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As a result, some retailers are struggling to satisfy both markets through all delivery channels. And intermediaries such as Shipt and Instacart have begun to emerge.
Often the closest that customers come to interacting face-to-face with brands that primarily sell through online platforms is through other online channels, such as social media. Final delivery becomes one of the last points in the supply chain that is human-driven. That’s where customers encounter a service that is provided by an actual person arriving at the door and delivering an order. And even that interaction may be changing, with the introduction of drone and autonomous delivery.
So is traditional supply chain management obsolete? Under the brick-and-mortar operating model, supply chain was viewed as a necessary evil — a cost-based activity that, while necessary to retaining inventory on the shelves, did not impact the customer experience. Now, in the online world, end-to-end tracking and tracing, 100-percent on-time delivery, and customizable delivery options are becoming table stakes for retailers and B2B sellers alike.
If we consider final delivery as an opportunity to enhance the customer experience, then it becomes a potential profit center. This shift in mindset allows supply chains to create and execute operating models that can be better tailored to customers’ individual needs.
The Amazon Prime subscription model, for example, generates an additional revenue stream that offsets some of the cost associated with two-day delivery. Amazon.com also allows customers to opt for later delivery or consolidation in exchange for discounts on products.
Amazon is utilizing Flex, its Uber-type model, to enable the delivery of groceries from Whole Foods and other fast-moving products. Even some less-digitally savvy B2B players have gone so far as to replicate a 3PL model internally, whereby logistics management is centralized as a service, and the margins traditionally captured by 3PLs are kept and tracked in-house through a profit center. This organizational shift can serve to align logistics with sales and marketing rather than manufacturing and operations, as the focus shifts to profit instead of cost and revenue.
When you manage your supply chain as a profit center, you shift from cost-based key performance indicators (KPIs) such as cost of delivery, on-time delivery, equipment utilization, days of supply and inventory velocity to more profit-focused metrics such as customer profitability, perfect orders, customer satisfaction and customer loyalty. Either way, the choice you make should be driven by your organization’s overarching strategy, and not simply a desire to keep up with the latest trends.
Delighting the Customer
As last-mile delivery becomes an increasingly important part of the brand promise, how can it be leveraged to delight the customer?
The question might best be directed towards creatives in your branding department. For the sake of argument, however, let’s briefly work through a thought experiment.
We can envision a future whereby customers are able to select between having their goods delivered to their residence, office, or wherever they might be located at a given moment. This creates a series of additional questions:
How do you transform delivery drivers into brand ambassadors? Typically, cost and dependability have been among the major factors when hiring drivers. As their profile in the customer experience expands, drivers’ role in representing the brand becomes a larger consideration.
If you utilize 3PLs, how do you ensure that customer interactions meet or exceed customer expectations? Conventional wisdom says that if supply chain is not your core competency, then you should outsource its execution. But how do you maintain control over last-mile delivery interactions while satisfying the need to utilize cost-effective partners?
Can you reap the operational efficiencies of “Uberization” without sacrificing consistency in brand messaging? We’ve all had a wide range of experiences with Uber and Lyft drivers. We often sacrifice a similar degree of quality control when it comes to delivery, but is this a risk worth taking for a high-value brand?
These questions aren’t easily answered, but we believe they are the ones that supply chain leaders, particularly in the supply-chain space, should be thinking about.
An Underserved Market
Of the large traditional players, UPS has been the most progressive in viewing its drivers as an extension of the “Brown” brand. But as the opportunity to interact with customers face-to-face continues to shrink, is it enough to simply trust your brand identity to someone else?
Top-of-the-line service in last-mile delivery is typically associated with “white-glove” service, in which drivers are highly trained and vetted. White-glove is typically reserved for high value or dangerous goods. Would you feel more comfortable outsourcing delivery of your brand experience if you could be guaranteed certain controls above and beyond the traditional shipper and carrier relationship?
“Beige-glove” service might be the answer. It places a high value on the brand associated with the good being delivered, instead of on the value or danger associated with the good itself. This enhanced delivery experience could manifest itself in many ways, but let’s walk through what a specific example could look like.
Imagine you are a tech-savvy upcoming graduate. As a reward to yourself, you purchase the latest tech gadget from an established online retailer. Using information posted to your public social media accounts, the online retailer can surmise that this is a graduation-related splurge. When your gadget arrives, the delivery person greets you by name and offers you congratulations. He hands you a package accompanied by a personalized thank-you note from the retailer. Opening the box, you are treated to a personalized, graduation-themed experience that includes packaging materials in your school’s colors. Finally, if so desired, the deliverer is available to stick around and walk you through setup and a quick product tutorial, eliminating the need for you to wade through a complex instruction manual.
The graduation gift is an advanced example, but in the near term beige-glove services could entail things like guaranteed delivery by drivers who consistently maintain a high customer-satisfaction (CSAT) score, addressing the customer by name, helping with assembly and installation, providing instructional demos, or other services tailored to the wants and needs of the target demographic of a brand.
While some of the above points might read like speculative fiction, we see an emerging trend whereby high-value brands make significant investments to take back control of last-mile delivery, and other crucial aspects of the customer experience.
With a strategic shift of this magnitude, companies of all sizes and maturities should consider operational and organizational changes that will be necessary to support this new model. Communication, governance, KPIs and technology are all likely to be affected by this change, and must be carefully evaluated to position the seller for success.
Jeff Hughes and Charles Schreiner are digital operations consultants — managing and senior, respectively — for Capgemini Consulting.
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