Last mile home delivery is a key driver shaping the growth of the US online sales. While efficient and innovative delivery models abound for parcel products, large format product categories such as white goods, furniture and large electronics remain stuck in an ineffective and inefficient supply chain model, preventing their full potential growth.
Despite the need, progress has been slow for retailers and manufacturers to transform today’s large format product home delivery performance. (see figure below):
In a forthcoming whitepaper, we examine the historical context of today’s delivery model and the structural barriers impeding transformation. We offer a perspective on how the different actors can catalyze the formation of a new win-win integrator model. (see figure below):
Call for national integrator model
An integrator serves a pool of clients rather than being dedicated to a specific retailer or product category. They could unlock value—building scale advantage and reducing coordination complexity—by performing a crucial set of integration activities that are thus far absent or underdeveloped in the industry.
Integration will encompass a variety of actions:
– Coordinate pooling across retailers to increase scale and density in last-mile delivery, thus reducing cost per delivery and increasing flexibility. Although the trucks and uniforms would not be dedicated to one retailer, differentiation could occur at the point of delivery. For example, by providing retailer-branded invoices and information packets and using wireless tablets to access retailer-specific product information.
– Configure last-mile delivery to commingle orders across categories.
– Develop integrated system platforms for end-to-end order management and tracking. This enables a seamless customer service experience from order to post-delivery.
– Develop software tools to improve productivity, such as route optimization and delivery management. In addition, provide incentives for continuous improvement across downstream local delivery networks.
– Establish a national training program to ensure consistent delivery quality.
What’s in it for retailers (shippers)?
For retailers, an integrated HDS network provides strategic flexibility for large-format home deliveries, allowing them to meet their evolving business needs. Opting into the network will be smart for those seeking to capitalize on the breakthrough value of cross-firm scale and density, such as boutique online retailers or regional dealers. Large retailers with significant volume may also opt in if they choose to focus on scale-based cost and service efficiency rather than develop in-house home delivery as a competitive differentiator. This provides an ideal outsourcing option with a small commitment of internal capital.
An integrator network unlocks and passes on significant cost savings to retailers. By doubling its scale with a cross-retailer, cross-category network, a midsized retailer could save about 7 percent in last-mile delivery costs. And the savings increase as the network grows—up to about a 20 percent cost savings at volumes nine to 10 times that of today’s average retailer.
Related content: National Home Delivery Association Keynote, 201