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Last Mile Delivery in E-Commerce

What is a ‘Last Mile’? It is the process which starts at the moment when a parcel is dispatched from the final distribution ground to the end receiver (which can be either an individual or a collection ground). (Gevaers et al., 2014). The complete supply chain of a company contains several logistics. There are few processes in the distribution logistic which make direct contact with customers to symbolize the quality and boost the consumption experience of the customers. Despite these facts, many companies under-estimate it and tend to delay or completely ignore to contact customers to know their remarks. The abstract of the discussion is, therefore; “Last mile logistics is the last part of a B2C delivery process. It takes place within a predefined delivery area (e.g. urban area); including the upstream logistics to the last transit point until the destination point of the parcel. It involves a series of activities and processes, of critical value to all the involved stakeholders (e.g. Customer, Industry and Institution) within the delivery area” (Wohlrab et al., 2012)

The last step in the delivery service is Last mile logistics that includes many activities and processes, which are required to perform in order to complete the delivery from last distribution ground to receiving ground of a supply chain. (Lindner, 2011). Hereby, the human resources are the key factor for the last mile in a supply chain, the courier is delivered by a person to the door of the customer, this is the only contact point where a customer is going to meet someone during the online shopping experience. A poor delivery encounter can very easily harm the customer perspective about online shopping. To make the last mile logistic successful the transporting company should try to create a balance between costs, profit and the quality of the delivery service. Now a day’s e-commerce is in trend and further growing as the time passes and the last mile is a key performance indicator for it. So, could this inspire the logistic companies to strongly desire to invest in improving their last mile distribution? Let’s analyze the result of a research conducted investigate this reality, let us see the logistics performance in UK during 2004: There were complaints from 30% of the customers about the delivery failure at first time according to the logistics provider’s report, resulting in poor customer remarks and in un-ignorable logistic inefficiencies. (Ding, 2013). During the year 2006, the reports reflected that about 12 percent of home deliveries failed to be delivered, and around 50–60 percent of UK household customers were not at home when the delivery man arrived to deliver the products (during the working time) (Ding, 2013). 50- 60 percent is a wide gap of no one at home to receive the parcels. To resolve this issue of unattended deliveries a motivational and innovative idea appeared in the logistic management which will be discussed in the analysis part later.

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Figure 3:  Cost breakdown of the entire logistic cost (Goh et. al. 2011).

Figure 3 illustrates the cost break down of the logistic cost . The logistics cost in final distribution is much higher than in line haul as graph showed above

Figure 4:  Last mile (intra-city) delivery economics (Goh et. al. 2011).

The Orange line in figure 4  represents the relation between the average cost of each parcel and total amount of all parcels in self-owned logistics, and the blue line represents the same relation with outsourced logistics cost. Both results follow same standard that in one city and in one. In case of Outsourcing Logistic Services, the delivery cost is consistent thought out the activity level (the numbers of parcels delivered per day) but on contrary, in the owned logistic services the costs are very high at the lower level of delivery activities and it reduces up to 2 Yuan’s at maximum activity levels. Therefore, it can be predicted that a logistic company can achieve the low cost only in the case of occupying a large customer base (i.e. a higher number of deliveries per day).

Last Mile Delivery Options

The main role of the last mile delivery is to bridge e-commerce and customers. It has also discussed it as the final key step between on line businesses and online shoppers (Holdorf and Haasis ,2014)

LMD has become a significant factor for both online shoppers and online sellers due to the advanced technology. That motivates the online sellers to adjust and improve their current transport capacity. The delivery of the last mile is an inevitably crucial critical success factor now more than ever because of the increasing demand online buyers.

The traditional delivery services like UPS and FedEx are inefficient in all areas and the online retailers seek alternatives logistics to fulfill their customer’s needs and want to expand their market share (Holdorf and Haasis, 2014). An alternative approach to conduct the business is provided by the fast paced IT driven environment. Therefore, retailers are adapting variety of software applications, which help them to provide easy and more targeted customers access to their products. (Lee and Yang, 2013).

There are two ways a LMD might fall into, which are attended delivery and un attended delivery.(Gevaers et al, 2011). The matter of unattended delivery arises when the online shoppers are not at home when the parcel arrived while the attended delivery means that the parcel was received by the person when it showed up on the door-step of customer..
Now the matter of unattended delivery is need to be dealt in such a way that it balances the costs, customer remarks and customer’s privacy.  There are certain ways to make sure that the products are safe and sounds when they are reached at the door of the customer and there is no one accept them.

