8646 descartes study.pdf

2016 Home Delivery Benchmark Study

Perspectives from Leading Retailers on Strategies

& Tactics for Home Delivery Success

Home delivery continues to rapidly evolve as new business models and strategies redefine how retailers are competing and how their financial performance has been impacted. Retailers are challenged to know what strategies in home delivery are working – and those that are not.

They want to know what practices are making a difference and which ones to avoid. There is a lot of hype and opinion in the market, but not a lot of concrete evidence. This benchmark study was born out of in-depth surveying and conversations with Descartes’ home delivery customers using advanced home delivery solutions, many of whom are global leaders in retail.

Who We Surveyed: An Overview & Demographics of Respondents

Participants are from a number of continents including North America, Australia, and Europe. They were mid-size to large retailers and offered a wide range of products including grocery, wine, home furnishings, DIY, appliances, and electronics. The study did not focus on parcel-based home delivery.

Most respondents ran national operations. A few of the respondents were large regional retailers. The retailers with national operations all had diverse geographies to serve, from dense cities to sparse countrysides. In many respects, service challenges were universal and had little to do with global location. In addition, there was a blend of delivery strategies using private and dedicated fleets with dedicated representing the most used delivery method.

The majority of home deliveries were sourced from distribution centers. However, a number of retailers sourced deliveries from stores or a combination of store and distribution center. Drop shipping from the supplier was also cited and is definitely a growing approach as retailers expand their assortment. However, drop shipping also presents its own set of delivery visibility and service quality challenges.

One interesting discovery was that the most productive home delivery operations had as few as one planner per 100 vehicles or routes. These logistics operations had considerable experience using advanced planning and execution technology. What was also interesting was that these same retailers offered either same or next day delivery services.

Business Strategy

Objectives & Harmonizing Delivery across Sales Channels

In general, survey respondents were located in a number of global locations, included larger retailers ($1Bs to $10Bs) from a range of industries. Home delivery planning was centralized via local dispatching and managed as little as 100 vehicles or routes to 1 planner with 5 to 50 stops per route.

The Critical Importance of Customer Choice

Windows, Speed & Metrics

Delivery Performance Metrics

Exploring Additional Opportunities to Generate Revenue

Customizing Delivery Options to Balance Choice & Cost

Delivery Performance Metrics

Metrics are a critical part of any supply chain strategy. However, since home delivery touches consumers, supply chain metrics alone do not paint a complete picture of consumer needs.

Basic delivery success was defined by arriving within the promised window, although many retailers took it further to include completion within the delivery window. While this approach drives performance up, it reduces delivery capacity.

There was a good combination of delivery metrics (e.g., complete and on-time, miles per delivery, and deliveries per route) with some form of consumer-focused metrics such as Net Promoter Score.

Consumer-Focused Metrics

The tightest time window the respondents gave was 2 hours, and 4-hour/half-day delivery windows were the most common. Delivery density was also a great driver of window size as it gets much harder and more expensive to make tighter windows in highly dispersed geographies.

Delivery Speed

The majority of respondents were evenly split between same day and next day as their fastest service. Business model, strategy, and competition as opposed to products sold were cited as the greatest drivers of delivery speed.

Free vs. Paid & Value-Added Services

Another hot topic in home delivery is the discussion of free versus paid delivery. The majority of respondents (85%) charged something for home delivery. For those that did offer free delivery, the all day window was the only option; a number of the respondents (40%) offered free deliveries as part of promotional activity and, in highly competitive situations, there was discretion to make free deliveries.

Dynamic vs. Static Booking

In a dynamic booking approach, the consumer is given unique delivery choices based upon their delivery address, products and services being bought, delivery network capacity, the orders already in the booking system, and the retailer’s preferences and business constraints.

In a static booking approach, the consumer is given delivery choices based upon a fixed number of deliveries in an area or standard lead time that does not take into account existing deliveries or actual network capacity.

Omni-Channel Home Delivery 2.0

Home delivery complexity remains one of the biggest obstacles for respondents. Many of the retailers cited having multiple channels for home delivery including private and dedicated fleets, LTL, regional couriers, suppliers, etc. These retailers also offered a wide array of goods: large and small format.

Respondents mentioned that visibility and delivery consistency were top issues. For example, a large format good (e.g., TV) that is being delivered by a 2-person dedicated carrier might also include a smaller format good (e.g., iPad) that was purchased separately going to the same home, which eliminates parcel shipping costs and possibly reduces the days to deliver.

Two Critical Questions

All of the respondents stated that they treated each home delivery uniformly. The best and worst customers got the same level of delivery options.

Retailers have the opportunity to provide more options for high spending customers and steer casual customers to the lowest cost delivery options.