Freight Pros: Get Your Share of the Next Trillion
It’s not every day that a company gets valued at $1 trillion. In fact, when Amazon’s total market value surpassed a trillion dollars earlier this week, it was only the second American company ever to do so, joining Apple, which reached the mark over the summer.
Amazon reached its first trillion because of the many profitable businesses it operates. But no matter how much they diversify, their bread-and-butter remains online retail. It’s no surprise that one of the biggest updates from the e-commerce giant post-trillion dollar valuation was the purchase of 20,000 delivery vans to bolster its last-mile delivery services.
Because Amazon’s next trillion will depend on how they master the 24-hour last-mile.
What Is the 24-Hour Last-Mile?
The 24-hour last-mile is the idea that a customer’s order can go from checkout to delivery within one day.
Since Amazon popularized subscription-based free two-day shipping, customer demand for same-day delivery on e-commerce purchases has been steadily rising. A 2016 global survey by consulting firm McKinsey found that a quarter of participants would be willing to pay a premium for same-day or instant delivery on online orders. That number has surely risen in the past two years.
E-commerce companies have tried to tackle same-day delivery in various ways already, but each method has limitations. Many online retailers have tested same-day delivery in urban markets, but they haven’t expanded beyond the big cities. Bricks-and-clicks companies like Target and Wal-Mart offer in-store pickup by effectively turning their physical locations into stocked warehouses, and orders fulfilled in-store are usually ready in a matter of hours. But in most cases, they still require the customer to pick up their purchase from a store location if they want it the same day.
A fully-realized 24-hour last-mile would deliver to the customer’s door no matter where they live and within a day of checkout. No in-store pickup or relocating to a big city required.
Challenges and Changes
Implementing 24-hour last-mile delivery poses some deep challenges. The most obvious one is skyrocketing costs. Labor, fuel, and delivery fleet maintenance costs will all go up under the constant pressure of a 24-hour delivery cycle.
Retailers also need even more robust and sophisticated inventory data than they have today to avoid stock issues. Inventory poses a challenge across the whole supply chain: retailers need to have their ready-for-delivery stock at the right levels to prevent low supply or overstock, while carriers have to be able to handle demand capacity without sending half-empty containers to sea. This is a major challenge for Freight Forwarders and NVOCC’s as well: if the 24-hour last-mile is tackled, inventory can’t be the weak link in the logistics chain. Freight professionals will need to keep up the pace or risk being excluded from reaping the benefits of the new, expedited supply chain.
In fact, with speed and costs being the keys, the whole supply chain needs a review. Demand will force the current supply chain to optimize, and if it can’t meet the demands of the 24-hour last-mile as it is today, it’s a near-certainty that the supply chain will have contract in between the first and last-mile.
Technology Can Close the Gap
The 24-hour last-mile could be the catalyst for technology changes in logistics that we’ve been hearing about for years.
One of the biggest reasons for delays in the current supply chain is documentation. But the need for speed from first- to last-mile could require the universal adoption of blockchain record-keeping solutions which promise to provide the necessary security needed to allow freight to cross borders and change hands quickly.
Demand for same-day last-mile is one of the main factors behind the research and development of robotic and autonomous delivery, including drones, driverless trucks, and even captainless ships. Driverless/pilotless vehicles could work around the clock without forcing overstaffing, while drone delivery could reach anyone anywhere, reducing the costs and inefficiencies that come with rural delivery.
Get Ready for the Next Trillion
Online retailers are likely going to dictate the future of logistics. But we’re often left with the question: where does that leave Freight Forwarders and NVOCC’s?
Logistics professionals have to achieve speed and efficiency alongside e-commerce. As e-commerce dominates the demand for freight services, the logistics industry has to keep up with their requirements or risk becoming obsolete. There’s a clear opportunity here: adopting the right technology solutions that optimize your freight business gives you the best chance at playing a part in the e-commerce-influenced future of logistics.
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By: Fauad on Sept. 7, 2018, 12:18 p.m.