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Is Last-mile Delivery Ripe for Disruption?

Competition, profit-taking, and emerging technologies may contribute to rapid and disruptive changes in last-mile package delivery worldwide.

For online sellers, the “last mile” describes the final leg of a product’s journey to a customer. The last mile is also the most expensive part of that journey, constituting as much as 50% of the total shipping cost.

The Last Mile

Consider the trip a package might take from a warehouse to a front porch.

  • Transport to the carrier. The carrier picks up a truckload of orders from the shipper’s warehouse, or the shipper drops the orders off. In either case, hundreds of packages are traveling together.
  • Move through the carrier’s network. Using a combination of trucks and airplanes, the carrier moves the order from the departure city to a regional facility close to the customer. This too is done in bulk, taking advantage of economies of scale.
  • Deliver to the customer. The order goes from the regional facility to the customer’s door. While many packages might share the ride to a neighborhood, the scale is much smaller. Labor and fuel are much more expensive relative to the number of packages.

Competition

Chinese businesses are among the best at ecommerce package delivery. Companies such as the Alibaba Group have used efficient software integrations, low-cost workforces, and hundreds of logistics partners to ship orders globally.

For example, Cainiao Smart Logistics Network Limited, an Alibaba subsidiary, uses its close integration with Chinese customs officials to clear orders for international shipping in an hour or less.

Earlier this year, the company announced that its consumer marketplaces, AliExpress and Tmall, will soon offer free, 72-hour shipping from its facilities in China to almost 190 countries.

The further AliExpress, Tmall, and other Chinese ecommerce businesses expand, the more they compete with Western ecommerce powerhouses such as Amazon, Walmart, and Germany’s Otto Group.

Each of these will need to keep costs low along the entire supply chain. The global competition could pressure last-mile delivery, as massive ecommerce companies (and hundreds of regional and small businesses) all seek to offer free and fast shipping. Alibaba, Amazon, and the rest are presumably doing everything possible to reduce last-mile shipping costs.

Profit Taking

While ecommerce competition is increasing globally, package carriers — established and emerging — are looking for ways to increase profit.

FedEx, for example, is raising rates for many of its services by an average of 5.9% in 2022. UPS will likely follow.

Profit is also motivating Walmart to enter the last-mile delivery business. The company is said to be looking to diversify revenue. In August 2021, Walmart announced a white-label, last-mile delivery service called Walmart GoLocal.

This service, based out of Walmart’s 4,700 retail locations, will deliver locally for other retailers. For example, a regional chain could sell an item online and have a GoLocal driver pick it up in an unmarked van. The shipment then arrives at the customer’s doorstep within a few hours. The Home Depot has already announced a partnership with Walmart GoLocal.

Finally, a discussion of last-mile delivery and profit-seeking should also include services such as Doordash, Uber, Postmates, the Front Door Collective, and Walmart’s Spark, which utilizes gig drivers.

With so many companies addressing last-mile delivery, change is almost a given.

Technology

If global ecommerce competition and a burgeoning local-carrier industry are not enough to disrupt last-mile delivery, the addition of autonomous delivery vehicles and drones could do it.

Alibaba, Amazon, Walmart, and dozens of drone and autonomous, electric vehicle companies such as Nuro, Kiwibot, and Starship Technologies are all working to reduce last-mile delivery costs with driving and flying robots.

Alibaba’s fleet of 10,000 autonomous, electric delivery vehicles has been in service for three years. Each robot can carry approximately 50 packages at a time and cover 60 miles on a single charge. At full capacity, each delivers about 500 packages per day. Collectively, they have made more than 1 million deliveries by September 2021.

Photo of Alibaba's electric, autonomous delivery vehicles.Photo of Alibaba's electric, autonomous delivery vehicles.

Each Alibaba delivery robot can carry approximately 50 packages at a time and cover 60 miles on a single charge. At full capacity, each delivers about 500 packages per day. Image: Alibaba.

