A crisis can create an opportunity to innovate, and we’re certainly seeing this reality play out with last mile delivery.
In 2020, the Covid-19 pandemic has disrupted supply chains everywhere. Businesses have experienced disruptions caused by workers becoming sick. They’ve suffered slowdowns resulting from supply chain personnel being forced to work remotely. They’ve struggled to keep up with unexpected surges in demand for products such as cleaning wipes and hand sanitizers. And even on-the-surface positive trends, such as record-breaking e-commerce sales during Thanksgiving weekend, have put a strain on supply chains.
A number of businesses are adapting by improving last mile delivery, which is the most visible (to consumers) part of the supply chain – the moment when a business delivers a product to a person. Here are some recent examples of last mile innovations:
Turning Stores into Fulfillment Centers
During the pandemic, retailers find themselves with plenty of unused floor space with fewer people visiting stores. Apple is one of them. Apple operates 300 retail centers in the United States and Canada. A number of them have achieved renown for their aesthetic design and use of open spaces. Apple is now converting many stores into fulfillment centers.
Apple’s supply chain extends all the way to China. Now, Apple is shortening that supply chain considerably by shipping products directly from stores. Since many Apple stores are empty, anyway, it makes sense for the company to turn them into product fulfillment centers. Apple stores are located in densely populated areas, making them ideal for processing high volumes of product orders. By using its stores as fulfillment centers, Apple can get products in the hands of consumers faster, which is especially important as the company rolls out new iPhones. Apple is working through logistics carriers to manage the last mile of delivery for customers who live within 100 miles of a store. Apple can fulfill orders as quickly as one day.
Consumers can also visit an Apple store and pick up their orders, which is ideal if they are out shopping and want to combine a pickup with running other errands. In essence, Apple is making its stores both fulfillment centers and locations for curbside pickup.
As reported in Bloomberg, Apple is applying a model that grocery stores have been following. The practice reduces costs, potentially improving product margins, and is beneficial to the environment.
Best Buy wants to ship products faster to customers at a time when demand for rapid delivery of consumer products is skyrocketing. So Best Buy has turned to one of the masters of same-day delivery, Instacart.
Most of us know Instacart as the company that delivers products for grocers. But during the pandemic, Instacart is expanding its ecosystem to include retailers such as Walmart. Instacart’s relationship with Best Buy is one such example.
As reported in the Verge, the Best Buy/Instacart relationship makes it possible for Best Buy to accelerate the last mile of product delivery. At the same time. Best Buy does not need to manage the logistical requirements that come with same-day delivery. Instead, Instacart does all the heavy lifting, relying on Instacart’s core competence:
“For Best Buy, it’s a way to tap into the ease of on-demand delivery while also leaning on companies with the resources and technical expertise to manage the complex logistical side of the operation in ways traditional package carriers cannot.
Right now, if you order a product from Best Buy, it’ll be delivered from FedEx, UPS, or the USPS. Those services are reliable, but they also tend to be slower unless either the retailer or the customer pays extra.
Even then, same-day delivery is enormously resource-intensive for traditional package carriers to perform and is often not an available option except in special cases or when shopping at retailers like Amazon that have invested billions of dollars in building out their own delivery infrastructure to support such initiatives.”
The partnership is also more cost-efficient for Best Buy because Instacart relies on a contract workforce.
Instacart is not the only delivery company working with merchants. DoorDash is expanding partnerships, too. These partnerships do create one risk that retailers need to be mindful of: when you expand your ecosystem, you give up control of your reputation. Best Buy, Walmart, and other retailers who work with delivery services lack complete control over their supply chain, unlike Amazon, which has invested in a massive in-house delivery ecosystem. Retailers, in essence, are allowing newcomers to have a stake in their brand equity.
Finding Better Ways to Deliver
The pandemic is not the only crisis inspiring innovative ways to manage the last mile. For years, businesses have been responding to the mounting threat brought about by climate change. In a growing number of European cities, municipal governments are banning or restricting delivery carriers from using gas-emitting vehicles in congested areas. So the carriers are adapting. UPS, for example, has been investing in a fleet of electrically-assisted cycles (e-cycles) to manage the last mile. According to UPS,
“Equipped with battery-powered electric motors and customized, modular load containers, UPS e-cycles allow us to service dense city centers more efficiently. Whether with three wheels or four, these e-cycles are a growing part of our fleet of more than 10,300 alternative fuel and advanced technology vehicles deployed worldwide.
European cities seeking climate-friendly solutions to emissions and congestion are eager to keep commerce flowing sustainably. UPS is now working with city stakeholders on more than 30 such logistics projects in cities around the world.”
According to UPS, e-cycle riders operate from locations called “eco hubs” positioned around a city. Those eco hubs receive package deliveries early in the day. Riders make stops within a small geographic radius. The e-cycles are narrow enough to travel on cycle lanes and side streets, and they don’t block traffic or require large parking spaces. They consume less energy than motorized vehicles, reducing congestion and emissions.
UPS piloted its first e-cycles in Hamburg, Germany, in 2012. Since then, UPS has expanded its fleet across Germany. In addition, UPS is working in campus environments such as University of Dublin’s Trinity College. UPS notes that campuses are ideal for e-cycle delivery because thousands of potential customers live in a concentrated area. At Trinity College, UPS has built an eco hub on campus, where students and staff can also collect their parcels from storage lockers at any time of day.
UPS notes that its partnership goes beyond everyday package delivery. UPS is creating research and educational programs for Trinity College’s young environmental leaders and offering students internships across Europe.
As large cities continue to cope with climate change, we may see the UPS approach catch on with many other forms of last mile delivery. For example, in Chicago, Bosch is working with charitable organizations to use e-cycles to deliver goods to the needy. This approach is especially beneficial for people living in disadvantaged neighborhoods, where getting access to help is more difficult especially during the pandemic.
Of course, e-cycles have their limitations. By design, they are ideal for carrying lighter items compared with other transportation methods. But for smaller package deliveries, they are incredibly efficient – and more sustainable.
In 2021, business everywhere will continue to learn to pivot as they work their way through a world-changing pandemic. But as climate change demonstrates, businesses will be called upon again and again to figure out better and more mindful ways to meet the needs of customers. Innovating the last mile is an important step.