Deciphering the Logic Behind Logistics
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
The world of logistics is changing fast. With the advent of digitisation, customer expectations are at an all-time high. Customers now expect door delivery for everything, and businesses have to cater to these needs or risk losing customers. Logistics have now become an important part of most e-commerce businesses. It is the point where the online transaction gets transformed into an offline event.
Why is it Crucial?
Many a times, providing value to a customer does not only depend on quality or quantity. It also refers to availability. A company's willingness to provide doorstep delivery of its product/service is becoming a key component for growth in terms of company's outreach.
In order, to match customer expectations, delivery companies off late have invested a lot into ensuring their customers get the best experience possible. All of this with an assumption that efficiency will come in with time and scale.
What's Troubling Logistics?
The logistics sector is facing problems of high costs and friction.
Due to the boom in e-commerce, everyone is hiring delivery boys. Nowadays delivery boy salaries have spiked up to INR 20,000 and you have to give them incentives on top of that. With a number of options available, there is high attrition and low dedication. There is always a new job available within a week or two.
If you fail to deliver your product to the customer at the first attempt, it results in second or third delivery attempts leading to a loss of time, money & customer experience. One of the most time-consuming part and greatest source of friction is the last mile or actually going up to each customers door and delivering the product.
There are multiple legs involved in fulfilling your order. If it is an inter-city shipment, your shipment often has to reach multiple Distribution centers which route your shipment to the city or area you need it in. The areas where the highest costs are incurred are - transportation and warehousing.
Steps to viably trim down your logistics spending:
The Middle legs
The mode of transportation must be considered carefully and one can even use a mix of transportation (road, rail, water, air) if necessary. As for roadways, which is the most popular medium in our country, to cut down on transportation charges, focus on better truck utilization in both full and less than truckload shipments. Insist on tracking the shipment at all possible times, to make sure there is a sufficient level of visibility to estimate delivery times accurately,
For Warehousing, labour costs are the key here. Automated warehousing solutions which do all the work are currently only available with the big guys who can make a significant one-time investment. Try to automate whatever you can to get your work done with the least amount of labourers.
There are tech solutions available to optimize every stage of warehousing. From inventory management, picking and packing - every stage will have a labour cost which can be translated into your labourers' salary. This cost might appear small but if it is not optimized, this can burn a hole in your pocket as it adds up with every order you ship.
Cutting Costs in the Last Leg
To make it simple, this means the number of deliveries your average delivery boy does every day. The more deliveries he does, the more cost-effective your delivery network is.
- Efficiency in Density - If your delivery boy is delivering across an area or pin code, he can do at most 15-20 over the day. The more orders you have in an area, the more efficient your deliveries in this area. If you can, focus on conquering areas one at a time or even get your delivery team to do deliveries of other products along with your own in the same area.
- Better Route Planning - A smart route planning algorithm can make a huge difference to your delivery efficiency. Your delivery executive can do much more deliveries if you ensure the least amount of travel between each drop.
If you are at an early stage, it makes sense for you to outsource the last mile to companies that can get it done for a fixed per order cost. As you grow and have a sizeable number of orders in an area/city you should have your own logistics team whose performance can be monitored and optimized using easily available solutions like Locus, Hypertrack etc.
On a final note, it is important that you set the right expectations with your customers. Don't set expectations that are very difficult to match and end up with disappointed customers. It is always better to under commit and over deliver in logistics where there are many human elements and factors out of your control such as traffic, weather conditions. It is also better to give visibility to your customers and to your team. It makes sure your interactions with customers are over detailed information.
To all my entrepreneur friends, now is the best time to deliver efficiency and change the way you spend on logistics.