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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 24-May-2019
Posted by: Daniel ZAPFL
Category: logistics

How to master the last mile more efficiently


The last part of the transport route is the most complex: recipients are not at home, inner cities are increasingly difficult to supply and the consumer expects ever better service. In this blog post, you can read about the screws the logistics experts are turning in order to overcome the last mile more efficiently.

E-Commerce continues to grow strongly. In Austria, this sales channel recorded an increase of more than 11 per cent over 2017 in the previous year. Of course, the logistics sector, especially courier, express and parcel services (CEP), is also feeling the effects of this boom: in 2018, the number of parcels delivered in the B2C sector grew by more than 16 percent to 122.7 million, reports the study "Handel in Zahlen". Tackling this avalanche of parcels is challenging.

These 4 reasons make overcoming the last mile more difficult and expensive

When it comes to transporting goods and merchandise from one warehouse to another, logistics companies are already using very efficient processes today. However, the last stretch of the journey - the so-called last mile - is difficult and fraught with problems. And: the costs for transport between the distribution warehouse and the recipient amount to a good half of the total costs. There are several reasons why it is becoming increasingly difficult to cover the last mile.

1) The number of single households is growing. More and more women are employed. And mobility as a whole is also on the rise. These trends reduce the likelihood of finding someone in the recipient's household during business hours or even in the evening. This reduces the chance of a successful first delivery attempt.

2) Many European cities want to counteract traffic congestion and the environmental pollution caused by driving bans. This mostly affects diesel-powered vehicles, i.e. precisely those means of transport that CEP services like to use. In order not to endanger the basic supply of the inner cities, there are special permits for delivery staff in many places. However, these are only conceived as transitional regulations. At the same time, sustainability is becoming increasingly important as a purchasing criterion. Even if this may be a problem of a lack of self-reflection, online consumers are also annoyed about too much delivery traffic, but also about receiving three different deliveries in one day from three different CEP service providers. In any case, they understand the effective use of resources to be something else.

3) Shipments to private households are small and can hardly be bundled. Containers with standard sizes, as are common in the international freight business, do not exist on the last mile. Standardization is also hardly possible. This makes it extremely difficult to automate processes.

4) Consumer expectations of delivery are high. If this happens too late or unsuccessfully, the online shopping experience is clouded. If the goods do not fit, the recipient wants to be able to return them as easily as possible. If possible, the consumer does not want to pay for shipping and returns.


Innovation Check

In order to alleviate or even solve these problems, the CEP service providers make many efforts and try out different inventions on the market.


1) Increase delivery rates with digital services

Mobile online services such as parcel redirection, storage permits or delivery to a desired branch are already standard with many CEP service providers such as Österreichische Post AG. In order to increase the probability that the recipient can also open the door, the parcel service DPD and Amazon offer a live tracking service. This shows the current position of the van and how many stops it still has to make before it arrives. This enables the recipient to estimate when the doorbell will ring.


2) Deliver parcels without personal delivery

In order to decouple the successful delivery from the personal presence of the recipient, the CEP service providers are partly building up a dense network of collection stations with partners such as food retailers. If desired, CEP service providers can also install reception boxes in residential complexes, which can be easily opened with a notification stored in the mailbox. The mobile parcel letterbox PakSafe uses a sophisticated mechanical solution to guarantee secure delivery: If a customer expects a shipment, he simply hangs PakSafe on his front door. The deliverer places the shipment in the bag and closes it. When the recipient arrives home, he can open PakSafe with a key and remove the shipment. The mobile parcel letterbox is securely attached to the entrance door and cannot be stolen. The Flexibox from Austrian Post AG works in a similar way. Instead of the key, however, RFID chips are used.

With Amazon Key, the recipient can let the deliverer remotely into his house, apartment or at least into the garage. The deliverer places the shipment in the entrance area. The recipient can watch it via the Amazon Cloud Cam. This shows him a current live picture from his home on a website. Amazon wants to establish this solution as a platform so that users can also let cleaning staff, craftsmen or dogsitters safely into the house when they are not present. Amazon Key is currently only available in a few states and cities in the USA. In principle, however, any smart door lock can be used to have parcels delivered to the home and not to the front door. Like Nuki - an invention from Graz.


