Technology is revolutionising last mile logistics at an important time when e-commerce is booming. Last mile is the final leg of the supply chain where a product is delivered either from business to business or business to customer, and consumers expect their orders to be brought to them within a short timeframe.

Designing the physical network

Having the right network is a critical first step. At Argon & Co we typically start by ensuring our client have the requisite physical network to meet their customer needs. Whilst E-Commerce fulfilment activities have traditionally been embedded within many organisation’s distribution centre networks, we are now increasingly seeing the emergence of standalone operations. As part of this, proximity to the end customer is a now fundamental consideration.

We are also increasingly digitalising the network design process, with the use of digital twin technology to speed up scenario design and analytics. The added benefit for our clients are that they can subsequently use these network digital twins to further optimise their network flows, through tactical network scenario planning, or more effectively manage risks through business contingency planning.

The enabling systems

The criticality of integrated systems for efficient route orders through to the end customer deliveries, has never been more important.

Traditionally freight management systems have been the key to last mile optimisation, whether that being basic carrier management or more advanced route optimisation functionality. However, with the push towards decentralisation networks, so inventory can be positioned closer to end customer, order management systems are now the real brain- driving fast and efficient last mile deliveries.

The Order Management System (OMS) involves managing inventory and delivery. It’s fundamental to allocating customer orders to inventory that is closest to the end customer, which minimises both lead time and delivery costs.

It’s important to note that this does not mean the role of freight management systems has been diminished. Off the back of COVID driven disruptions across our domestic freight network, the traditional model of having a single strategic carrier partner to manage your last mile logistics no longer works. We have seen a significant shift towards a multi-tiered model, where multiple second and third tier providers that have specialty capabilities in particular geographical areas or industry segments are brought in to supplement the capacity provided by organisation’s primary 3PL partner. To efficiently manage this new level of complexity in carrier management, businesses’ need dynamic carrier selection capabilities within their freight management systems.

The reality of rising cost pressures

There is a lot of inflationary pressure washing through the supply chain. While the desire to lower costs is always front of mind for supply chain professional’s, the simple reality is that we’re seeing a significant increase in costs.

Whilst customers have been conditioned to expect that delivery will be fast and free, these days are coming to an end. Fast and free delivery has been used as a marketing tool to attract shopper to “buy online”, meaning businesses’ have been willing to invest in last mile logistics. With the recent cost pressures, these strategies are starting to become unsustainable.

Online retailers are typically adopting one of two strategies: firstly, a strategy of transparency, where businesses are flagging the increased cost so if you want to pay for express you can elect to do so; secondly, the extra costs are hidden within the increased price of the product. Either way, end consumers will have to pay more in the short-to-medium term.

For express deliveries, where customers are paying for the ease conferred by speedy delivery, it is especially crucial they have assurance that their product will turn up on time. This is where having the right technology to enable real-time visibility, such as integrated IoT devices, is critical not only from an optimisation perspective but also for proactively managing customer enquiries and supporting customer service.  

Having the ability to monitor where a product is at any point in supply chain delivery process is a fundamental nowadays. With people increasingly having to pay for fast-paced deliveries, they want to both see and know where their delivery is in real-time.

Will technology provide all the answers?

There have been significant and recent advances with drone and driverless deliveries. An example of this was when Dominos in the US used autonomous vehicles to deliver pizzas. There will undoubtedly be further exciting developments in the technology space, that will continue to transform the economics of last mile logistics. By using drones and driverless vehicles to deliver, this means that less labour is required, which will in turn reduce costs. 

By the end of the decade, we will see driverless vehicles. How you regulate something like this will be the real challenge. The private sector will need to proactively drive this, working in partnership with the relevant regulatory bodies to solve this problem.

Tech and software companies are collaborating with automotive providers to develop driverless vehicles. What’s driving these developments is not mechanical engineering advances. The software is the brain of the instrument, so Google, Apple and Amazon are at the forefront of this. These technologies are what will transform last mile logistics.

James Lee

Associate Partner

[email protected]

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