Last-Mile Delivery Revolution: Overcoming E-commerce Fulfillment Challenges with Technology

The eCommerce market has experienced a 20% drop in growth in the last two years. The projected market increase in 2023 is just under 15%. The days of double-digit growth and 50% to 70% gross profit margins are fading. Today’s online merchants face a more competitive market.

Not only is the eCommerce landscape more competitive, but it is also more costly and complex. Orders can come from multiple channels, making inventory management more challenging. Supply chain disruptions can increase the cost of goods sold (COGS), and shipping charges often eat into profit margins. Online retailers need ways to address order fulfillment challenges from check-out to delivery.

Technology-driven fulfillment solutions can help merchants enhance customer experience with advanced delivery systems. Incorporating artificial intelligence and automation allows businesses to meet expectations for last-mile delivery.

Last-Mile Delivery

Last-mile delivery costs make up 53% of a retailer’s shipping expenses. With consumers wanting free shipping, merchants have to carry more of the delivery dollars, which reduces profits. In fact, 48% of shoppers will abandon their carts because of added shipping, taxes, or fees. Another 22% will fail to complete a purchase because of slow delivery times. Finding ways to address the last-mile delivery challenge is a top priority.

Making the final step in the delivery process more efficient is the best way to reduce costs. However, the complexity of multiple routes, numerous locations, and limited drivers can make the challenge overwhelming. Adopting an artificial intelligence (AI) solution can significantly improve the efficiency of delivery logistics. 

AI analyzes delivery addresses, possible routes, and driver schedules. It considers weather conditions and traffic patterns to develop delivery routes that save time, minimize fuel costs, and reduce errors. Because AI uses volumes of data from multiple sources, the technology can establish routes and schedules that humans would have difficulty identifying. Technology provides route optimization for eCommerce merchants.

Inventory Control

Low inventory not only hurts current sales but can also damage customer relationships. A recent survey found that over half of consumers prefer to shop in stores or pick up orders in stores when ordered online to ensure availability, accuracy, and quality. While some eCommerce merchants will indicate an item is out-of-stock when ordering, others inform buyers after the order is placed. 

Stockouts create friction. Some merchants keep “safety stock” to help protect against shortages and overcome delivery challenges. However, adding inventory means higher storage costs. Other retailers try to forecast inventory requirements with spreadsheets and anecdotal data.

Third-party logistics (3PL) providers use AI-enabled planning tools and predictive analytics to optimize inventory. They collect data across the supply chain to determine the ebb and flow of market demands. The data is used to determine the inventory level for each forecast period. 

3PL providers can recommend where to locate inventory to ensure it can reach customers as quickly as possible at the lowest possible price. With planning tools, they can help merchants relocate inventory to be closer to their markets and incorporate inventory changes based on multiple sales channels. AI tools can auto-order out-of-stock products to minimize possible shortages.

Order Processing

Successful order fulfillment begins with efficient order processing. How long does it take for an order to reach the warehouse from an online store? Many merchants add processing time to orders to ensure they have sufficient time to process the order and make the delivery window. However, extending the delivery deadline can result in lost sales. Shoppers will cancel an order if the delivery times are too slow.

Many eCommerce merchants struggle to reduce the time between order placement and order processing. If orders are batched and delivered once a day, online stores will have longer delivery windows than those with real-time order processing. If carriers have stringent cut-off times, retailers may need an extra day to prepare the order for shipment. 

3PLs that use software to interface with eCommerce platforms and marketplaces can accept orders electronically. When the shopper places the order, it is sent to the logistics provider for immediate processing. Not only does it reduce processing time, but it also minimizes errors. There’s no transferring of data from one format to another.

Once the order is received, 3PLs with automated technologies can forward the items to a warehouse system that can locate, pick, and pack items for shipment. With automation, order processing can continue 24/7 with no breaks, improving final-mile operations. 

Warehouse Management

Warehouse management systems (WMS) are software applications that help warehouse managers oversee operations. Most systems provide functions such as warehouse design, inventory tracking, shipping, and receiving. Some systems integrate with advanced technologies for more automated processes.

