The ‘last mile’ distribution involves a variety of challenges and related consequences. This can be considered from the perspective of the sender and the recipient. Below you will see the main wishes and challenges for the sender and the recipient respectively.
Apart from the issues mentioned above, recipients may sometimes be dissatisfied with the current state of the ‘last-mile’ service delivery. On average, parcel services are given a Net Promoter Score (NPS) of -9. The main causes for this are high prices, unavailability of same-day delivery, delivery errors, and late deliveries.
In addition, recipients often do not have insight into the status of the shipment. The status changes shown are limited and sometimes do not match the current situation. This results in frustration and unnecessary burdening of the customer service. And in some cases, customer services also lack the right means to share the current shipment status information.
Oh no... No one is home
The biggest challenge for home delivery is that frequently nobody is at home to receive the shipment. For a significant percentage of shipments the first delivery attempt is unsuccessful. The shipments then need to be temporarily stored elsewhere, because of lack of storage space. The challenge is how to deliver the ordered products to the recipient at the first attempt in a cost efficient way. Many recipients prefer shipments to be delivered to their home address, but the problem is that to an increasing extent, there are no fixed times when recipients will be at home.
The overview below shows the challenges and related consequences, divided into three categories: i.e. challenges related to costs, service, and the process.
Challenges
| Cost related | Service related | Processrelated |
|---|---|---|
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Consequences
| Cost related | Service related | Proces related |
|---|---|---|
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A guideline for testing
The case shown below is an example of the current costs related to the distribution process. This concerns a theoretical approach to a problem that occurs daily. The actual costs are subject to minor differences, and may vary.
Example case of possible costs for an organisation (wholesaler)
A wholesaler has 35 vehicles, used to drive 50 routes per day, 6 days per week. The average number of calls on a route is 15. In addition, the wholesaler uses 3-side roll containers (packaging material) for delivering the shipments. In addition, the paper route lists and packing slips are used for registering actions. The following table shows the possible costs for each step in the process, based on calculations.
| Organisation-wide | Back-office | Drivers |
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Paper costs: 2000 prints per day (€0.02 per print) x 312 working days per year = € 13.000 Registration of packing material: 35 vehicles x 24 3-side roll containers per day, per vihicle x 312 working days per year x cost of 3-side roll containers (€100) x loss percentage (2%) x loss prevention (25%) = € 131.000 |
Preparing route list: 4 minutes per route list x €35 labour cost per hour x 35 route lists per day x 312 working days per year = € 25.000 Post-processing administration: 2 FTE x 37.5 FTE per week x €35 labour costs per hour x 52 working weeks per year = € 135.000 Unnecessary manual planning: number of planners (3) x 0.33 hours per day x €35 labour costs per hour x 312 working days per year = € 11.000 |
Costs for correcting errors: 2% shipment errors x 525 (35 routes x 15 stops) shipments per day x costs per error (€75.00) x 312 working days per year = € 246.000 Unnecessary vehicle movemets (depreciation): 3.329.473 km per year x percentage unnecessary km (2%) x costs per km (€0.38) = € 25.000 Unnecessary vehicle movements (wages): 35 routes x unnecessary km per day per vehicle (2%) x labour costs per km x 312 working days per year = € 35.000 |
| Total per year € 144.00 | Total per year € 170.000 | Total per year € 306.00 |
Overall costs per year € 620.000
However, the following results can be regarded as a guideline for testing to what extent costs apply within a particular organization. An example with different scenario’s (low, medium, high) can be used for making different forecasts.
Stay tuned!
Hopefully you now have a good overview of the challenges and current situation within the last mile delivery. In the next blog we will discuss the benefits the various stakeholders are hoping to achieve. Besides that we will zoom in on the desired situations and possible solutions to achieve those goals.
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