Last-Mile Delivery: Why Managing the End-Customer Experience is So Critical

Local delivery is among the hottest trends in the logistics field today, especially among retailers, both online and brick-and-mortar. But why? It’s not a new business practice. In fact, back in the early 1970s, my dad and uncles provided free grocery delivery to customers who shopped at our family bodega in Brooklyn, which my cousins and I delivered using a customized bicycle (a large square metal box with three wheels and a seat attached). And local delivery is certainly not new to furniture and appliance retailers that have been delivering goods to homes for decades, or to business-to-business (B2B) retailers and distributors that deliver office supplies, repair parts, and other items to local companies every day.

The reason local delivery is “hot” right now is because it’s no longer just a back-end process that happens after a sale is made — it’s truly becoming a competitive differentiator that, if done well and correctly, drives sales and enhances customer loyalty.

Nowhere is this trend more evident than in omnichannel fulfillment, where retailers are providing customers with a wide range of delivery options — including ship-from-store and same-day delivery — to win the sale, whether it happens online or at a store. Over the past couple of years, for example, we’ve seen Amazon, Google (Google Shopping Express), eBay (eBay Now), Walmart (Walmart To Go), and Nordstrom launch same-day delivery services, and last December the Wall Street Journal reported that Home Depot plans to invest at least $300 million on supply chain, technology and online improvements this year to enable same-day shipping and delivery.

Simply put, companies that can leverage local delivery to drive top-line growth — and do so profitably — will be the winners moving forward.

But local delivery is very different from other transportation operations, and companies that dive into it without understanding the unique attributes and challenges associated with local delivery are destined to fail.

For example, there are more than 4,000 local carriers (couriers) in North America, and very few of them operate nationally or even regionally, which means companies have to work with a patchwork of couriers in every market they serve. And most of these couriers use proprietary software systems to manage their operations — if they use any software at all! And in some cases, service providers subcontract deliveries to other agents in the market, which adds another layer of complexity.

Simply put, the local delivery market is very fragmented and much lower on the IT maturity curve than other segments of the transportation industry. As a result, many companies have poor visibility and control of their local delivery operations, which impacts cost and service levels.

But the biggest issue and concern, and what differentiates local delivery from other transportation operations, is measuring and controlling quality — that is, the end-customer experience.

The local courier, and especially the driver and other personnel assisting with the delivery, represent your brand to the end customer. If a courier is two hours late making a delivery, or if the driver is wearing a t-shirt with offensive wording on it or drags mud across your recently-cleaned carpet, or if the driver and his helper break or damage something in your house, it’s the brand owner (the retailer or distributor) that the end customer ultimately holds accountable, not the courier.

So, if the buck stops with the retailer or distributor, how do they manage and control local delivery quality and the end-customer experience?

This is an area that traditional software solutions do not address very well. Most transportation management systems, for example, are designed for upstream transportation processes, such as inbound deliveries to manufacturing plants or outbound deliveries to distribution centers and stores. And TMS applications that are used in local delivery operations primarily focus on load optimization and truck routing and scheduling, which are very important capabilities if you manage your own trucks and drivers, but they provide limited or no visibility to quality metrics, especially if third-party couriers and drivers are involved.

Therefore, taking all of these factors into consideration, I believe there are several important attributes a local delivery solution should have to best address the unique challenges involved, including:

• Network-based platform. One of the benefits of network-based solutions — aka software-as-a-service or cloud — is that in addition to providing users with software functionality, they also come with a pre-integrated network of trading partners, in this case a network of local couriers. The ability to make a single connection to a network-based solution provider and gain access to thousands of couriers is a valuable benefit, especially because this segment of the market is so fragmented.

• Provides “Customer Relationship Management” capabilities. As the saying goes, if you don’t measure it, you can’t manage it. So in order to effectively manage the end-customer experience, users need visibility to quality metrics related to both the couriers they use and their drivers. This includes not only service metrics, such as having real-time visibility to deliveries and whether they were scheduled and delivered on time, but also the ability to capture and manage customer feedback and complaints, including damage claims.

• Easy-to-use courier tools. Ideally, couriers should take the lead role in managing delivery quality and the end-customer experience. In order to do so effectively, they need to streamline the way they capture and communicate information with their shipper clients. Therefore, the solution should provide couriers with easy-to-learn, easy-to-use tools to help them manage the delivery process.

I recently spoke with Cole Prenger, Director of Operations at I.O. Metro to get his perspective on this topic. I.O. Metro is a specialty home furnishings retailer with 18 stores in eight states, with plans to expand to 16 states in three years. I.O. Metro is using Grand Junction’s network-based solution to manage its local delivery operations (disclosure: Grand Junction is one of my clients and a Talking Logistics sponsor). I.O Metro averages about 900 local deliveries per month and projects it will do about 10,000 local deliveries in 2014.

Originally, I.O. Metro would send full truckloads of items from its central distribution center in Arkansas to each of its stores for local delivery fulfillment. “We relied on store managers and teams to process all merchandise through their back rooms and schedule customer deliveries with local couriers in the area,” Prenger said. “Stores would spend up to 72 hours per week processing ‘truck day’ which took away from their sales activity. So, we realized we needed to shift delivery operations to local couriers that could warehouse the goods and manage the end-to-end delivery process with our customers.”

The company selected 11 final-mile delivery agents that provide white glove, two-person delivery service within a 60-mile radius of each store (some agents serve more than one store). The next challenge was visibility. “We needed a way to track the merchandise to the end customer because once we shipped it out of our central distribution center we instantly lost visibility to it,” Prenger explained.

I.O. Metro’s initial approach was to develop their own tracking system using Google Docs, but it ultimately didn’t work. The company looked at a variety of TMS solutions, “but a lot of them are set up for companies that have their own truck fleet and need to figure out how to get from Point A to Point B, but that’s not what we were looking for,” said Prenger. “Luckily, we then learned about Grand Junction’s solution. We were already operating with this new delivery model and we needed the ability to see our local delivery inventory as soon as possible and Grand Junction helped us out in a matter of weeks.”

I asked Cole about how they manage delivery quality and the end-customer experience:

The Grand Junction software gives us a whole set of reports and customizable metrics for us to manage delivery quality. Our customer service team is able to log in and see the status of delivery metrics. For example, dwell time: Is a customer order sitting at a delivery agent’s warehouse for more than 48 hours without being scheduled for delivery? We can quickly pull these reports and take action, which is what the Grand Junction system does best for us. It is a centralized platform between our customer service team and our final-mile carriers to communicate. It alleviates so many unnecessary calls and back-and-forth emails.”

The Grand Junction solution also has a case-logging tool where couriers can enter customer feedback and complaints, as well as initiate damage claims. “Once a case is created, an email is auto-generated and instantly sent to one of our customer service representatives to take action if necessary,” said Prenger. “And you can upload photos and it’s all accessible through the case-logging tool. In essence, this is a CRM module for us.”

Finally, Cole agreed with me that local delivery agents represent their brand to customers, which is why managing delivery quality and the end-customer experience is so critical. “Yes, it’s something you have to feel out pretty well before you decide to work with a courier, “ he said. “A lot of times it’s that service portion that ends up biting us, which is why we’ve moved away from a couple of couriers. Everything [about the customer experience] has to be as seamless as possible.”

And my favorite quote, which I believe says it all:

Our sales associates work so hard to make that sale, but everything could be thrown off by that last impression, which is the delivery agent.”

Photo credit: Jesus V, Flikr