What the coronavirus shows us about current delivery models

By Kees Jacobs, Vice President, Global Consumer Goods and Retail Sector, Capgemini

In times of disruption, innovation moves from being a tool for growth to a necessity. Now, more than ever, we are seeing the vital role that technology plays in our society – from communication tools in times of social distancing to drones delivering goods to closed-off areas. 

It’s particularly true in tackling the last mile delivery challenge. We know that before Covid-19 appeared, 97% of retailers felt their delivery models were not sustainable. 

In the current climate, as demand for home deliveries has soared, many retailers’ capabilities have been stretched far beyond their bandwidth. The weak links in retail supply chains are now more fragile than ever – and delivery models are being held to account over both their safety and efficiency. 

Looking to the future, retailers must re-think their approach to last mile delivery. Traditional models can only take them so far; they must now become more reliant on digital technologies that reduce error, costs and human input on manual tasks. 

New age, last mile delivery vehicles 

Over the years, drones have been experimented with as a last mile delivery solution by the likes of Amazon and Walmart. However, airspace restrictions and concerns about drones crossing over flightpaths meant the solution has thus far never taken off – until now.  

Covid-19 has spurred the world’s first drone delivery service into existence in Ireland, and it’s likely that more will follow suit in the coming weeks. If these test deliveries are successful, logistically possible on a wider scale and public opinion of their use is positive, we may see restrictions around drone deliveries eased, leading them to become a viable delivery device for remote orders. 

While this may not be the future of delivery on a mass scale, drones do offer an interesting solution to current issues of social distancing and the overwhelming levels of demand.

Autonomous vehicles have also been put back in the spotlight. While most physical testing has paused for the moment, we are seeing instances of autonomous vehicles being used for safer deliveries that reduce human-to-human contact; for example, the Mayo Clinic in Florida is using four driverless shuttles to ferry coronavirus test samples from a drive-in testing site to its processing lab. 

Last year Capgemini research found that just 49% of people would be comfortable with self-driving cars running an errand on their behalf. There’s no doubt that Covid-19 has accelerated the need and opportunity for automation in every industry, and driving is no exception.

If the right investment is made, it is likely that these delivery services will come out permanently stronger and more in demand as a result of the current climate. 

The power of automation 

The call for automation is warming up in response to Covid-19, and the power of this technology can be felt in supply chain operations, which are under huge strain to fulfil the sudden increase in consumer demand. 

Our research found that warehouse and sorting represent one third of supply chain costs, so there is a significant opportunity to make savings through automation. 

“The current climate has revealed the weaknesses in delivery models and many retailers have been left with nowhere to hide; to recover, they simply must innovate and digitise in the future”

Automation reduces fulfilment errors; if items are left out of a manually handled order by mistake, multiple packages have to be sent out to remedy the error, increasing costs and decreasing customer satisfaction. Returns can also be processed using the same automated systems. 

The automated warehouse at Ocado can fulfil a 50-item delivery in five minutes. This would take two hours on average if done by hand. Depending on the type of automation used, our analysis shows that warehouse automation could potentially increase profit margins by 8% through higher throughput and lower fulfilment costs.

In the current situation, retailers that have spent a lot of money on visibility, automation and networks are seeing their investments pay off. That’s because they have full visibility into their supply chain processes and can meet the ebb and flow of demand with more ease.  

Dark stores

Defined as retail outposts with a store-like layout but intended only to fulfil online orders, dark stores can process a high throughput of online purchases thanks to their adjusted design, independent operations and the ability to position them closer to the final product destination. 

Our research found that one in four grocery retailers were already using dark stores for same-day deliveries, making delivery costs 23% cheaper than for conventional retailers.

Fulfilment from a dark store also eliminates disruption and contact with in-store customers, as operations are completely separate from physical stores. As the volume of delivery services grows in the next few years and retailers seek assurances that they could manage another crisis like Covid-19, dark stores will become a much needed solution.

Leveraging the last mile delivery partner ecosystem

In the wake of Covid-19, companies are realising that they need to act quickly to accelerate their last mile delivery services and that they are not the only ones facing this challenge. 

The urgency to partner with the delivery ecosystem has further increased and there is a great opportunity to leverage established delivery ecosystems within the fleet network, which would help organisations ‘plug and play’ last mile capabilities and avoid delayed deliveries. 

We see a few emerging delivery partnership models used by retailers today – Carrefour and Uber Eats partnered to provide home deliveries in France during their nationwide Covid-19 lockdown, and the ride-sharing firm Lyft partnered with Amazon for package and grocery deliveries in the US.

Looking to the future

Last mile delivery has always been an integral part of the customer experience and it is now under more pressure than ever. The current climate has revealed the weaknesses in delivery models and many retailers have been left with nowhere to hide; to recover, they simply must innovate and digitise in the future. 

There’s much talk about the evolution of retail but the reality is that most of this will take place behind the scenes, not on the shopfloor.