Perfecting the Last-Mile of Grocery Supply Chain With Data-Driven Strategies

Ayesha Saini

By Ayesha Saini

On August 10, 2020

Perfecting the last-mile delivery continues to push the boundaries of efficiency for grocery retailers looking to satisfy customers’ increasing desire for speed.

With e-commerce demand rapidly evolving, the default expectation from consumers is that they ‘need it now.’ Buyers are looking for faster, cheaper last mile deliveries with greater control over their experience.

In fact, up to 25 percent of consumers are willing to pay more for same-day delivery.

At the same time, it is precisely this “last-mile” that has many companies falling behind. Grocery retailers feel the pressure to reduce costs of the last mile, find real-time insights, and thwart competitive threats of companies like Amazon Prime.

Order fulfillment becomes a strategic importance for grocery retailers.

According to McKinsey, businesses must incorporate a strategic view of their data and technology initiatives to improve last-mile logistics and lower delivery costs.

What is Last Mile Delivery?

The “last-mile” of delivery is the final destination of the product’s journey – the point where the order reaches the consumer’s door.

Winning the last-mile experience is a critical component of the retailer’s value chain to see an enhanced loyal consumer base with a higher spend.

Besides, the relevance of last mile delivery will increase. By 2030, about 60 percent of the world’s population will be living in cities. The World Economic Forum predicts the demand for urban areas in these cities will soar by an unprecedented 78 percent through 2030.

But challenges abound: Navigating traffic, coupled with fragmented demand cause inefficiencies in the final leg of shipment, which generally involves several stops with low drop sizes.

E-commerce has skyrocketed during the pandemic, especially in the last 90 days. Combined with this is the promise of end-to-end services, and same-day or same-hour deliveries, creating a significant pressure on grocers to shoulder costs — and rewarding those that have scale.

Why Do Most Online Grocery Stores Fail?

The last-mile delivery has become a key expectation in food and grocery as consumers want faster and more frequent deliveries.

And grocery chains are struggling with it. For the same reason, Walmart recently announced its Express Delivery. This new service delivers grocery and food items to the customer’s front door in less than two hours, rivaling Amazon’s Prime Now.

Whether it be a last-minute ingredient or medicine when a fever hits, for buying customers, time-to-delivery matters. If consumers are unable to get a speedy home delivery service, they are more likely to switch retailers.

 

last mile delivery grocery
Source: McKinsey

  

The biggest customer dissatisfaction with brands revolves around delivery frustration.

CB Insights, in one of their reports reveals that consumers want online shopping to be more personal, more immersive, and more automated. Grocery retailers must continue to lean on new data and tech options to give consumers the experiences they expect.

The last-mile problem is the most significant cost driver in supply chain management.

According to Business Insider, last-mile delivery costs comprise 53 percent of overall shipping costs. Competitive grocery retailers find themselves subsidizing deliveries to gain market share – taking a cut on overall margins.

Another problem: Keeping stock levels in check.

As consumers stockpile groceries, shelf-stable foods such as canned items, flour, and pasta are hard to keep in stock. Grocery retailers are challenged around cost-per-drop, route optimization, and meeting fulfillment timelines to keep their supply chains efficiently running.

So how do online grocers manage their costs and improve their margins? Or find the operational flexibility they need to remain profitable? How can they tap their data for advanced analytics and create a better operational advantage?

Data-Driven Strategies To Perfect the Last-Mile Grocery Experience

Grocery chains are rethinking about having detailed data on everything from product availability and pricing to customer needs.

Smart data analytics help ease their last-mile delivery woes by uncovering delivery patterns and improving operational efficiencies – especially as they move digital fulfillment from their distribution centers to their local stores.

Leading grocery stores, along with Target and Walmart, have cut costs by 40 percent by fulfilling two-thirds of its digital orders from brick and mortar stores. Pick-ups occur in a separate, dedicated area of the store. Along with it, they have expanded their pick-up services, creating more value from their existing retail assets.

With the right data, companies can quickly prepare for additional demands or emerging spikes – based on city, channel, or even down to specific neighborhoods.

A food distributor focused on institutional deliveries pre-COVID – such as hotels, colleges, and schools – can quickly pivot to seek new partners. Making new connections in high-demand sectors is easy if they have the directional data to do so.

Other companies with older systems may be stymied due to a lack of functionality or governance. They may have limited reporting and forecasting abilities and may be unable to fully integrate with other key technologies. This in essence creates a silo of data and hampers growth and operational potential.

More consequently, companies with the right data foundation do not spend an inordinate amount of time focusing on data fixes. Instead, they focus on providing good customer experience or improving fulfillment.

Benefits of an Integrated Data Platform 

Data is generated in all parts of the last-mile delivery process. The best starting point is to use the insights of existing data to refine last-mile processes.

Gain better last-mile transparency

Analytics provide insights into what is and is not going right operationally. It helps steers focus on customer needs after they hit the “Place Order” button.

The customer is able to find accurate and transparent information around deliveries, including the visibility of package location.

Prevent out-of-stocks and accelerate time-to-market

Up-to-date data across suppliers, departments, and channels ensure the right groceries and products are stored at the right levels in the store locations with the highest demand.

Consequently, this arms them to deliver a tailored, speedy, and automated experience and balance consumer demand with inventory on hand.

Grocery stores (and any food delivery for that matter) can hit delivery windows during peak demand. They can lower total costs and manage route optimization through real-time alerts and ratings.

Distribution that serves well in the e-commerce age

Visibility around warehousing and logistics data helps tie insights from dynamic buying patterns of consumers – and making decisions.

Micro fulfillment centers or subletting distribution space closer to consumers maintains quality and freshness (or help prevent spoilage). This ensures the integrity of products and more customer satisfaction.

Improve customer loyalty

Capgemini states, 74 percent of satisfied consumers intend to increase purchase levels by 12 percent with their preferred retailer. By linking product, supplier, and customer data in an integrated platform, grocers can find the insights they need to make better decisions and take faster actions that drive customer loyalty.

Winning the last mile of grocery delivery will not only find cost-savings but also see efficient, streamlined operations moving forward.

 

About The Author – Ayesha Saini

Ayesha Saini is a content strategist for Riversand.

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