How Far Would You Go For Last-Mile Logistics?

How far is eCommerce pushing companies to compete using last-mile logistics?

A big retail chain might have employees drop off deliveries on their way home from work.

That’s what Walmart announced in early June. Media reports say the company began to pilot an employee home drop-off program to cut cost in last-mile logistics. The pilot program has in-store employees at three locations drop off online orders at customers’ doors.

The world’s largest retailer employs 1.5 million workers in 4,700 stores in the US. Consequently, the company says, it “just makes sense” to turn branches and branch employees into last-mile logistics for eCommerce. More to the point, 90% of the US population lives within ten miles of a Walmart.

Turning Branches into Fulfillment Centers

Walmart’s plan makes sense on paper.

In the first place, last-mile delivery is considered the trickiest and most expensive part of the eCommerce supply chain. Last-mile is a metaphor for the journey a product makes from a distribution center to the customer. Because individualized shipments to distinct and often hard to reach locations are relatively expensive, why not cut the courier whenever you can? Thus, assuming employees live in the same vicinity as the customers, Walmart do just that.

Secondly, Walmart already seems to be turning its branches into eCommerce fulfillment centers. It even started a Pickup Discount program that reduces the cost of an online product if the customer takes delivery at their local Walmart.

The problem with this new pilot is it’s been done before and undone. Forbes says it’s a disaster waiting to happen, quoting industry observers who say Nordstrom stopped a similar program due to accidents and other mishaps. They also see reliance on employees as opposed to logistics specialist as inviting “uneven delivery streams” for scattered successes and failures.

The current and future state of last-mile logistics

Omnichannel sellers currently enjoy limited choices for last-mile logistics. Suppliers either arrange for shipment directly with shippers with established routes, like FedEx, UPS, DHL and the like. Alternatively, when they sell through marketplaces, particularly Amazon, they do not deal with shippers at all but rely on built-in last-mile logistics.

Suppliers arrange directly with shippers, like FedEx, UPS and DHL. Alternatively, particularly through Amazon or 3Pls, they may not deal directly with shippers at all.

Observers see other choices on the horizon. These will likely drive down fulfillment costs at some point in the future. They include autonomous vehicles, drones, and specialized last-mile delivery services optimized for urban or rural order fulfillment.

Regardless of these options, omnichannel sellers must manage logistics as part of their overall supply chain strategy.