E-Fulfillment Picks Up Speed
How e-commerce companies and transportation services meet demand when fast delivery isn't fast enough.
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E-commerce customers cherish speed, and this love engendered the Amazon Effect, the competitive pressure to get products to consumers in two days, one day, or even a few hours.
Whether they ship parcels or big and bulky items, and whether they ship nationally, regionally, or locally, direct-to-consumer retailers can speed up processes at many points along the supply chain, from the fulfillment center to the consumer's door. Much of that effort might focus on transportation.
When shippers and their transportation partners seek to cut delivery times, some of their best strategies center on the way they design the transportation network, how they position inventory for future deliveries, how they deploy technology, and how they combine transportation modes.
LaserShip, based in Vienna, Virginia, provides same-day, next-day, and two-day delivery in 20 Eastern and Midwestern states. For orders within those regions, an e-commerce merchant might choose LaserShip over a national parcel carrier because the regional service delivers the goods faster.
"We're looking to shave days, or even hours, off the transit whenever possible," says Josh Dinneen, chief commercial officer at LaserShip. "We have larger one-day and two-day footprints than the national carriers, depending on the product's origin."
For example, a product picked up in New Jersey could reach a destination in Florida via ground transportation in two days.
Although it can't compete with the likes of UPS or FedEx on national service, LaserShip claims to have an edge in regional deliveries thanks to the way it has engineered its hub-and-spoke network, which includes 60 locations and four sorting centers.
"We designed this e-commerce network for residential delivery," says Dinneen. Although LaserShip also goes to commercial destinations, its drivers—all independent contractors—typically don't spend their days servicing high-rise office buildings or corporate campuses. So LaserShip doesn't site its facilities near those properties.
"We need to be where the dense urban and rural residential communities are," he says.
The pandemic has slowed things down, but LaserShip continues to expand its footprint, adding services in Raleigh and Durham, North Carolina, Wilkes-Barre, Pennsylvania, and Buffalo, New York, in 2020. "We're very strategic about the next metro areas we want to be in," Dinneen says. "We ask, 'How does that help our retailers, our current partners, our future relationships, get things to the consumer faster?'"
Optimizing the Last Mile
The Ryder Last Mile service, which delivers big and bulky items, carefully sites its facilities to optimize transportation time. When a consumer buys a product from a Ryder Last Mile customer online or in the store, Ryder receives that order, schedules an appointment with the consumer, and then makes the delivery from a fulfillment center near the destination.
"We have about 90 unique facilities strategically located around the United States that receive consigned freight from the retailer or manufacturer," says Jeff Abeson, vice president of sales at Ryder Supply Chain Solutions. Consigned freight consists of items that consumers have already ordered.
Ryder's employees do quality checks on all products before they're shipped and, if required, assemble them before putting them on trucks for delivery.
Where to Put Product
Ryder also uses its last-mile facilities to position not-yet-sold inventory for merchants, keeping popular items near major markets to promote quick fulfillment. Merchants who forward-allocate unsold inventory have to think carefully about which products to put where, and in what quantities.
"They're trying to balance the service against the inventory carrying costs," Abeson says. "We work with them to try to figure out the optimal locations."
Ryder designed its last-mile fulfillment network for speed, and it looks for opportunities to improve the configuration. "We continuously do network design exercises to make sure that we've got our locations in the right spots to support the volume," Abeson says. "We try to make sure that we're close to the population and that our facilities are right-sized to support a certain amount of growth."
Establishing a Bond
Bond, a last-mile fulfillment service in New York City, uses a network of "nano distribution centers" (NDCs) to place merchants' inventory as close as possible to customers for same-day delivery. The NDCs are small commercial spaces, such as storefronts, that Bond leases from large real estate firms.
Through links to its customers' e-commerce platforms, Bond collects data on past and projected demand, using that information to calculate where to store inventory. The placement, and even the number of NDCs in service, can change as merchants see demand fluctuate in various neighborhoods.
"We can launch another distribution center in 48 hours," says Dan Eblagon, Bond's chief marketing officer. "It can be two nano distribution centers that cover the city, or it can go up to 13. It's very dependent on volumes, delivery options, and other requirements the brands have."
Bond traces its roots to a direct-to-consumer grocery firm called Shookit in Tel Aviv. Discouraged by its experience with third-party delivery providers, Shookit developed its own network and supporting technology. It soon started to offer delivery to other e-commerce retailers.
A U.S. company, Bond is headquartered in New York, although its research and development arm remains in Israel. It is preparing to expand its service into several other cities.
E-commerce merchants that work with UPS can choose from various options for inventory positioning. UPS' Ware2Go service lets merchants place product in any number of warehouses to shorten delivery distances. Merchants can also revise their positioning strategies as requirements change.
"I might need a warehouse for six months in Orlando because I'm doing a promo only in Florida," says Nick Basford, vice president of global e-commerce and retail strategy at Atlanta-based UPS, by way of example.
For many small and mid-sized e-commerce firms, however, the UPS service of choice is eFulfillment, which lets them put merchandise in a fulfillment center in Bloomington, California, one in Louisville, Kentucky, or both.
