How retailers can win in the last mile race

Publications

How retailers can win in the last mile race

The 7 Make or Break Elements of Retail Supply Chain

A game changer for the brick-and-mortar retailer

Assessment Process

Report Structure

Growing into New Spaces

Managing Change in Traditional Spaces

Meeting Changing Consumer Demands

Summary of Proposed Structure

A game changer for the brick-and-mortar retailer

Demand for home delivery has grown rapidly, yet providing this service at a profit is difficult for retailers. It is a race to secure market share and a battle for the attention of the consumer. Most challenging is that there is no clear pathway to success.

  • New entrants are raising service levels and customer expectations; subsidizing immediate losses to gain market share
  • Last-mile is a logistical and strategic challenge, with today’s delivery partners having the potential to become tomorrow’s retail competitors
  • Retailers are exploring vastly different strategies to pick, pack and deliver. All of which are consuming cash and time
  • The reward for getting this right is clear — domination in delivery can be the key to owning the customer, their data and share of wallet. The cost of failure is equally clear and is the opposite of the reward
of total UK r etail sales will come f r om online in 2021 1 15% of shoppers a r e unlikely to shop with a brand again after a poor delivery experience 4 83% ma r gin on home delivery for sto r e- picked g r oceries 3 -15% expected CAGR for online g r ocery delivery services till 2024 2 29%

Navigating the last mile battleground

Retailers must find the balance between meeting consumers’ expectations and maintaining profitability. The route taken must factor in questions such as:

3 ■ ■ ■ ■ ■ ■ ■ ■ ■ 1. STR A TEGI C 2. OPER A TIONA L 3. IMPLEMEN T A TIO N Decision level What is the right combination of service offering(s), price and product range? What will attract and retain customers? What should we provide in-house vs outsource to not impact our long-term success or market access? What are the investments that we need to make? What are the likely returns on those investments? How soon do we make them? How do we re-organize or boost fulfillment, infrastructure, systems, processes and people to deliver services effectively and profitably? What range of logistics models is required to best serve my client base (urban and rural) at an acceptable cost? What capabilities and data platforms do I need to communicate with customers or partners and manage my operations? How do I integrate them with my existing infrastructure? How do we organize our processes all the way from pick and pack to route planning; and train our people and partners to deliver a seamless and profitable experience? How do we build and scale at pace through pilots? What do we need to prove before investing further? How do we use early learnings to develop a wider rollout plan which minimizes disruption internally or to our customers?

We have helped others address the same challenges

Integration has supported retailers to lower delivery costs, increase speed and on-time-in-full (OTIF) rates and launch new services to the market.

CHALLENGE

  • Our client (>1500 stores) struggled to achieve reliability and efficiency in its omnichannel operations and was losing online market share
  • We redesigned and implemented a omnichannel operating model; breaking down internal siloes and integrating teams, tools and data around an empowered leader. This involved defining a new range of service offerings, redesigning, and implementing a new fulfilment model

APPROACH

  • We redesigned and implemented a omnichannel operating model; breaking down internal siloes and integrating teams, tools and data around an empowered leader. This involved defining a new range of service offerings, redesigning, and implementing a new fulfilment model

RESULT

  • Through the project, we:
    1. Launched a 1-hour express delivery service
    2. Realized 30% lower delivery costs
    3. OTIF improved from 81% to 89% (next day) and 88% to 93% (same day)
    4. Enabled scale at pace, handling a 300% order growth during COVID

CHALLENGE

  • Our client was shifting to online and was investing in express delivery as a differentiator
  • The existing logistics model was underperforming with a 5-day delivery time on average

APPROACH

  • With customer experience at the core of our design we implemented the ideal journey through a redesign of the inventory and logistics model, setting up a new control tower & enabling tech platform

RESULT

  • As a result of the new op model we:
    1. Reached 99% of customers in 4hours
    2. Ramped up fulfilment to 60k orders/month
    3. Increased productivity of the delivery team by >2.5x reducing costs 50%
    4. Launched a new comms system which reduced failed deliveries by 3%

CHALLENGE

  • Our client was losing customers to competitors who were providing better and cheaper service in a particular market segment

APPROACH

We redesigned the entire method of service delivery for this segment. The model was customizable for different countries and regions. It utilized new forward stocking locations and courier models supported by a tech and management solution

RESULT

  • As part of the project, we:
    1. Proved the concept in an important geography, which achieved a total cost reduction of 20%
    2. Improved delivery success rate and customer satisfaction
    3. Developed a business case for a wider rollout and roadmap for execution

The 3 core components required to win

We support our clients to see the reality of their unique situation, put in place a pragmatic plan to make the necessary adjustments; and implement those plans together.

