiFi, 4G, apps, YouTube and the retail apocalypse. Now think about all your products available for online purchase from literally anywhere on the planet. And it all happened in less than a decade.

Taking control of your last-mile strategy

Jumping into the ecommerce arena can be a daunting task. It’s not for the faint of heart. Nor is it something your organization can ignore or delay pursuing. It’s time for organizational decision-makers to take back these margin percentage points and say, “We’re no longer going to let someone else control all our online sales. It’s time to reclaim some of the sales margins we’re not tapping into. We’re ready to make the investment in both time and money and recognize this isn’t a minor segment of our business.”

Transforming a percentage of your operations to capture D2C capabilities is a lot of work. For example, in-house operations will have to be adjusted for, among other things:

  • Pick to pack/single pick
  • Eaches — individual items versus a full case
  • Dedicated ecommerce operations
  • New warehouse management system (WMS) or warehouse control system (WCS) or warehouse execution system (WES) capabilities
  • Labor requirements

Your packaging will need to evolve for, among other things:

  • Etail versus retail functionality
  • Sustainability improvements
  • Frustration-free design
  • Damage protection from increased touchpoints

Finally, your distribution network will have to consider what items should be available for ecommerce, SKU limitations, geography and so on.

The transformation will take time and skill to determine how to prioritize the numerous projects associated with multichannel distribution. However, one area in which you can begin to make immediate improvements is your transportation operations.

Driving change through transportation

For starters, you need to evaluate what percentage of your products are available for ecommerce and the transportation mode that best serves each of those products. If it’s a small box of nails or a five-pack of lip gloss, for example, a parcel is obviously the way to go.

To get started right away, you can go with one of the national carriers (FedEx, UPS or the United States Postal Service). Each can provide a quick solution and a great way to pilot your new program. However, you must consider a few things before choosing one of these options for the long term. Their pickup and delivery times can be rigid, their rates higher and their specialized services that you may need to service your customers limited. If you’re volume is high enough, however, you can negotiate better rates from the big parcel players.

As you establish your long-term parcel transportation strategy, you'll want to look at the capabilities of both regional and local carriers. Regional carriers cover groups of states (such as the Southeast) while local carriers only cover specific metro areas. These carriers trade national coverage for personalized services and a greater ability to adapt to daily changes or demands from your customers.

For larger items, such as a water heater or an outdoor swing set, you’ll need a less-than-truckload (LTL) provider (if not a handful) with the capacity and service you need to protect your brand from negative experiences. This requires a careful vetting process to make sure your customers receive their products on time and damage-free. Depending on the product, many customers will expect white-glove treatment for their delivery, including inside delivery, installation and dunnage haul-away.

You also need to make sure your carriers understand how your freight needs to be handled. This comes down to the commodity, size, weight and packaging of your shipment. These factors all go into properly determining your freight class. It’ll need to be fully vetted with your carriers to be sure your customers’ orders are delivered to their expectations.

In retail, almost all items have seasonal spikes. You must account for seasonal capacity needs as online orders spike to meet various holiday needs. The last thing you want is a surge of online orders that can’t be delivered on time.

If your organization has private fleet capabilities, you can implement route optimization technology and tailor your transportation management system (TMS) capabilities. Both will be crucial to meeting delivery targets and budget restrictions successfully. The number of TMS providers is increasing, so you may need to reevaluate your existing system to determine its defined capabilities or whether you’ll need to investigate a new selection process.

Navigating the waters of direct fulfillment and last-mile operations requires patience, insight and a well-laid-out strategy. If your organization is seeking to get ahead of or alleviate existing ecommerce challenges, having a conversation with supply chain experts with cross-functional experience often proves the best place to start.

— By Bryan Wyatt

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