UPS chose those locations because they are the optimal sites for taking advantage of its transportation network, Basford says.
Often, a retailer that has its own fulfillment center will use eFulfillment to add a presence at the other end of the country. "For example, a customer is already on the West Coast and wants to serve the East from a shorter zone [the unit on which UPS bases its rates] with faster ground time in transit," says Basford.
A merchant might also use the warehouses, and different UPS transportation services, to meet different time commitments for different shopping channels. For example, a shipper might arrange faster delivery for orders that come through the Amazon Prime Marketplace, and slower service for orders made through eBay or Etsy.
Shippers and their transportation partners also rely on technology to cut delivery time. "We continue to add automation into our delivery hubs, getting more material handling equipment to make things move faster," says Dinneen at LaserShip.
Technology plays a big role on the road as well. "We built our own mobile app, which helps our independent contractors get automated sequencing and turn-by-turn directions for making deliveries," Dinneen says. The app helps drivers build efficient routes and then helps them move smoothly from one stop to the next.
Another company that uses digital technology to support speedy service is Rapidus, a local courier service that currently operates in California and Colorado, and in the Seattle and Dallas areas. Rapidus serves a variety of traditional courier markets, delivering everything from paychecks to blueprints to organs for transplant.
It also serves e-commerce merchants, often through its partnership with the Shopify platform. A Rapidus app on Shopify lets merchants offer one-hour and same-day local delivery within Rapidus' service areas.
Rapidus uses an Uber-like model, partnering with small courier firms and independent professional drivers. Drivers use their phones to accept delivery jobs; Rapidus then uses the mobile link to track drivers' progress in real time and communicate as needed.
In addition, Rapidus and its drivers use the technology to plan for maximum efficiency. When Rapidus gets a request for a package pickup, it can offer the job to the driver who is closest to that location, and who is already headed in the right direction, says Olexandr Prokhorenko, co-founder and chief executive officer at Rapidus in San Francisco.
"We have that information because we learn as much as we can from the driving patterns of all the delivery partners, since they're using our apps and we track them in real time," Prokhorenko says. The company also taps into third-party information, such as traffic data services, to make decisions that can hasten deliveries.
Recently, Rapidus added artificial intelligence (AI) to its arsenal, using historical data about deliveries and current data on market conditions to predict upcoming demand.
"For example, how likely are we to get a delivery at 8 a.m. from San Francisco to San Jose?" Prokhorenko says. "That allows us to expose that information to the drivers and let them do pre-booking."
Ryder Last Mile boosts fulfillment speed by using proprietary technology to plan deliveries, execute those plans, and monitor drivers' progress. In each fulfillment center, the process starts a few days before a set of delivery appointments, when Ryder optimizes drivers' routes.
"That allows us to look at all the freight we have in our building, run the optimization routine, and then build productive trucks," Abeson says.
The Right Tradeoffs
One challenge in this process is how to make the right tradeoffs between speed and customer service. That's especially crucial when a customer needs Ryder not just to deliver a large item to a home, but to bring it inside and set it up.
"We and our customers try to achieve that balance between an effective route, being as efficient as we can, and making sure we've built in ample time to spend with the end consumer," Abeson says.
Once delivery trucks hit the road, Ryder uses an app on drivers' phones to watch for traffic jams, slower-than-expected in-home deliveries, or other delays.
"The application understands the estimated time of arrival against the planned ETA," Abeson says. "If a material deviation starts, our system automatically updates, so we can make an adjustment." A dispatcher then works with the driver to get things back on track.
At UPS, when a merchant's e-commerce platform transmits orders to the eFulfillment service, UPS' integrated order management and warehouse management systems determine which UPS service to use and where to induct the parcels into the transportation network.
"They would be delivered on either the air or ground service portfolio, or our Mail Innovations or SurePost portfolio, to match the time in transit that connects back to the rate cards the customer picked for those particular orders," Basford says.
Bond uses proprietary technology to keep its service fast, strategically assigning packages to drivers and sending them by the fastest possible routes.
Delivery a la Mode
A fourth set of strategies involves the transportation mode. Bond, for example, keeps its speed up, despite big-city traffic, by sending drivers across New York's five boroughs on electric cargo tricycles. "They're fast, convenient, and eco-friendly," Eblagon says.
UPS commands a network that includes both ground and air transportation. And Rapidus will soon introduce a new service that combines ground and air to offer regional same-day delivery. The price for this transportation is competitive with next-day service from a national parcel carrier, Prokhorenko says.
"We have contracts with a number of airlines that we can combine with our last-mile delivery service," he says. For example, a Rapidus driver could deliver a package from a location in San Francisco to the local airport, putting it on a flight to Los Angeles. There, another Rapidus driver would take the package to the destination.
"If you're lucky, you can get it in three to four hours," he says. "And you can see on your phone or on the web exactly where your package is."
Neither Rapidus nor the other companies interviewed for this article have claimed credit for the man with a jet pack seen flying near Los Angeles International Airport in September and October 2020. But who knows? How long before some company seeks to cut delivery times even further by launching couriers into the sky?