Retail is getting digitized as we speak. The tide of e-commerce and digital management of brick-and-mortar stores has been enormously fast. Supplies that, five years ago, were carried by customers from retail store to home now have to be transported the “last mile” to homes by suppliers.
The optimization of last-mile delivery is gaining more prominence as customers are placing smaller orders and expecting increasingly swift deliveries. The ability to successfully manage that delivery is becoming the ultimate factor in making or breaking a business.
The characteristics of delivery areas are defining the challenges of the last-mile delivery. In big cities with high population densities, slow traffic, limited vehicle size and security concerns complicate delivery. On the other hand, in low population density areas, delivery consolidation is difficult, leading to either low delivery frequency or long routes.
These are among the many reasons why supply chain mangers are experimenting with different last-mile delivery models. In some models, the parcels are sent from the closest retail outlet to customers. In other models, the last mile becomes hundreds of miles, when individual shipments are sent directly from fulfillment centers to the customers.
It is impossible to predict with certainty which model, if any, is going to dominate in the future. But, let me lay out one possible scenario.
The high density urban areas, with more than 2,000 people per square mile, will develop into a model where major third-party logistics providers are going to have fixed scheduled distribution routes. They will have access to leave packages in ground-level pick-up points that are a few minutes walking distance from homes. In such a scenario, each metropolitan area has its own fulfillment center, and many specialized third-party logistics providers, with human drivers, will survive.
In the medium density suburban areas, the last mile starts either at the fulfillment center of the closest metropolitan area, or from the closest brick-and-mortar outlet. The actual carrier might be an autonomous van, or in some limited occasions, even a drone leaving packages on a front porch.
For low density rural areas, it might be necessary to start that last mile from self-pickup lockers several miles away from customers, meaning the customer handles the last mile from locker to home.
Industry is still experimenting and seeking ways to optimize this area. We in the supply chain management program at the John L. Grove College of business are in the game to teach future professionals who will participate in the development of well-functioning and efficient last mile supply chain solutions. We are really curious to see what those solutions will be.
Otso Massala is associate professor and director of Charles H. Diller Jr. Center for Entrepreneurial Leadership and Innovation at the John L. Grove College of Business of Shippensburg University in Shippensburg, Pa. Email him at OAMassala@ship.edu.