Brick-and-Mortar Retail Needs Last-Mile Logistics Solutions Now More Than Ever

January 11, 2019


5 minutes

In the e-commerce era, tech-enabled trucking is essential for retailers hoping to master last-mile logistics.

Brick-and-mortar retail is dead. E-commerce will take over. So goes the narrative that Brick-and-mortar (B&M) sellers have been listening to, fearing, and fighting against for the past few years. Of course, these predictions did not, and will not hold true — B&M isn’t dying. For this, we can blame the assumption that physical retail wouldn’t or couldn’t adapt to compete with its digital counterpart.

Yes, online retailers figured out how to deliver great customer experiences that drew customers away. But (some) physical retailers responded — with digital/mobile integration, in-store tech like wall-mounted touch-screens, and proximity marketing — innovations that now have analysts projecting a rosy future for the industry.

The key to B&Ms resurgence has been the integration of e-commerce innovations into the store experience, along with the development of cutting-edge inventory management solutions.

Physical retailers have had to be more careful about how they manage inventory levels. They understand that they must find their inventory equilibriums faster and faster, even as they shift more and more rapidly. And to a large extent, they’ve done that — by overhauling inventory strategies, improving data sources, and implementing predictive analytics into supply chain processes.

But e-commerce retailers aren’t standing pat. Amazon continues to expand and improve its shipping and delivery operations, and Rakuten has made some interesting moves in the space as well.

As the online shopping experience continues to evolve, it’s become clear that B&M’s need “[near] perfect inventory management” to compete. Companies like Gap know it, and so did Toys R Us before they were forced to shut their doors for good.

This extreme fixation on inventory management has caused big box retailers to search harder than ever for efficiencies along each step of the supply chain. As a result, they are turning to trucking companies that can provide rapid and cost-effective last-mile logistics solutions. These solutions are being unearthed in “smart trucking” technologies — smart routing, video-based safety, and contextually aware real-time navigation systems.

For an industry that has traditionally lagged behind when it comes to new technologies, the opportunity is there, and it’s a big one. B&M retailers are looking for partners capable of giving them the data visibility they need to optimize their inventory management strategies for speed, flexibility, and cost-efficiency. And the trucking companies that can provide this transparency will position themselves for long-term, industry-wide security.

Shipping-Last Mile Logistics

E-Commerce Puts Pressure on Last-Mile Logistics

Retailers can’t ignore e-commerce. Online sales currently represent about 10% of all U.S. retail sales, a number that grew by 16% in 2017. Consumers have come to expect services like in-store pickup for online orders, free returns across all channels, and well-stocked inventories.

One major player, Target, is spending $7 billion to adjust to market projections. Over a quarter of its 1,800 stores now allow online order fulfillment for customers, and the storerooms act like hyperlocal distribution centers, allowing near-instant shipping access.

But most retailers will find it difficult to make similar overhauls, and instead will rely on trucking companies for agile logistics solutions in supply chain management. Just as the end-customers expect transparency, retailers are increasingly asking shippers for greater visibility and stock-tracking, along with enhanced flexibility for dynamic routing.

The pressure is on to streamline last-mile shipping, which already represents some 28% of total shipping costs. Last-mile logistics are especially expensive and risky in urban areas. Meanwhile, pricey driver shortages mean retailers are eager for cost-effective contracts. The race is on for shippers to find efficient solutions, without sacrificing consistency and compliance, as they face a host of significant challenges.

Rapid and Transparent Delivery

E-commerce giants like Amazon have raised consumer expectations for fast, trackable delivery. For B&M retailers hoping to compete, the stakes are high: an IHL Group study suggests that almost $1 trillion goes missing in the global retail space because of out-of-stock situations. Those 32% of consumers who encounter an empty shelf are likely to go to another retailer or shop online.

As retailers compete, they require rapid order fulfillment to avoid those lost customers, and that means knowing when stock will arrive — or never running out of stock in the first place. Just as customers expect to be able to ‘follow’ their packages, retailers need to be able to maintain inventory and track deliveries. No longer is it enough for suppliers to check in once a week — now daily, even hourly updates are essential to manage last-mile logistics.

As a result, shippers work to unite their moving parts — distribution centers, drivers, trucks, and delivery — and prevent communication delays or gaps. Failures in delivery communication can wreak havoc in any industry: When KFC changed carriers in the UK, two-thirds of the restaurant’s national locations had a menu shortage, which in some cases persisted for several weeks.

Flexible, Efficient Scheduling

With few corners left to cut, optimized scheduling is a key way for drivers to reduce costs and stay competitive. As shipping demands grow, trucking companies may find themselves busier than ever and expected to field more requests. At the same time, driver supply is suffering due to low unemployment, and companies have to do more with less.

In this environment, trucking companies can’t afford to be wasteful. Nearly 20% of trucking miles already include empty trailers, which means lost revenue. Loading dock wait times cost truckers over $1 billion annually. Further disruptions, like truck breakdowns, can halt the day’s revenue and affect customer satisfaction for the retailer. At the same time, retailers need trucking companies to be able to handle ad hoc requests and adjust their planned routes for urgent situations.

Shipping-Last Mile Logistics-Map

The Compliance Question

Updated industry standards for truckers from the Department of Transportation (DOT) mean that shipping companies are currently reassessing and adjusting their practices. Currently, compliance rules are quickly moving carrier logs from paper and older on-board devices, to the registered electronic logging devices (ELDs) required by December 2019.

While compliance is important for the driver and public safety, increased regulation can seem like a confusing burden for companies already pressed for time. However, the changes may actually present an opportunity for companies to save money, especially if the data from ELDs is used to improve efficiency. With ELDs alone, a DOT analysis suggested major savings in paperwork costs and a 15% decrease in downtime. Non-compliance, meanwhile, results in about $27 million in fines across the industry.

Technological Solutions

More data points mean more instant and complete insights. Sensors and Internet of Things (IoT) devices can help unite supply chain management, providing a common operational picture for retailers and trucking companies. For instance, RFID allows for more frequent inventory scans and a clearer sense of needed quantities. Geo-enabled alerts help companies manage deliveries, account for missed deadlines, and share information in real-time.

Platforms that integrate all this data help trucking companies and retailers connect the dots for last-mile logistics solutions. With instant visibility the process can be more streamlined, allowing for efficient scheduling and on-demand route changes. Drivers can better understand if an item needs to get to a store as quickly as possible, or if a slower, cost-saving route will work.

As companies gather data through technological tools, they also learn about historical trends and operational impact, and can use machine learning for surprising insights. The resulting analytics help improve efficiency — and customer satisfaction — for the long-term.

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