Supply Chain Shortages Make Last-Mile Delivery a Household Obsession

Filling orders has always been the mainstay of retail.  But as eCommerce has surged throughout the pandemic, consumer expectations for delivery of their purchases have made good logistics a must-have, and delivery time frames have only gotten shorter. Even though prices are up and supplies are down, consumer expectations for fast and error-free delivery remain.

Khaled Naim, CEO of California-based last-mile delivery firm Onfleet, which boasts more than 100 million deliveries in 80 countries, told PYMNTS consumers aren’t cutting retailers any slack for the holidays.

Read more: With 10 Shopping Days Till Christmas, Consumers’ Delivery Expectations Are Unbending

As much as shoppers are aware of supply chain issues, they have expectations for quick delivery — a reality that presents a challenge and an opportunity, he said.

“There is no shortage of stories about the supply chain delays and impact on retailers, but shoppers have grown to expect to receive their purchases fast regardless,” he said.

“The new players in quick-commerce coming out of the pandemic have reinforced how important it is for retailers to have a long-term delivery strategy that takes consumers’ expectations into account, or else [they’re] risking market share to competitors that are,” he added.

With cargo ships waiting in the country’s busiest ports, shortages of everything have reached historic levels. Nearly two weeks ago, The Wall Street Journal reported earlier this month that  30 vessels could be seen in the Los Angeles and Long Beach ports waiting to be unloaded, while another five-dozen intended for the harbor were further out to sea. In addition, ships thousands of miles away en route from Asia reduced their speed to delay their arrival.

Long before the busy shopping season kicked off, shipping companies were already bracing for what some were referring to as “shipageddon” to describe a possible shortfall of as many as 7 million packages daily amid the holiday season.

The shipping crisis has its roots in spring 2020, when goods that manufacturers expected to be delivered sat in containers because the pandemic strangled demand. A demand surge at the end of last year led to delays, blockages and port traffic jams worldwide. Today, containers are stuck in ports due to rising demand and a lack of dockworkers and truckers.

Last month, the U.S. Census Bureau of the Department of Commerce announced in a press release that third quarter eCommerce sales totaled $214.6 billion, a 6.6% increase compared to the same period last year.

Given the explosion of online sales, merchants and logistics companies have been forced to devise novel ways to meet their customers’ needs. And that brings us to last-mile delivery, the movement of products from a warehouse to their final stop, typically the customer’s doorstep.

The concept behind it is to get items to customers quickly and at minimal costs to the company. But keeping prices low is among the biggest challenges because retailers and third-party logistics providers, such as C.H. Robinson, Worldwide, Fedex Corp., United Parcel Service and J.B. Hunt Transport Services, can be more than 50% of total costs when labor and fleet costs, route optimization and warehousing are added in. As a result, free shipping is hardly free.

ShipHero, a New York-based software company that promises to make it easy for eCommerce retailers to ship, reported on its blog that there are number of challenges when it comes to last-mile delivery. They include: the size of the store or third-party logistics provider; the number of orders picked and packed each day; the frequency of order pickups; the proximity and location of delivery stations to the distribution center; and the number of routes and deliveries along the way.

While there’s no simple solution to last-mile delivery challenges, retailers or third-party logistics companies may find that a mix of improved technology and analytics could solve the problem, the blog post suggested.

Amazon said it does most of its transportation planning before a consumer buys a product. The company may employ artificial intelligence (AI) to track when large orders are placed in certain parts of the country and ship those items in advance to the region’s warehouses.

Among many lessons learned is the need for additional investment in smart technology. Tracking sensors inside a package, for example, can monitor location, temperature and other essential information needed for prescription drugs, frozen foods and controlled items such as alcohol. Technology can also predict the weather to keep products safe along the journey. In addition, the use of drones — touted by Walmart and Amazon — driverless vehicles and robots are expected to improve shipping efficiency.