  1. Company may ask the permission to let the delivery man enter into home using home access system;
  2. Company may ask permission to drop the order into reception/Locker box;
  3. Send the parcel to the local reception ground to store and delivery it to the customer when he is available.

Home access system:

It is a system in which a telephone is connected remotely to an electronic key pad that can open or close a door (Iwan, Kijewska and Lemje, 2016).The password to home access can be changed after every delivery. When the door is closed after the delivery, keypad will generate and send a new code to confirm that the delivery is successfully made.

Reception boxes:

It is fixed box outside the house of a customer which can controlled either by manual lock or electric lock. It is mainly used for receiving parcels and emails. Modern Reception boxes also have temperature controls so they can receive food deliveries as well.  (Iwan, Kijewska and Lemje,2016).
Delivery boxes:

These boxes Distribution Company or retailer’s property, The Company will correct the boxes which include empty box or return goods box on another collection round (Iwan, Kijewska and Lemje, 2016).

Local agency:

They are local collection grounds acts as an intermediary between final distributor center and customer in case of unattended delivery. This company helps their customer to receive order but also deliver to customer’s home when it is convenient with them. When a parcel reaches at the local agency they notify their customers by mobile phone or email. (Iwan, Kijewska and Lemje, 2016).

All Assignment Experts - Thesis WritingFigure: Classifications of Delivery Option to Home (Frenie and Spark (2014))

Based on the solution of unattended delivery above, the parcels can also be placed in the collection point and then acknowledge the customers by any means available to collect their parcel (Iwan, Kijewska and Lemje, 2016).
According to Interactive Media in Retail Group (IMRG) report 2016, Four options available to the online shoppers which are mentioned below:

  1. In-store click and collect: Buyers book their orders online on a website and collect them from retailer on their own.
  2. In-store reserve and collect: Buyer books the orders and requests the retailers to keep their orders until the payment is cleared. After the clearing of payment buyer collect the order from retailer.
    3. Parcel Store: Buyer pay and check out website and select a convenience store to pick goods from
  3. Lockers: Buyer pay and check out the website and request retailer to send their goods to private lockers or MRT Stations and then customer picks up the parcel using the Pin code or QR code.

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Figure : Click and Collect Options (IMRG Report (2016))

According to Cullinane (2009), customers are required to reduce the delivery time, preferably an hour, but as the distribution company, the wider of the delivery, the lower cost of the delivery. The density from 3 hours reduce to 1.5 hours will lead the cost increase 17-24%, and ignore the delivery window altogether result will lead to saving 27-37%. DTI (2009) make a survey based on 317 online shoppers and the result shows that the 34% of respondents indicate the best delivery time is on 6pm until 8pm. A huge delivery demand generate in this short period, and lead the delivery motorcade move at low capacity for 80% of the day (Xu, Ferrand and Roberts, 2008).

Comparing the Last Mile Delivery Method

From the literature review above, each delivery method have different advantages and disadvantages. Table below compares and explains each delivery methods as below.

Attended delivery Reception/ Delivery box Controlled Access system Locker Bank Collection point
Last mile Delivery company Delivery company Delivery Company Customer Customer
Customer available Yes No No No No
Product types Any Packages, Grocery Packages, Grocery Packages, Grocery Packages
Failed deliveries High Virtually none Virtually none Virtually none Virtually none
Delivery hours Fixed delivery hours Delivery company operating hours Delivery company operating hours Delivery company operating hours CP Opening times
Collection time Not appropriate 24 hours 2 hours 24 hours CP Opening times
Retrieval time for customers None Very short Very short Short-Long Short-Long
Drop off Time Long Short Short Very short Very short
Initial Investment Low High/Medium Medium Medium Low/ Medium
Delivery Cost High Low Low Lowest Lowest
Possible Operational Problems High Failed Deliveries. Poor use of vehicles Large number of boxes required. Collection of boxes Safety concerns Customer has to travel to collect Customer has to travel to collect
Reduction in vehicle activities Some reduction Some reduction Greatest reduction

Greatest reduction

Table: Comparing the Different Method of Last Mile Delivery (Iwan, Kijewska and Lemke (2016)