JDA and Other Analysts Suggest Omni-Channel’s “Last Mile” Needs Work

Current e-commerce activity remains viable, but it remains in its early stages of last-mile supply chain management.

Industry experts say much has been made of innovations, but drones, robots, and rapidly-changing distribution networks, as well as Uber, are still in early development.

That concept is considered valid by some industry stakeholders, who suggest on-demand carriers could deliver packages to consumers as a low-cost option relative to other modes or options, coupled with increased efficiencies and supply chain productivity gains.

Industry analysts say this not to suggest something like that is actually on the cusp of happening. They maintain that North America omnichannel logistics and last-mile delivery has not adopted, progressed, and evolved as quickly as it has in other regions, according to Fab Brasca, vice president, industry strategy, for JDA.

“If you think about how things get delivered today in North America, the primary channel has been a handful of large parcel players like UPS, FedEx, USPS and Purolator in Canada,” he said. “But in Europe the evolution has already started, where the term parcel in the context of omnichannel really means local delivery. We are already seeing a different scenario where this is not these set of dominant players creating a defacto standard. There are a lot of small, local regional providers. From a supply chain perspective, that creates a lot of challenges, because it is not about offering a couple options from a service perspective, it is more than that as myriad carriers and services levels and other things.”

Brasca said it is possible that in North America there could be an evolution in that the pace of omni-channel adoption is growing, with shippers looking to potentially bypass standard existing providers in exchange for better flexibility and timeliness.

In North America, many retailers have a dot com division, which might be supported by one or two distribution centers handling e-fulfillment. In those cases, Brasca said it makes sense to turn to a standard provider for last-mile delivery, as the origin points are static.

But with distribution points anywhere in the network, including DCs, direct from suppliers, or stores, Brasca said retailers are continuing to figure out they need to be closer to customers. And in order to do so they need to be closer to their existing infrastructure to allow a greater degree of flexibility for where they ship from and fulfillment, he explained.

“When you are closer to the consumer, there is less of a requirement to go through the static or rigid networks a FedEx or UPS might have, and there is a greater ability to take advantage of these existing local city logistics functions like couriers, which have been around forever and typically relegated to specific industries,” he said. “With e-commerce, there is the ability for couriers to expand their horizons based on flexibility in their network and what makes the most sense for their customer and for the retailer from a profitability standpoint.”

So, where does something like using Uber for last-mile deliveries fit into all of this?

It is still very early in the game in that regard in terms of retailers using it in that way, noted Jean-Francois Gagne, chief product officer for JDA.

“It depends on where s retailer is regarding its sophistication on the omni-channel curve,” he said. “As for where it might go, there are reasonable alternatives, and it paints an attractive picture when you think about responsiveness and time to customer. The theme is about getting goods to customers with the promise of delivering it as fast as possible. There has not yet been enough emphasis yet on the profitability of doing that, but it is inevitable that is going to happen, as core fundamental financial metrics will take hold in the marketplace.”

In regards to Uber and its potential impact on last-mile logistics, Brasca said one thing it has done is lower the barrier to entry for new driver and vehicles to enter the market and leveraging an infrastructure that was already deployed through mobile phones and GPS systems.

At the same time, it could expand available capacity and lower prices when demand is low and increase rates when demand rises while establishing a market dynamic with lower annual operating costs, too.

“All across the board, you see people using infrastructure now in place while trying to lower barrier to entry and adding capacity and help to solve or lower the costs of the last mile,” said Gagne. “There are some forces now at play in the market and some technology now available, and it is a matter of time before it becomes possible. It is a reality now that [shippers] need to be thinking about, as well as plan how they can leverage it.”

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