Speed to market got a kick in the pants in 2020. Shippers had to balance a dramatic rise in orders, and consumer demand for on-time and quick delivery and fulfill these orders with fewer workers. But even during a normal year, parcel delivery can go awry. 3PLs and other delivery companies employed to transport goods could encounter problems, either on their end or with the end consumer. And when that does happen, it’s bad news for a shipper’s profitability.
As the logistics industry continues to evolve towards the consumer preference for online shopping, parcel deliveries are becoming increasingly outsourced to last mile specialists. The last mile market could reach $51 billion by the end of this year, up from $35.3 billion in 2019. And the 3PL market is on track to hit $1.7 trillion by 2026, registering 8% annual growth between 2021 and 2026.
Demand for logistics services isn’t going anywhere. When employee turnover is high, delivery windows are shrinking, and logistics providers are expected to do more with less, the solution to managing it all could be combining technology and human efforts to gradually improve the delivery process.
What is Driving the Need to Ship Faster?
Ever heard of the Amazon effect? It describes how shoppers’ purchasing habits and expectations have changed due to Amazon. The success of Amazon has transformed the retail industry as companies have evolved to include an online shopping presence for consumers.
As explained in Supply Chain Digital, Amazon offers a huge array of products at competitive prices and can ship most of them to a residence within two or three days. That ubiquity of fast, free shipping has led consumers to expect short delivery windows, regardless of what shipper they purchase from.
In other words, expectations are changing at the speed it takes to get your next Prime shipment. Seven to ten-day delivery is out, and two-day shipping is in.
The Need For Speed
A Ware2Go survey confirms this phenomenon. In 2020, 75% of survey respondents told the 3PL providers that offering two-day shipping made them more competitive. When asked about the most impactful ways of increasing cart conversions, 56% of merchants mentioned free shipping, and 52% cited 1-2 day delivery. In contrast, only 29% mentioned free gifts with purchase, and a mere 26% referred to in-cart discounts.
On the consumer side, fast delivery is becoming less of a bonus offering and more of a requirement. Data from the Retail Industry Leaders Association shows that shipping speed impacts buying decisions for 62% of shoppers. A staggering 90% of consumers view two or three-day shipping as a baseline delivery promise, and 30% of shoppers now expect same-day delivery.
Delivery speed to consumers is a competitive advantage, but not every company is prepared to offer it. Those who do and onboard the right technology will leverage their logistics to gain a competitive edge.
Why is Delivery Speed to Market a Competitive Advantage?
Despite these numbers, many shippers have not mastered two-day delivery. Companies that do not evolve to accommodate consumer expectations for fast deliveries risk falling behind their competition.
Two-day shipping can be time-consuming, headache-inducing, and expensive. Yet there are good reasons to offer it. Here are six of them:
Companies with a handle on two-day delivery can grab a larger market share from businesses that lag behind. In today’s world, whoever gets a shipment to their customer first, wins. The prize is higher sales and repeat customers.
Customers Are Attracted to Logistics Efficiency and Shipping Time Transparency
One downside of commerce shifting towards online vendors is that e-retail does not always provide the same brand experience as an in-store visit. However, part of that brand experience can be reclaimed by offering fast and streamlined delivery. It resonates with consumers, so they will be likelier to tell their friends about it or leave a positive review online.
Reduced Inventory Costs
Fast delivery lowers inventory costs. Having less safety stock to store means fewer items taking up space in a warehouse and lower capital expenses.
Repeat Purchases From Customers Who Enjoyed Their Experience
According to the Ware2Go survey, short delivery times inspire customer loyalty. 59% of merchants said two-day shipping brought in more repeat customers, and 39% mentioned positive reviews online. Or check out this SendinBlue study showing fast or free shipping is a primary driver of brand loyalty for 75% of millennials.
Less Cart Abandonment
Short delivery times lead to higher conversion rates. In fact, sixty-eight percent of consumers say that fast shipping leads them to place an online order. Conversely, eighty-five percent of consumers search elsewhere for better options when delivery speeds are too slow. And one of the top two reasons for shopping cart abandonment is that delivery speeds were not fast enough. A few days of the delivery time can literally make or break a purchase.
Believe it or not, same-day or two-day shipping can result in higher profit margins. That is because when customers need an item quickly, they will be willing to spend more money on it. Instead of doing price comparisons, consumers tend to look for the fastest delivery option.
How Technology & Managing By Exception Yield Happier Customers
Supply chains can be complicated, with many moving parts and opportunities for mishaps. When there is a hiccup, it’s referred to as a freight exception. A freight exception is a catch-all term for anything that might go wrong in logistics. That could include damaged packages, lost packages, missed deliveries, weather disruptions, or even problems with the delivery vehicle itself.
As any professional knows, freight exceptions are inevitable in parcel delivery. But exceptions can also make customers pretty unhappy.
A company’s goal should not be to prevent exceptions but to have a system to deal with them as they occur. Employing the right combination of technology and people can help keep the fallout from freight exceptions to a minimum.
A cross-platform exception management tool can keep last-mile mishaps from spiraling out of control and prevent customers from deciding to end their relationship with your company. When choosing an exception handling platform, it’s important to look for a solution that utilizes historical data to anticipate future issues. An exception management system can amass logistics data points and analyze them to find recurrent problem areas and their root causes.
But technology alone is not enough. When a parcel arrives damaged or goes to the wrong address, communication is critical. Robust exception management software will have people behind it to maintain communication with shippers and consumers.
Ultimately, consumers want their deliveries when they are promised. Managing to stave off exceptions and course-correcting when they do arise can go a long way towards keeping customers happy.
Choose a Partner Focused on Speed to Market and Improving Customer Experience
There are real benefits from improving speed to market, but cutting delivery times also comes with its share of challenges. The good news is that companies do not have to be Amazon to provide fast delivery services. They just need to choose a partner who can help them optimize their speed to market.
Improving speed to market entails solving duel problems. There’s the need to eliminate as much manual work as possible, which is necessary to maximize efficiency and lower costs. Shippers must also maintain a human touch to deal with those inevitable exceptions. It’s a puzzle that can’t be solved with technology alone. Delivery problems have a tight deadline for resolution, and chatbots or general help lines are inefficient at best. That’s why it’s important to choose a last mile partner who uses technology to resolve exceptions before they happen and ensures that there’s always someone to talk to, without compromising either.
Last mile outlays can comprise more than half of the headline cost of transportation. Couple that with high demand for free shipping, and the connection between a company’s last mile capabilities and profitability becomes clear. Shippers who can shorten their speed to market time and use technology to maximize efficiency have a competitive advantage in today’s market. This is especially true with exception management. That’s why OneRail created a platform that intelligently predicts and searches for resolutions to whatever transportation snags could arise. The OneRail platform has eliminated up to 90% of manual exceptions calls for clients and helps maintain a 98.6% on-time rate If you’re looking for a technology solution that gives you full control over the customer experience with aggregated prices from a vast network and puts you on track to compete with Amazon’s shipping capabilities in less than three weeks, give OneRail a call today!