Last Mile: We need a plan, but where should we start?

E-commerce, omni-channel, last mile, direct-to-consumer—pick your favorite term, but they all refer to the same consumer-driven phenomenon. It’s complicated, and it’s only going to get more complicated (faster than most business leaders can even imagine).

How did we get here?

Until now, it’s been easy to ignore, and has been considered an afterthought at best. In your defense, it still kinda is. Reports like this one and this one still only show the percentage of retail e-commerce sales hovering in the low-to-mid teens through 2022, with annual percentage increases only jumping by an average of 2% YoY. It’s easy to gloss over these single digit numbers and think, “it’s not a big impact.” Why? Because we sometimes fail to read between the lines and forget how 1-2% increase equals $Bs. Yes, Billions. 

Think back 25 years ago. A rebounding economy, a decent percentage of the population still drove stick shifts, and the internet was something you accessed thanks to an AOL disc you got in the mail offering 1000s of free hours of a service you didn’t quite know how to use. “No one use the phone! I’m trying to connect to check this electronic mail stuff!” Aah, memory lane seems like such simpler times. 

Not like today. Our nostalgic selves didn’t anticipate how big the internet would become (although David Bowie did…RIP Ziggy Stardust) and bring about smartphones, WiFi, 4G, apps, YouTube, retail apocalypse, and all of your products now being available for online purchase from literally anywhere on the planet. And it all happened in less than a decade. 

Taking control of your last mile strategy

Jumping into the e-commerce arena can be a daunting task and is not for the faint of heart. It is also something that your organization can no longer ignore or delay pursuing. It is time for organizational decision makers take back these margin percentage points and say, “We are no longer going to let someone else control all of our online sales and reclaim some of the sales margins we’re not tapping into. We are ready to make the investment in both time and money, and recognize this is not a minor segment of our business.”

Jumping into the e-commerce arena can be a daunting task and is not for the faint of heart. It is also something that your organization can no longer ignore or delay pursuing.

Transforming a percentage of your operations to capture D2C capabilities involves a lot of work. For example, in-house operations will require adjusting for pick to pack/single pick, eaches, dedicated e-commerce operations, new WMS/WCS/WES capabilities, labor requirements, etc. Your packaging will need to evolve for e-tail vs. retail functionality, sustainability improvements, frustration free design, damage protection from increased touchpoints, etc. 

Finally, your distribution network will have to take into account what items should be available for e-commerce, SKU limitations, geography, etc. The transformation will take time and skill to determine how to prioritize the numerous projects associated with multi-channel distribution.

However, one area in which you can begin to make immediate improvements is your transportation operations. 

Driving change through transportation 

For starters, you need to evaluate what percentage of your products are available for e-commerce offering and the transportation mode that best serves that product. 

If it’s a small box of nails or a five-pack of lip gloss, parcel is obviously the way to go. 

To get started right away, you can go with one of the national carriers (i.e., FedEx, UPS, USPS). They can provide a quick solution and a great way to pilot your new program. However, there are a few things to consider before choosing one of them for the long term. Their pickup and delivery times can be pretty rigid. Their rates can also be higher, and they are often limited in providing any specialized services you may need to service your customers. If you’re volume is high enough, you can negotiate better rates from the big parcel players.  

As you establish your long-term parcel transportation strategy, you will want to look at the capabilities of both regional and local carriers. Regional carriers cover groups of states (i.e., the Southeast) while local carriers only cover specific metro areas. These carriers trade national coverage for personalized services and greater ability to adapt to daily changes or demands from your customers. 

For larger items such as a water heater or an outdoor swing set, you’ll need an LTL provider (if not a handful) who can provide the capacity and service you need to protect your brand from negative experiences. This requires a careful vetting process to ensure your customers receive the product on time and damage free. Depending on the product, many customers will expect white glove treatment for their delivery, including inside delivery, installation, and dunnage haul away. 

You also need to make sure your carriers understand how you freight needs to be handled. This comes down to the commodity, size, weight and packaging of your shipment. These factors all go into properly determining your freight class. This will need to be fully vetted with your carriers to ensure your customers order is delivered to their expectations.

In retail almost all items have seasonal spikes. Seasonal capacity needs must be accounted for as online orders spike to meet various holiday needs. The last thing you want is a surge of online orders that can’t be delivered on-time. (I covered this topic in greater detail in a previous blog post.)

For organizations possessing private fleet capabilities, implementing route optimization technology and tailoring your TMS capabilities will be crucial to successfully meeting delivery targets and budget restrictions. There is a growing number of TMS providers, so you may need to re-evaluate your existing system to determine the defined capabilities it has or if you need to look into a new selection process.     

For organizations possessing private fleet capabilities, implementing route optimization technology and tailoring your TMS capabilities will be crucial to successfully meeting delivery targets and budget restrictions.

Navigating the waters of direct fulfillment and last-mile operations requires patience, insight, and well laid out strategy. If your organization is seeking to get ahead of or alleviate existing e-commerce challenges, having a conversation with supply chain experts with cross-functional experience often proves the best place to start. Chainalytics is here to help.

A senior manager in the Chainalytics’ Transportation competency, Bryan Wyatt has over 20 years of experience and expertise in transportation operations, strategic sourcing, data analysis and logistics planning, as well as logistics/supply chain change management.