For example, WMS can work with barcode scanners and RFID tags to receive, store, and retrieve inventory. When machine learning is added, the technology can provide efficient routes for employees to retrieve items quickly. The programs can even suggest more efficient ways of storing merchandise based on how items are sold. The technology allows for advanced delivery management.

Deploying robots such as automated guided robots (AGR) and automated mobile robots (AMR) is another way that WMS can work with emerging technologies to streamline operations. Automated robots reduce labor requirements and the time employees spend walking the floor. They can complete the pick and pack process faster with fewer errors.

Merchants should have access to warehouse data to maintain end-to-end visibility of their operations. That requires APIs that enable WMS systems to communicate with merchant systems for better alignment and order fulfillment. Sharing real-time data allows businesses to gain a comprehensive view of supply and demand, order processing, inventory levels, and order fulfillment.

Order Complexity

Orders no longer come from a single source, such as an online store. Shoppers can place orders from social media platforms or from pop-up ads on other websites. With orders coming in from multiple sources, tracking inventory becomes more complex. Fulfilling orders with multiple items adds to the challenges of delivering accurate orders as quickly as possible.

Tracking inventory becomes more difficult as orders arrive from multiple sources. If the information is not updated in real-time, stock can be depleted without notice. Merchants are faced with unhappy customers and added costs for rush orders. 

3PL providers can consolidate information on inventory levels in a central location. By deploying technology, they can track products leaving the warehouse from the moment they’re pulled from inventory. Through customer portals or APIs, tech-savvy logistics companies can keep customers up to date on inventory levels regardless of the order source.

Automating the warehouse floor reduces errors when filling multi-item orders. Depending on the warehouse design, items can be spread throughout a warehouse floor. Items could even be stored in separate facilities. Automated systems can identify an item’s location quickly and dispatch robots to collect them for packing. AI-based systems can even suggest ways to shift storage locations to make for more efficient retrieval.

Scaling

Supply chain disruptions and material shortages have created an unpredictable order fulfillment process. While eCommerce merchants have always faced volatile delivery conditions such as weather delays or driver shortages, the last few years have made scaling a top concern. How quickly can merchants adjust to accommodate seasonal spikes or promotional days such as Prime Days or Cyber Mondays?

3PL companies can use sophisticated solutions to help predict spikes and to normalize inventory requirements. Many providers use predictive analytics and AI-based planning tools to map the ups and downs of online sales. The insights are used to forecast capacity requirements from warehouse storage to transportation needs. Having processes in place to address fluctuations makes for a more agile order fulfillment process. 

Some logistics businesses have created micro-fulfillment centers in high-volume locations to make better use of resources during peak times. Through data-driven forecasting, 3PL providers can identify high-demand products and place them closer to the consumer for easier scaling and shorter delivery times.

Returns

Returns play a role in effective order fulfillment. Processing returns takes resources away from delivering orders. It also requires adjustments in inventory control if returned items are placed into inventory. Streamlining the process can help reduce the impact of costly returns.

Although returns have declined slightly in the last three years, they still hover at around 20% of merchandise orders. Finding ways to reduce the time required to process returns not only helps the bottom line but also frees resources to focus on order fulfillment. 

As with inventory control and warehouse management, software solutions can help improve return processing. Combining software solutions with automated systems can make for better efficiencies. Automated devices can inspect returns and assign tracking codes or tags to ensure items are monitored.

AI-based tools can evaluate returns by product line to identify items with a higher-than-average rate of return. Eliminating possible reasons for returns before items are shipped not only reduces operational stress but also improves customer satisfaction.                   

Overcoming Order Fulfillment Challenges with Last-Mile Delivery

As the eCommerce market continues to grow, so will its challenges. Finding a technology partner in a 3PL provider improves a merchant’s ability to deliver exceptional last-mile service. Contact us to learn more about last-mile delivery and how technology in logistics can help retain that competitive edge.