It is unlikely that all of these bots will be successful. Regardless, our sidewalks and class G airspace could someday resemble a science fiction film with streams of buzzing and humming robots swarming to and fro.

Thus, if even a few of these services are widely accepted, ecommerce delivery will change. What seems wild now might be the norm before we know it.

Getting Started with In-house Fulfillment

Many emerging ecommerce businesses start in someone’s garage or kitchen. They store, pack, and ship from a home base and control all the activities.  But even established sellers sometimes opt for fulfilling in-house.

The benefits include:

  • Quality control for packing, presentation, shipping, surprises.
  • Elevated customer experiences for speed, communication, support.
  • Branding and materials for customized packaging.
  • Better control over inventory levels, avoiding stock-outs.
  • No barriers between you and the customer.

In-house fulfillment is best suited for one or more of the following:

  • Startups.
  • Order volumes of less than 20 per day.
  • Customized orders or unique customer requirements.
  • New product lines and suppliers.
  • Alternative picking and packaging processes.
  • Local customers.
  • Existing capacity (warehouse and employees).
  • Adequate funding to invest in technology.

What’s Involved?

Order processing includes picking the item(s), quality inspection, packaging and labeling, and dispatching. Managing inventory means receiving and recording the goods, monitoring stock levels, and otherwise organizing and accounting for it all. Failure to manage inventory means stock-outs, damaged goods, and waste. Moreover, the cost of managing inventory does not end with renting space and hiring staff. It also includes administrative, technology, and overhead, such as insurance.

Expansion involves:

  • Locating and securing suitable warehouse space. Consider starting with a secure storage unit or space in an existing facility. Try to allow for flexibility if growth is faster or slower than anticipated
  • Employ and train staff.
  • Research and source equipment and software for packing and labeling and, potentially, for automation.

Automation of routine tasks expedites and synchronizes the order fulfillment process. Select a software provider for only the functions that you need. Look for software that:

  • Loads new orders automatically from your ecommerce platform but also allows for manual order entry and editing.
  • Tracks inventory movements in and out and alerts for low stock levels.
  • Integrates with your existing software — accounting, customer management, ecommerce.
  • Processes product returns and credit notes
  • Runs reports on demand
  • Tracks historical volume to anticipate staffing needs and stock on hand.

Costs

There are four main cost centers for in-house fulfillment: warehousing, labor, packaging materials, and shipping. Shipping will likely be outsourced unless deliveries are local with your own transport.

Here is a hypothetical framework of how to estimate potential fulfillment costs.

By estimating the average fulfillment cost per order ($18.80 in our hypothetical example), merchants can compare to outsourced providers and decide on the best option for their business. There is no standard pricing for third-party fulfillment, but costs will likely include a monthly management fee plus charges for:

  • Receiving of inbound inventory, per hour of labor.
  • Storage, usually either by pallet or bin, per week or month.
  • Picking, packing, and labeling (per item).
  • Special services, including returns handling.

There may also be an on-boarding fee. Remember to add shipping when comparing the total cost per order. An outsourced provider could likely offer lower shipping costs due to volume discounts it receives from carriers.

3 Ways to Reduce Shipping Costs

Lowering shipping costs is a surefire way to improve profits. Same-day delivery, free shipping, standard transit, click-and-collect — all are candidates for cost reductions.

3 Tips to Reduce Shipping Costs

Negotiate rates with shippers. There is always room to negotiate on price, even for small volumes. Gain a clear understanding of how weight and size impact rates. Flat-rate shipping is an option that can save money — the same size box ships at the same flat rate every time, regardless of weight. Explore the options for various shipping speeds.

Benchmark rates you are offered against FedEx SmartPost and UPS SurePost rates. These services use USPS to manage the “last-mile” deliveries. Consider migrating to USPS for your entire shipment.

Minimize packaging.