2 3 1 ■ ■ ■ SER VICE MODEL DESIGN OPERA TIONAL MODEL We must first set the foundation for all decisions, considering all t r ade-offs and const r aints, in order t o drive clarity and consensus STRA TEGY Bringing the str ategy in t o ope r ation requires pace and precision, but also care for the people in v olved, who will be essential t o make implementation a success OPERA TIONALIZE Success comes with launching cont r olled pilots before scaling up, gathering data and refining the app r oach based on the real- world response IMPLEMENT Understand your existing and target cus t omers, design the offerings which are best by cus t ome r , by journey, by category etc. E v aluate the feasibility of different logistic models and potential pa r tners considering the existing SCH capabilities and const r aints . Mac r o-model design and high-l e vel costing for selected logistic model(s) ■ ■ ■ Determine correct balance between cost / se r vice / experience for each offering Agree inven t ory location & fulfilment model dependent on the se r vice Define the p r ocesses t o ensure reliability, efficiency & visibility ■ ■ ■ Outline the functional requirements required for client communication and cont r ol A r chitect solutions that stitch t ogether systems and data t o drive better decision making Decide where you should build or buy t o ensure competitiveness and differentiation TECHNOLOGY PLA TFORM ■ ■ ■ ORGANIZA TION STRUCTURE & MANAGEMENT ■ ■ ■ Pilots in cont r olled envi r onments t o measure results and identify imp r o vements Planning and execution of the wider r oll out t o ensure a smooth t r ansition Close ope r ational suppo r t t o ensure your team can sustain and imp r o ve the changes EXECUTION ROADMAP

Our offer to you

Within six weeks you will have clear focus and direction on how to tackle the last mile challenge.

PROJECT OUTCOMES

THE RIGH T SE R VICE P ACKAGE & EXPERIENCE FOR Y OUR CUS T OMERS SELEC TION OF Y OUR BES T FI T L OGISTICS MODEL MACRO SOL UTION DESIGN RO ADMAP T O EXECUTION Understand the right combination of price, delivery time , p r oduct choice and cus t omer experience that will win and retain cus t omers considering the competitive landscape. E v aluation of logistics models and selection of the one(s) that best fit the company st r ategy; considering timescales and restrictions for implementation. Initial estimate of benefits in cost and se r vice. High le vel design of the complete solution considering technology platform, communication st r ategy with the cus t ome r , R&Rs of each player in the v alue chain and management model . F ollowing this st r ategic phase, we will suppo r t you t o bring them t o life ope r ationally. Outline the implementation plan , defining the timeline , stage gates and any pilot that could be launched t o measure and refine the app r oach.

Top-tier performance in last mile delivers on many fronts

Reviewing last mile logistics is often necessary to realize cost-savings. It should also be an opportunity to increase basket size, increase customer loyalty, create new revenue streams, increase visit frequency and much more.

BASKET SIZE CUSTOMER LOY A L TY NEW REVENUES VISIT FREQUENCY 23% 53% 98% 41% of same-day delivery users of Ama z on said they were planning t o spend more on Ama z on in the next 12 months, compared t o 21% who were not same-day delivery users. 6 of cust omers confirm that shipping impacts b r and loyalty . 4 of satisfied cus t omers would be willing t o pu r chase a paid membership for delivery se r vices. 7 more repeat shopping trips t o retaile r ’ s s t ores and were more likely t o recommend the b r and t o family & friends. 8 Within six months after an omnichannel shopping experience, cus t omers had logged

Integration’s wider expertise in Retail and Supply Chain

Integration has had the pleasure of working with 59% of the world’s most valuable brands[5] in CPG and retail to tackle a broad range of challenges.

Sources

  1. Online grocery shopping ‘here to stay even when normality returns’ (foodnavigator.com) – 2021.
  2. Online Grocery Delivery Services Market | Size, Share, Growth, Trends | Industry Analysis | Forecast 2025 (technavio.com) – 2021.
  3. Why supermarkets are struggling to profit from the online grocery boom | Financial Times (ft.com) – 2021.
  4. Last Mile Delivery: What Shoppers Want and How to #SaveRetail (getconvey.com) – 2021.
  5. The 2020 World’s Most Valuable Brands (forbes.com) – 2021.
  6. 2018 U.S. Internet Sector Outlook (rbcwealthmanagement.com) – 2021.
  7. The Last-Mile Delivery Challenge: Giving retail and consumer product customers a superior delivery experience without impacting profitability (capgemini.com) – 2021.
  8. A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works (hbr.org) – 2021.

TALK TO US

Jamie Gale

Partner

Jamie Gale is a partner at our  London Office. He has spent more than 25 years in the consulting industry and private sector. Jamie is recognized for his extensive experience in digital, developing and executing strategies that enable business transformation. He has supported clients across manufacturing, retail, telecommunications, financial services, food & beverage and transportation [...]

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https://www.linkedin.com/in/jamie-gale-aa28343/

Julian Lempp

Senior Director

Julian Lempp is a senior director at Integration's Munich Office. He has experience both within consulting and industry, having previously worked for a leading German consultancy and as a business development manager within an industrial goods manufacturer. While he has experience across many project types, his specialization lies in supply chain, having undertaken numerous consulting [...]

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https://www.linkedin.com/in/julian-lempp-41a13123/
  • On 24 May 2021