Bringing Logistics In-House

Enterprises are facing either a perfect storm or a perfect opportunity in delivery, depending on how you look at it. With consumers demanding faster delivery, more flexibility and greater convenience, the fastest enterprises to adjust will be catapulted to the top of the pack.

The statistics are clear – online e-commerce is growing over 6 times faster than retail; online grocery sales are expected to grow by 15% in 2019; 40% of restaurant delivery orders will be online by 2020. There is an urgent need for companies to bolster their logistical capabilities in order to deal with the shift to delivery, but many are set to lose out on this huge opportunity. This typically happens because they neglect the potential inherent in establishing their own in-house capabilities, while remaining unable to cover all their needs through the use of external point solutions.

Why In-House Fleets?

Scores of enterprises across multiple verticals – retail, e-commerce, grocery, restaurants, etc. – work with third party solutions such as 3PLs and crowdsourced services, and that’s not a bad thing. At their best, they provide improved efficiency, reasonable customer experiences, and the resources required to get things done. They may not be doing a bad job, but what happens if their service goes down, their quality degrades, or their prices go up? Over-reliance on one of these solution providers may lead to painful situations in terms of your customers, as well as your financials.

Without an in-house delivery option, enterprises are often held back if they rely on external providers, especially if they’re only using one. They are giving up control over their customers’ data and experience, while paying fees that can significantly eat into their bottom line. Even if the third party helps them increase their sales volumes, they can end up being order rich but money and data poor. To provide an answer to these questions, enterprises need a platform that allows them to manage an in-house delivery service, while flexibly deploying third-party solutions as needed. The result is a model that allows for the customer data to be tied to the brand itself, fully leveraged to significantly improve the customer experience and develop brand loyalty.

How to Make the Move?

There are very few companies that have enormous budget required to build out the comprehensive in-house solution required to address the shift in the market and the logistical challenges that accompany it. A more realistic option for handling fleets, operations and technologies is to partner with those companies that can help coordinate, measure, and optimize every component of the omnichannel fulfillment and delivery process, including the ability to strategically deploy third party fleets as necessary.

The Panera Model

Panera Bread has been making waves for being a pioneer in building in-house delivery services. A recent Forbes article stated that because of their in-house capabilities their “delivery business continues to grow at a double-digit rate and has been Panera’s largest growth driver for the past few years.”

To handle the growth in delivery, Panera hired about 20,000 people over the past two years and it has paid off. They were set to hit $2 billion in total digital sales by the end of 2018 (including online, mobile, and kiosk orders) which accounts for roughly a third of Panera’s overall sales, and amounts to about 1.4 million digital orders per week.

Driving that success is Panera’s own custom brand experience that is offered solely on their platform and is centered around data, delivery flexibility and customer experience. Because they do it all in-house, they can leverage customer data in order to better target their delivery and promotional offers. And if they choose to deploy external fleets during peak times or in certain geographical areas, they can measure their performance which is critical in order for Panera to maintain its top-notch customer experience.

Not every company will be able to scale its fleets like Panera did, but bringing at least some components in-house gives businesses the ability to deploy fleets more strategically and significantly boost customer experience. By implementing a holistic approach, enterprises are paving the way to a more effective deployment of fleets, faster service, easier scalability, and improved customer satisfaction even as delivery volumes grow and consumer expectations soar.

To be sure, no solution is without its challenges, but being able to provide deliveries to customers on their own terms is what increasingly makes enterprises stand out. And by embracing a more diverse, holistic approach to delivery logistics, they are far more likely to be successful.