The internet and the personal computer have changed behavioral patterns, from how people spend their leisure time to how they shop.
Vigorous growth of e-commerce is a manifestation of the impact technology has had on the global economy. Forrester Research predicts that online sales will reach $523 billion in the next five years. This dramatic shift in how and where people shop is having an increasing effect on the movement of product.The challenges of today’s changing global economy are prompting companies to transform their supply chains to a more information-driven model that provides additional value to the company and to the customer. Peerless Research Group identifies several issues that are facing companies trying to maintain core competency in order management and fulfillment:
- An explosion of order and delivery channels
- The complexity of global supply chains
- The rising expectations of customers and consumers
An explosion of order and delivery channels - More than two thirds of companies use more than one order fulfillment system.
The problem is not necessarily in using multiple systems, but whether those systems are poorly integrated or simply not integrated at all. How these systems communicate can determine if a company’s solution is successful or not. If systems purchased or built in-house do not communicate with current systems, there is the opportunity for waste to occur. This waste can be in man hours – hand-entering information from one system to another, for example – or it can be a more tangible waste, such as lost orders. Maintaining speed and flexibility between systems is no longer a luxury; it is required in order to stay competitive in today’s environment.
The Complexity of Global Supply Chains
As the global footprint for most organizations expands, new suppliers and partners come into the mix with regularity. Access to information concerning where and when products need to be must flow from end-to-end in order to meet demand. Business leaders point to these growing footprints as an ongoing challenge to their supply chain. Globalization is not going to go away, so as new markets continue to open and businesses look for new streams of revenue, an increasing number of relationships must be managed in order to create a smooth supply chain between all partners.
The Rising Expectations of Customers andConsumers
The internet has opened not only companies, but households to a massive global marketplace. Customers have more choices than ever as to where and what they can purchase. Whereas in the past people had a limited number of options for the goods they bought and from whom they bought, product and seller selection has exploded, and this has increased competition. Companies are promising more to customers in order to maintain market share. This means consumers are making choices based on ease of ordering, visibility to their order, and shorter delivery times.
In today’s omni-channel environment, the supply chain has become what The Consumer Goods Forum has called “the consumer-facing front office”. Consumers are demanding visibility to the supply chain, and this requires integrated systems that provide end-to-end coverage accessible to the customer.
The Final Mile Challenge
As companies face the challenge of a 21st Century economy, many are discovering that the obsolete management methods and tools they are using exacerbate the problem of improving delivery performance in this changing environment. A vital part of the supply chain that is most often in need of an overhaul is the final mile – the movement of product to their final destination. Final mile is the most visible portion of the supply chain to the consumer, and in the customer’s mind it is the most important aspect of delivery.
Final mile is also the most inefficient part of the supply chain, and can account for almost 30% of total transportation cost. There are several factors which account for the cost of last mile delivery, and they fall into two categories: fleet and labor.
Fleet costs not only includes vehicle purchases and leases, but also insurance, maintenance, and fuel. Labor costs include drivers, supervisors, and planners. You can look at these expenses in terms of Fixed and Variable cost, with vehicle purchase/lease, preventative maintenance, and labor as fixed, and fuel as variable. An inadequate maintenance plan and poor equipment usage can result in unexpected variable expenditures.
Aside from the expense of final mile delivery, the demands of the customer represent an important component and an ongoing challenge. Meeting time windows and providing a high degree of accuracy, consistency, and visibility are vital. If companies provide these things, customers will be satisfied. If expectations are not met, customers will seek other options.
Software in the Equation
To minimize the cost of final mile delivery and to better meet the demands of consumers, companies have turned to final mile routing software solutions. Routing, scheduling, and dispatching systems help companies manage and control the challenges inherent in last mile:
- Financial – fleet optimization provides companies with the most cost-effective routing solutions. This saves miles, which translates into lower fuel cost, reduced fleet lifecycle expense, and fewer man-hours.
- Regulatory – electronic tracking of Hours of Service and DVIRs allows companies to keep an accurate accounting of driver activity and DOT-required vehicle inspections.
- Customer Satisfaction – combined with mobile technology, final mile software provides customers with up-to-date delivery status information. Routes, optimized with efficiency and time windows in mind, improves delivery accuracy and increases customer satisfaction.
- Planning – territory modeling and route planning based on customer needs, equipment types, customer requirements, and driver capabilities, present companies with multiple solutions for delivery operations. Companies choose the best overall solution, then make small changes based on performance of the plan in a real-time environment.
Need help getting through the final-mile challenge. Contact TMW today for expert consultation. And download our whitepaper, “The New Freight Transportation Puzzle,” now. The free document covers using advanced transportation management systems for omni-channel and last-mile delivery models.
(Brian Larwig is a VP and General Manager for TMW Systems.)