Welcome to the first in a series of questions, where we aim to be transparent about five key things that we believe customers look for
- Pricing and costs of last mile delivery
- Problems
- Versus and comparisons
- Reviews and best in class of services, technology, and products used to offer last mile delivery
Increased demand for home delivery accelerated from the recent Covid lockdown and looks set to stay as shopping habits shift further online. For the first time in its 500 year history Royal Mail recently announced parcel revenues have overtaken letters after seeing unprecedented volume growth for people staying at home to work.
This has driven three key market trends
- Customers want reliable, fast, responsive and flexible delivery times that fit around their lifestyles and schedules
- Retailers and technology companies are investing significantly in solutions to provide last mile offerings since barriers to entry are deemed low
- An increased focus by regulatory bodies on environmental policies, such as emissions targets and other “green” friendly regulations
When you combine these with the volume of growth, traditional last mile carriers have to transform and digitise their operations to stay competitive.
How many of you have purchased product, to see it being delivered by a ‘white van’ and literally thrown at your address whether you answer the door or not? This service is impacted by time and cost due to the market forces that set the cost of that delivery service.
If I told you that each parcel probably earns less than £1 per delivery for last mile, would this be a business that you would invest in?
Add to that the following challenges
Customer demands are changing and speed is of the essence to remain competitive. Volume continues to grow as shoppers move from the high street to online. There is also a move, led by Amazon, towards free or subscription based next day delivery. While consumers are still highly price sensitive on delivery options, there are now over 15 million UK shoppers who have signed up to Amazon Prime. This subscription not only brings additional revenue in from the service fee but also drives spending, with Amazon Prime members spending 230% more than non prime members in 2019. Consumers are not just looking for faster delivery times but they are also pushing for increased flexibility and visibility; they want to be able to select the timing and location of each delivery and be able to track that delivery all the way through the supply chain.
Technology is driving new and innovative ways of being able to deliver to customers. From drones to automated vehicles, technology giants are looking to take a share of the growing last mile market. While carriers have previously invested in in-house technology to enhance their delivery model (increasing efficiency, optimising routes, and providing traceability) they will need to accelerate this to remain competitive with the specialist technology companies. Traditional vehicles and methods of delivery in both urban and rural areas will be outdated within 5 to 10 years based on the predictions by the top automotive companies for the timelines for autonomous vehicles.
Environmental awareness is growing and with that consumers and governments are increasingly focused on sustainability, making purchasing or policy decisions based on the potential environmental impact. Boris Johnson’s recent 10 point plan laid out measures to scale up the nation’s climate ambition. Major cities are setting timelines for going fully “green”. Bristol City Council has approved a ban on all diesel cars in the city centre during the day from 2021. This ever-changing regulatory landscape will only continue to expand across the UK; fundamentally changing carrier networks, delivery methods and vehicle requirements as plans accelerate to stop the sale of petrol and diesel vehicles.
With such a dynamic environment how can last mile carriers remain competitive and keep up with customers, technology and policies
Investing in technology is a necessity.
At Hail we use class leading logistics software that allows the customer the selection of when they want product to be delivered. We harness that with the ability to do route optimisation to select the most efficient route to deliver to. (After all we are human powered with a bit of electrical assist). Do not be surprised to see artificial intelligence growing in this area using live data to propose further efficiencies.
Alternative Technological delivery models.
While existing carriers focus on transforming their business models by lowering costs, dealing with legacy systems, and often complex labour arrangements with unions, we have focused on investing in alternative technological delivery models and more flexible labour arrangements giving Hail distinct cost and speed to market advantage. So what does this actually mean?
We operate true last mile, with our presence and delivery service tied to a geographical area that has been carefully reviewed to allow us to focus on customer service. After all without customers, we do not exist. By operating in an area that is no more than a mile radius, we can deliver quickly, efficiently and give our workforce flexibility to work with us on peak demand, and taking time out when the service is not required. This is a gig economy, but we allow our workforce to focus on a work life balance to suit them, and not spend 12 hours a day in a van trying to deliver 100 parcels for less than £100 (Remember profitability?)
This flexibility can allow the newer last mile providers to match peaks and troughs in demand and match costs in a more agile way.
Currently, deliveries still rely on humans for the last mile, but autonomous delivery methods are being widely developed and tested, and are due to change the landscape for last mile delivery. With drivers being one of the biggest costs for carriers, the benefits to the bottom line of moving to autonomous delivery is so large that the investment in these technologies is increasing every year. The use of small automated vehicles to deliver parcels in urban areas might be closer than you think. A mobile delivery locker self-driving to your door with your package is likely to take over urban city deliveries. Outside of the main cities, drone deliveries for remote areas and smaller parcels are already being trialled for the Isle of Mull in Scotland, with larger cargo drones set to impact transport options further up the supply chain. The regulation and implementation of these technologies presents a challenge to be overcome, but with governments committing to go green, it’s only a matter of time until they become more commonplace.
As the last mile market grows, companies are having to flex to meet demand, as seen by Tesco needing to expand its home delivery by 3,000 delivery drivers to meet demand. Have a look where Tesco are now changing their business model by closing stores, counters within stores, but growing click & collect, and home delivery. This is because people do not shop in high volume anymore, getting to the shop is expensive due to rising fuel costs, and the technology and service is in place for you to order your groceries whilst sitting at home or at work
So what has this all got to do with Hail?
Well we started the article with Is last mile delivery profitable? for us as business owners, we had to react to the market forces, but we also had to offer our customers and workforce something different
- We have to utilise big data and use it to the benefit of the customer. By investing in the right software, we can deliver within the hour of initial demand
- We had to plan to ensure we have flexibility in our delivery and labour model. We are not going to be delivering at 3am in the morning, but we do try and work to when it suits our customer for us to be operating as well. Our workforce also want that flexibility, so we aim to give them that with a ‘happy workforce’ policy driving good customer service
- We are always looking at improving and AI will be used to create dynamic planning and delivery
- We are not afraid of alternative technologies as long as they meet our business ideals of zero emission delivery. We are already talking with providers in drones and autonomous vehicles
- Our mantra from the beginning was to create a net zero plan to adjust to changing regulations, but only because we passionately believe in this. The planet is damaged enough, and by not being responsible for this, we fail.
So is last last mile delivery profitable? Let us do the sums that drive these costs and margins
Based on a market force demand of £1 payed to deliver last mile, we need to deliver 30 items every hour that we are working or paying wages. In simple terms, every two minutes. Straightaway you can see the problems
- Do we have 30 parcels to delivery every hour?
- Can we deliver 30 parcels in an hour?
The answer to the above is yes as long as you follow key rules
- Control your distance. Remember the title Last mile? Only operate within the boundary of the first or last mile to allow distance and time to be effectively used.
- Optimisation. Work with customers who may have more than parcel being delivered. Ten parcels to the same address is more profitable than ten in the same street. You have to work with and retain customers who can meet your volume requirements
- Promote your strengths and beliefs – We are a zero emission company, using e-cargo bikes that electric pedal assist. Used daily, they can save over a metric tonne of C02 every year. If your customer is looking in planning its journey towards net zero, then services like ours can help them
- Offering excellent customer service is key to all businesses, but especially companies like ours. We do not just deliver, we look to see where we can help people either in business or at home. We invest locally and care about where we operate.
- If we cannot do it, we probably know somebody that can. Now this sounds daft if we recommend competitors, but we are in a market of growth and change where the use of vehicles like ours are key to improving the environment we live in. Our message is simple, the more vehicles like ours are used, the better the world will be.
So that leads to one final question?
Would you use us for local delivery?