The pandemic has rapidly increased demand for delivery. Deloitte predicted that e-commerce holiday retail sales would grow between 25% and 35% from November 2020 through January, compared with 14.7% in the prior year. Walmart announced three Black Fridays, and many other retailers were pushing e-commerce sales. Last-mile delivery has become the core of a successful season — but only if processes run smoothly.
The best way to ensure success is by measuring your labor-related key performance indicators (KPIs), as they relate to the pain points of your customer. Then build out from there.
Following are ways to use efficiency, accuracy, and wages to guide your KPIs.
Efficiency refers to the total time from when the customer orders to when the item is delivered. Measure a driver’s efficiency by tracking average on-time percentage and time at the location, which includes both warehouse and destination. A delivery is considered “on time” if it arrives on the expected day, quoted at the time the customer orders.
Efficiency starts in the warehouse. Create systems and remove unnecessary steps so that delivery drivers can minimize pickup time. Streamline pickup by choosing a central location, and clearly label the area so it’s easy to find. Be sure that warehouse staff members know the location too, in case a driver is lost and asks staff where to go.
Slot items for pick up. Packages should be at eye level so that drivers can easily grab them. Include a printed “pick list,” typed in a large font, that lists the number of packages and types of items included in the order. That way a driver can quickly double-check that the entire order is in place.
Warehouses should communicate the estimated size and weight of the packages, so drivers can ensure that all items will fit in their vehicle, or determine whether a rental van or truck is needed. Depending on the weight of specific packages, this can add time both in the warehouse and at destination.
There are a number of common pain points that delivery drivers experience at the warehouse and at destination. If the packages aren’t prepared by the time they arrive at the warehouse, this leads to lost time while they wait for fulfillment.
At the destination, drivers need clear instructions to find the address and, if it’s a multifamily unit, the correct unit number, along with access instructions for gated buildings or complexes. For couriers, if the customer is required to sign, be sure there’s a clear time frame in which they can expect to receive the package. Otherwise it wastes a delivery trip.
By keeping track of on-time delivery and time at the location, you can keep your operation more efficient. Always ask yourself: Where are the biggest losses of time?
Did the customer receive a complete delivery order, or are they missing any scanned packages? When it comes to accuracy, the two KPIs to measure are the cancellation amount and comp percentage amount. The type of item you deliver affects the cost and will tally up. Furniture or electronics are of higher value, and more is at stake to deliver them accurately, compared with most groceries or clothing.
The cancellation amount covers how many orders get canceled before, during or after delivery. This is a major concern in the food and beverage space because of the shorter delivery window. On the retail side, an item could be canceled because it didn’t reach the customer in time for a deadline, as in the case of a birthday gift.
Dig into the cause of the cancellation. Was the item back-ordered and the website wasn’t updated correctly? For e-commerce especially, technology needs to clearly communicate with fulfillment to make sure that the items are in stock and the delivery estimate is correct.
Comp percentage amount is another potentially costly KPI. How much money did your company have to pay out to customers because deliveries went wrong? At the end of the day, you don’t want to comp any orders, but your company should strive to be below 3% on a weekly basis.
Each week, evaluate the causes of your comps. For example, if the wrong item was delivered to a customer, check back on the processes in the warehouse to make sure packages are labeled clearly and correctly. If a package was marked as “delivered” but the customer didn’t receive it, is it the same driver who is committing fraud, or is it the same customer trying to work the system?
Delivery driver wages directly impact a company’s bottom line. Two key ways to break down driver wages are per delivery and per hour. Your goal is to give drivers enough shifts that their earnings remain above minimum wage and you’re able to retain them. If delivery drivers don’t feel like they’re making money, they could leave. And with so much saturation in the delivery space, you want to stay competitive with other gig apps in the field.
Per-delivery wages pay drivers a set amount based on mileage and items picked up. Set delivery drivers up for success by organizing orders in the same area of town. For food and beverage, make sure the delivery fee is above $5 or more. While this can be costly for the consumer, it gives the driver more incentive.
Per-hour wages mitigate risks for wage-and-hour claims, a common occurrence in the 1099 space. For independent contractors, you want delivery drivers to make at least minimum wage in that state. In California, the minimum wage is $15 an hour, so if they work two hours, they make $30. With per-delivery wages, if your driver can’t make the hourly rate, they can make a claim to sue.
One key thing to remember with KPIs: they may take time to iron out the kinks. Don’t implement anything new during peak season.
Aaron Hageman is owner and CEO of Delivery Driver Inc.