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Last-mile delivery challenges in the age of omnichannel

The last-mile delivery problem is getting more difficult as customers demand lightning-speed product fulfillment. Here's hope.

Omnichannel is the new normal -- and so are last-mile delivery challenges.

More than ever, companies are looking for ways to provide consumers with top-notch customer experiences whether they shop online from a mobile device, from a laptop or in a physical store. The fallout is a growing last-mile problem where enterprises must figure out how to get products to customers' doors more cost-effectively without compromising delivery.

One such company is Topo Athletic, a manufacturer of lightweight running shoes based in Framingham, Mass.

Outrunning last-mile delivery challenges

"At Topo Athletic, we've grown to support more than 450 stores in 13 countries," said Natalie Riley, vice president of finance and operations at Topo Athletic. "With that growth, the direct-to-consumer model has become a real focus for our business."

And, as Topo Athletic continues to build customer loyalty, the company recognizes that last-mile delivery is an important part of the overall experience, Riley said. In today's marketplace, consumers expect their packages quickly and without trouble.

To succeed in this area, the company must have timely and accurate customer and operations data, Riley said.

"Today's business intelligence is giving us this in a way we didn't have it before," she said.

In addition, Topo Athletic relies on its carriers to "excel in service" to help meet its fulfillment and last-mile delivery goals, Riley said.

"We also leverage third-party logistics for our warehouse and are exploring transportation management systems that can integrate into NetSuite, our core inventory management system, to give us even more visibility into the entire logistics process," Riley said.

Getting close to last-mile delivery solutions

Keeping the right inventory levels is critical to solving last-mile delivery challenges.

Keeping same-day delivery from a single location in the United States to most of the U.S. population is impossible.
Bryan JensenExecutive vice president, St. Onge Co.

The companies that are the most effective at delivering last mile -- immediate, next-day or even same-day delivery -- are those that position their inventories closer to their customers, said Bryan Jensen, chairman and executive vice president at St. Onge Co., a supply chain strategy and logistics engineering consulting firm in York, Penn. From a system perspective, that means inventory management.

"Keeping same-day delivery from a single location in the United States to most of the U.S. population is impossible; you're too far away," he said. "Physical position of the inventory is the most important factor in cost-effectively achieving the transportation to the customer."

However, having that inventory all over the country to service as many people as possible, as rapidly as possible, can actually eclipse the savings of the transportation costs, Jensen said.

"In order to maintain in-stock in all those multiple locations, my inventory is higher than if, at the other extreme, I was shipping it all out of one location," he said.

Everyone thought that e-commerce would be cheaper because companies wouldn't have to pay for real estate, stores and store workers during slow times, said Sucharita Kodali, retail analyst at Forrester Research. The reality is that e-commerce introduced high variable costs into the delivery process, Kodali said.

A lot of companies are investing in microfulfillment centers, basically small distribution centers closer to urban locations, she said. However, most of what is sold online is long-tail items -- for example, less popular items -- and a microfulfillment center is only going to stock the most common items.

"You can't store every single one of those items in a distribution center close by [customers]," Kodali said.

The challenge is balancing the inventory growth with the additional locations necessary to be close enough to the customer to provide guaranteed delivery the next day or same day, Jensen said.

That's why distributed order management systems that help companies predict and deploy inventory become critical, he said.

"You almost have to be in a constant cycle of looking at how your customer demand is maturing in those individual areas to influence where your inventory is deployed," Jensen said.

Sophisticated tech to solve last-mile delivery challenges

Inventory that meets customers' needs is difficult to get right, and companies need technology that can handle nuance.

The in-store inventory management system must be sophisticated enough to maintain the right product levels, Jensen said. It also has to be able to release items, where appropriate. It must also be able to freeze potential purchases at the store if a customer places an online order for that same item, he said.

"You need to make sure your system precludes an in-store customer from purchasing that [product] out from under that internet customer," he said.

The marketplace is extremely competitive, and the bar is high, which means companies need to be both proactive and effective in the service they offer to customers, Riley said. Disparate systems that aren't connected, aren't integrated or aren't available on the same platform make that difficult.

To that point, Topo Athletic uses NetSuite for ERP, inventory management, order management and CRM.

"Having one platform in NetSuite has given us complete visibility into our current business and the ability to forecast two to three months out," she said. "It has also given us the sophistication we need so we can avoid loss of inventory and meet our distribution needs to ultimately meet the desires of our customers."

The platform's reporting capabilities enable the company to optimize demand planning and prepare its manufacturing team for upcoming demand, ensuring its retail partners and online store are well stocked, Riley said.

"Retailers are a majority of our business right now, but we're very focused on continuing to build our direct-to-consumer model," she said.

Topo Athletic is always looking at how it can compete in the market and deliver goods to doors as fast and efficiently as possible, and an integrated platform is one of the tools that helps the company do just that, Riley said.

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