Customer interaction with the Last Mile
We recently ordered a mattress from a leading e-tailer for our guest room. Due to some issues at the logistics service provider’s end, the delivery was delayed. We timed our order to coincide with the arrival date of our guests so we ended up complaining to customer service of the e-tailer. In addition to apologies, we ended up getting free vouchers.
That made my wife thinking (she has an undergraduate degree in Industrial engineer-their species are inquisitive by nature). She did a quick back of the envelope analysis that out of millions of deliveries that service providers make for this particular e-tailer every week, even if a small percentage were delayed and some form of compensation was made for these late deliveries, the company was taking a significant hit. Her questions were-Isn’t it cost effective for this e-tailer to co-ordinate better with their Logistics Service providers? Can’t the service providers better manage that Last Mile network? Was there a better way to manage these deliveries so that these additional costs can be avoided?
Last Mile and its challenges
I had to explain to my wife that the hard fact is that the last mile is the most complex piece of puzzle to solve for a Logistician. Those who are not familiar with the jargon “Last Mile”, it is the final leg of the shipment, where the product gets delivered from a Hub to its final destination.
For this e-tailer, and many other similar companies, the additional challenge is that using service providers does not allow them to have the kind of control they would desire on their last mile. That is the reason we have been reading a lot recently about a leading e-tailer planning to build its own fleet and gain that end to end control on its Supply Chain. Most of the leading e-tailers have systems integrated with their service providers and have real time visibility into shipments. The providers also share data with these companies which these companies leverage to better plan and manage their last mile complexities.
Even for companies that have full control on their Last Mile, not only is the last mile the most complex piece of puzzle to manage, it is also the least cost effective and always less efficient than other parts of any logistics network. However, it is the most important part of Logistics network as it is customer facing and is the final moment of your brand interaction
Leveraging Analytics in Last Mile
Organizations have been leveraging analytics across their last mile network for years now and the advent of big data has obviously helped. Most of the leading e-tailers are already leveraging best in class analytics for the final leg of their shipments. For those interested in application of analytics in the Last Mile, below are three slides I created back in 2014 when I taught an undergrad Industrial engineering class as a guest faculty at University of Louisville. These provide a good high level overview of areas in the last mile where analytics can be leveraged.
With the recent focus on leveraging analytics, many organizations have invested in tools and manpower to harness data and leverage analytics across their Last mile network. However, I believe that the first and the most important step is to define a strategy and roadmap for the Last mile which can help an organization leverage analytics more efficiently. There are many companies out there that have tools in place but struggle with defining a strategy to handle the last mile challenges.
Defining a strategy for your last mile
My perception is that the strategy to manage the last mile has to be a combination of Technology, Strategy, Operations and Customer Service, as indicated in my Last Mile Framework Below. Technology, Strategy, Operations and Customer service are the four pillars that will help you define and sustain your last mile-essentially the two key aspects of your last mile: Customer Satisfaction and Operational Efficiency.
Please note that the framework below was copyrighted with USPTO in 2016 so any use without prior permission or reference will be against the law
Involving expertise across functions (Technology, Corporate Strategy, Operations and Customer Service) to define a Last Mile strategy enables an organization to not only devise a Last Mile strategy that has a higher probability of being effective but also ensures that the strategy will gain support from all the critical functions involved in the strategy making process.
The framework shown above is based on my own experience as a Logistician so is primarily just my perspective. No two companies will have the same journey when devising and implementing a strategy for a complex piece of their operation like last mile as aspects like organizational culture also play a pivotal role in defining success or failure of strategies. What works for one organization may not work for other but what I reflect here in my posts is what I believe can be a good approach to define a Last Mile strategy.
To summarize it, though the definition of Last Mile is simple, it is a complex beast to manage. So next time you have a delayed shipment from a company that has otherwise delivered excellent customer service, please don’t be mad at them. Just remember that there are people out there who are doing their best to manage the complexities of Last Mile as efficiently as possible so that you can receive the stuff you need when you need it.