Online shopping has changed the world of parcel delivery with a sharp increase in B2C deliveries. UK trends[i] suggest that B2B volumes have been falling, combined with a serious increase in B2C activity. Globally we still see 3% growth in B2B but B2C is growing faster at 6%, and B2C is still only 20-25% of the total market[ii].
The increase in B2C is largely driven by growth in online shopping and is expected to continue with increasing choice, convenience and competitive offerings. With the growth of B2C deliveries, the industry is facing a new set of challenges:
Significant levels of delivery failure due to ‘not at home’ in combination with ‘no permission to leave’ and/or ‘signature required’.
- Inefficient delivery volumes as B2C generally involves one package per stop compared to larger volumes in B2B.
- Congestion in residential areas.
- Lack of delivery density, as routes that used to be concentrated around industrial and commercial areas now have to be expanded to residential neighbourhoods.
Looking at the Australian market, we also see increasing competition in the Courier Express & Parcel (CEP) market with new parties entering the scene. In line with global trends, a main growth area in Australian transport is going to be parcel delivery, driven by online retail purchases. We now see that Toll has decided that the market has become interesting enough for them to participate, and the Fox group has made a similar decision. In acquiring 100% of Startrack Express, Australia Post is working hard to reorganise its parcel delivery service. And there are more players in the area, including TNT, DHL and a large range of smaller CEP providers.
Different ways to tackle the final mile
Parcel companies are investigating and implementing different approaches to increase their hit rate of completing a delivery. Some have a policy of allowing delivery to a neighbour or even just to leave the parcel at the door if no one is at home. Other providers offer a service with second or even third delivery attempts. Alternative collection points are on the rise as well. Where this originally meant collecting at a depot or the nearest post office (not always necessarily that near), we now see concepts where local stores act as a collection and drop off point for parcels. Another new development is parcel locker stations in and around shopping centres. A courier can place the parcel in a locker and the customer will receive a notification with a unique key to get access to the locker.
We also see more and more parcel service providers looking at technology to assist in increasing their efficiency and improving their delivery hit rate. IT systems are playing a crucial part in making the supply chain a more efficient one.
Managing the expectations of customers has become increasingly important. If a consumer experiences a problem during any part of the online shopping experience, from ordering to delivery, this can have a negative impact on both the online retailer as well as the parcel delivery company[iii]. A NetworkResearch reporti shows that in customer service on time delivery scores very highly, followed by reliability and helpful communication.
The good news is that there are now many software tools available to assist parcel operators to become more efficient, to deliver on time with increased reliability and to provide up to date information on order status that can be communicated to the customer.
Technology and the final mile
Vehicle scheduling and route optimisation tools can enable parcel operators to solve their delivery challenges. With efficient planning mileage can be reduced, saving driving time and at the same time increasing customer service.
Reviewing a typical parcel delivery process, we see that vehicles are allocated to zones. These delivery zones are created on a strategic level based on historic and forecasted volumes. With the new generation of software for vehicle scheduling and optimisation reviewing these strategic allocations becomes an easy process. This means reviews can be carried out regularly, so operators can respond to changing volumes and seasonal influences. By reviewing the delivery runs frequently there will be less operational pressure to manage daily deviations, making the whole delivery process more efficient and reliable.
Once a parcel arrives at the last cross dock location and is sent through the sortation system, it will end up in the chute allocated to its delivery zone. Next the goods are scanned onto the vehicle, marking the moment they are ready for delivery. While scanning the parcels onto the vehicle, the courier needs to take notice of the delivery addresses and any special time window requirements, so the parcels can be delivered within the service level agreement. This is not an easy task with up to a hundred or more deliveries per day.
This is where IT solutions can support couriers with efficient planning. By sending the orders through a sequence optimisation engine, an optimised delivery run will be produced. Orders are sequenced in such a way as to minimise driving time, while taking into account not only customer service level agreements such as time windows but also historic and live traffic conditions.
The optimisation process serves two purposes: optimisation by reducing mileage, ensuring highly efficient execution with increased customer service; and the calculation of reliable estimated times of arrival, important information that can be communicated to the receiver and can be used to monitor execution versus planning.
These engines are run on a server or cloud solution, so high performance calculations can be guaranteed. The results are transferred to the driver’s handheld device and can feed into a navigation solution to direct the driver to follow the optimised sequence via the most efficient route.
Improved customer communications
At the same time the results can be used to communicate with the receiver. The calculated ETA can be used to provide a reliable delivery time window by creating a one or two hour band width around the ETA. Research has shown that customers highly appreciate delivery time confirmation and will use it to plan to be at home to receive the delivery. This is a very effective way to increase the hit rate of successful deliveries.
Customer communication can also be made two way to allow customers to respond in case they are not able to receive the package at the proposed time. Options could include leaving an alternative address in the area or an alternative delivery time. This information can be processed automatically by passing it through the optimisation engine again to see if the revised service request can be fulfilled. The parcel can be re-routed based on this feedback, and the driver will receive an updated schedule on his onboard device. Even if a delivery on the same day cannot be achieved, the communication process improves efficiency as the driver will save the time of making an unsuccessful delivery.
A further advantage of the calculated ETA’s is that it is thereby possible to monitor the execution against plan. Every time a delivery is made, the actual delivery time can be compared with the ETA, and the impact of delays can be calculated and combined with actual traffic information to keep a close eye on the ETA’s of orders still to be delivered. By creating time based geofences, customers can be warned when a delivery is due, for example in fifteen minutes, again making sure the customer will be home to receive the delivery.
If communication with the customer fails and a delivery cannot be made due to a not at home situation, there is the option to replan the parcel for redelivery later in the day. With an optimisation engine the order can be efficiently replanned with an earliest delivery time later in the day, increasing the chance of successful delivery on the first run, reducing the number of parcels coming back to the depot and reducing the cost related to additional handling.
The carbon footprint
Evolving vehicle and fuel technologies have helped the parcel industry to reduce the impact of tonne kilometres driven, but the most efficient way to reduce emissions is to not produce them in the first place. Vehicle scheduling and route optimisation software can typically reduce the delivery mileage by 5 to 15%, which directly results in lower fuel consumption and ultimately fewer emissions.
New technological solutions have been developed to provide detailed emission calculations as part of the routing and optimisation solution in order to help the industry to calculate the carbon impact at the trip and the drop level during the planning stage. Information on customer and order level can be visualised and will show the company’s commitment to managing the carbon footprint. The early adopters will be well positioned to remain a step ahead in this very competitive business environment.
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[ii] Focus Future Building a new compelling position for posts, International Post Corporation & The Boston Consulting Group.
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