June 23, 2020
In business, every issue is a customer service issue. If your goods don’t arrive when promised, you will lose customers. If shipping costs too much, you will lose customers. Customers want predictability and good prices, and one way to do that is by shortening last mile delivery. Achieving that goal, though, is complicated, with multiple interrelated factors including cost, storage availability, storage and customer location, and service level agreements. While logistics and shipping are a large line item for businesses, the last mile is often the hardest to tackle. It involves the tricky dance of delivering in denser areas while fighting traffic and making other stops. That’s one reason that last mile delivery comprises 53% of the total shipping cost.
Fortunately, there are proven logistics strategies that help shortening the last mile, and in doing so continue serving customers and providing that great service they deserve. Here are some approaches to give you a competitive advantage.
Forward stocking locations
Forward stocking locations (FSL), also known as field stocking locations, involves getting the goods closer to the customers, by moving the goods to nearby warehouses. These warehouses may be smaller than traditional warehouses or distribution centers, but they also hold fewer of your items, an approach notably successful for e-commerce companies like Amazon. With this decentralized approach, your company would stock it with a smaller selection of items per FSL, curating or customizing those selections based on what customers in that area tend to buy.
Some shippers use a model of storing vast amounts of goods in a handful of regional warehouses. But these may still be far from customers. Every time the customer places an order, it’s a longer drive to their location, which takes more time and costs more money. Hiccups along the way are amplified with increased distances.
Using a distributed warehouse network is a good solution and it can save time and money, while also expanding your service into new markets. Goods located closer to the customer minimizes the need to use overnight shipping services, decreases stress levels and costs. It also increases predictability, as there’s less concern whether goods will arrive when the customer wants or needs them. Who wins? The shipper and the customer.
More packages now are going to residential addresses, which is a more expensive delivery service proposition. Crowded urban environments, less dense deliveries and multiple stops all contribute to the higher costs. As ecommerce expands, the major carriers have more competition, with new logistics companies cropping up to deliver goods to the customers. That gives shippers more options to possibly increase cost-effectiveness, like the USPS, which has to deliver to every residential address in the country, not just urban consumers. That service sometimes takes more time than a comparable FedEx, DHL or UPS service, but it’s less expensive. Using the FSL approach, the shipping distance is lower, which can shorten the delivery time as well, making the economical carriers a good option for maintaining a positive customer experience.
Visibility, data and analytics
Maintaining visibility through all aspects of your logistics supply chain means you can better plan the real-time movement of goods to your regional warehouses and FSLs. It means understanding main trends like when your shipments will get to receiving, and when your customers will then receive their packages. That visibility is worth a lot, as it allows you to be more efficient, with lower inventory carrying costs. It allows you to better restock the warehouse, and anticipate your customer needs, even before the customer anticipates them. It also allows you to be more flexible, which is critical during changing market environments like COVID-19.
With analytics, you can understand what inventory should be shifted to each location to best serve those customers, and avoid it sitting on the shelf too long. Data and analytics allows you to see whether you should expand FSLs into new regions as you can appreciate how cost savings work with each model and understand different seasonal logistics options. Or to understand how changing carriers or their services can better help the bottom line while meeting customer needs. In using key performance indicators (KPIs) you can measure the areas of interest to your customers and to your company, making appropriate decisions based on those to give you the competitive advantage.
Shortening the last mile isn’t done alone. It involves warehouses, carriers and other logistics partners. Stord can be that partner, offering end-to-end visibility over your entire network, even with disparate software systems tracking various elements of your supply chain. As a one-stop shop, Stord provides that visibility, plentiful warehousing options, distribution, freight and a last mile network.
Download our one-pager on forward stocking locations to learn more.