3) Use cars as parcel boxes

As a rule, a car spends most of its life cycle in parked mode, thus blocking the valuable space in an urban area. This abundance of securely locked, barely used loading space has left logisticians in no peace for several years. Delivery to the trunk is an issue that many CEP service providers and car manufacturers are already dealing with - some solutions are already on the market: Volvo has been offering this service since 2016. Amazon has been delivering to the trunk of customer cars since 2018. VW intends to offer this delivery option together with DHL before the end of 2019. Österreichische Post AG is also testing trunk delivery in the B2B sector: it supplies fitters and craftsmen with the necessary tools and spare parts directly in their company cars. The principle: the customer orders the required parts from his supplier. The customer orders a "trunk delivery" from Swiss Post. On the day of delivery, the courier can use an app to locate the exact position of the vehicle, unlock the boot using a highly secure identification and authorization system and insert the shipment directly into the company vehicle.


4) Robots help or replace human deliverers

In order to complete the last mile more efficiently, logisticians try to use machines. For example, Österreichische Post AG tested autonomous parcel delivery in the city centre of Graz. An e-mobile navigated independently and without a driver to the destination address. The recipient is informed by SMS upon arrival of the autonomous e-vehicle and can automatically remove his parcel from the vehicle's box using an RFID chip. Even more convenient for the recipient, however, is the concept presented by the German automotive supplier Continental at CES 2019: A driverless e-shuttle brings the parcels independently to a housing estate. The vehicle is picked up by robot dogs who then deliver the parcel directly to the apartment door. The advantages of the robot four-legged dogs are that they can climb stairs and operate doorbells. However, even Continental cannot yet say when the system will actually be operational.

Delivery robots on wheels, on the other hand, have already undergone practical tests in Germany: the German parcel delivery company Hermes, for example, started a pilot test with the delivery robots developed by the Estonian startup Starship Technologies in autumn 2016. The biggest advantage of the delivery robots is that they can be used around the clock: For example, if a consumer wants to return the goods he has just received on Sunday at 3.30 a.m., he can order a robot to collect the shipment from him.


5) The fastest way is by air

While delivery robots on wheels or even on four legs move relatively slowly - for example because their paths lead through city centres - autonomous aircraft can use free airspace. The delivery of drones thus seems to solve many problems: Traffic obstructions are avoided and even receivers in places that are difficult to access are easily accessible. Since Amazon CEO Jeff Bezos announced in 2013 that Amazon customers would receive their parcels with delivery drones in four to five years' time, the topic has been circulating in the media. Today we know: Bezos may have miscalculated - but many CEP service providers have also been dealing with drones since then. DHL completed the maiden flight of its Parcelcopter in December 2013. The company is currently testing its drones where other transport routes are lacking: As part of the "Deliver Future" pilot project, the unmanned flying object supplies an island in East Africa's Lake Victoria with medicines. In order to reach remote recipients, Swiss Post used drones as part of the "Heidi" project, which start from a special electric vehicle and climb the last few hundred meters - for example to a higher farm - by air. In regular commercial operations, drones are already delivering: Google's sister company, Wing, launched it in Australia in April 2019. But despite all the enthusiasm for the topic: drones will hardly be of any help in coping with the flood of parcels. Because they lack transport capacity and range. And: the width of the airspace is also limited: If the majority of parcels were delivered via drones, the sky above the cities would be black.


6) Reduce returns rate and avoid unnecessary transports

Fewer returns would already significantly reduce the avalanche of parcels and alleviate the associated problems. Although these transports are a necessary evil, they do not benefit consumers or e-commerce providers. According to a survey by the German industry association Bitkom, every eighth online sale is reversed. Individual retailers, such as Zalando, suffer from a return rate of 50 percent. Online customers send back so many items of clothing or shoes because the size simply doesn't fit. The Austrian shoe retail chain Humanic avoids this problem with its avatar. The customer goes to a branch once and has his foot measured. This data then helps him with every further shoe purchase: if he selects a model in the online shop, the avatar shows him the right size. In the case of children's shoes, the system shows how long the model will probably fit the young wearer. The Upper Austrian startup Twinster has developed a 3D body scanner with which the user can measure himself in just a few seconds. This helps consumers to order the right size online. 3D surveying not only helps to prevent returns, but also benefits the entire textile industry - for example in the design of new fashions. And: There are many other solutions to reduce the return rate in online textile retailing.


Conclusion: How to overcome the last mile more efficiently

Online shopping is becoming more and more popular and this is driving the business of CEP service providers. However, the flood of parcels is causing numerous problems and consumers are increasingly demanding sustainability without wanting to pay for transport or returns. CEP service providers are therefore forced to go innovative ways and test many inventions. Of course, some of these concepts will not get beyond the pilot phase. Others, on the other hand, we will all be using as a matter of course in a few years' time.

Innovation Check

Daniel ZAPFL

Born in Graz, Austria. After positions as project manager & head of innovation of the project management at LEAD Innovation, Daniel Zapfl has been responsible for the success of the innovation projects of our innovation partners since January 2018.

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