  • Size and weight. Know the exact size and weight of each of your products. Measure, weigh, and document dimensions and weights for all items — from heavy-large to small-light. Focusing on dimensions and weights can lower your shipping rates. In general, the less a package weighs, the less it costs to ship.
  • DIM factor. Dimensional or “DIM” weight is a formula carriers use to determine the cost to ship a package based on its volume. DIM pricing allows carriers to incorporate package size into their pricing structure.

ShippingEasy, a software provider, has a handy calculator for the dimensional weight of a package. Compare it to the actual weight of a package to see if you’ll pay more. DIM pricing mostly affects large and lightweight products as well as fragile items. To keep costs down, pack in the smallest box possible with lightweight filler.

Screenshot of ShippingEasy's DIM weight calculator pageScreenshot of ShippingEasy's DIM weight calculator page

Carriers apply a package’s dimensional weight when setting prices. This example DIM weight calculator is from ShippingEasy.

  • Packaging materials. Minimize your product packaging. Use the lightest and smallest possible carton for your items. This lowers weight and volume and also reduces filler. Look for lightweight, protective materials such as air pillows and bubble wrap and use the minimum needed to protect the items.

For smaller, lightweight, fragile products, use a padded poly mailer or returnable plastic bag. Compared to boxes, bags are weather-resistant, cheaper, quicker to pack, and inexpensive to ship. Plus, polybags are brandable, much like cardboard packaging.

Buying packaging materials in bulk to gain discounts makes sense when you are clear on future requirements. UPS, FedEx, and USPS offer free samples as well as free branded boxes and envelopes when you sign up for their services.

Consolidating orders into fewer boxes is another way to reduce shipping costs.

  • Recycle and reuse. Strip off labels from suppliers and repurpose the packing materials for shipping your own items. It saves money and fosters sustainability.

Outsourcing shipping. Contracting with a specialist ecommerce fulfillment service provider can reduce shipping costs. A third-party fulfillment company often provides lower rates because of its overall shipping volume. Many run multiple facilities, which could be closer to your customers, reducing transit times and fees.

Third-party providers offer custom solutions that suit your requirements, including money-saving packaging schemes for seemingly every product type. The providers can also solve staffing demands from seasonal peaks and fluctuating demand.

Last-mile Delivery Attracts New Services, Providers

With the holiday shopping season approaching, retailers and carriers are rolling out new delivery services. Smaller third-party providers are also entering the market, as last-mile delivery remains the most troublesome part of the package handling process.

Inadequate Capacity

Demand for package delivery during the 2021 holiday season is projected to exceed capacity by about 5 million parcels per day, according to UPS CEO Carol Tomé during the company’s Q2 earnings call. National and regional carriers are already at capacity.

Relying on USPS for last-mile delivery is becoming increasingly precarious. USPS is deliberately slowing down mail and package delivery and is suffering from a labor shortage in many areas. Additionally, USPS has asked the U.S. Postal Regulatory Commission to approve a rate increase of $0.25 to $5.00 per package — depending on the product and weight — from October 3 through December 26 for both individuals and businesses.

FedEx shifted all of its SmartPost last-mile parcels away from USPS into its own ground network at the beginning of 2021. UPS’s SurePost program continues to rely on USPS, but the rate increase and the possibility of UPS customers not receiving holiday packages in time may alter that reliance. UPS is already diverting some packages from SurePost to its own drivers.

Amazon is now shipping two-thirds of its packages directly to customers, according to supply chain consultant MWPVL International, up from one-half in 2019.

New Last-mile Provider

The last-mile predicament offers opportunities for small, agile third parties. Earlier this month a new provider emerged. Front Door Collective offers franchises to independent delivery companies. FDC provides uniforms, branded leased vans, and operational technology. The company says it can reach 90% of residences and businesses in the U.S. and Canada and has attracted over 100 small delivery providers. Most of them started in Amazon’s Delivery Service Partner program.

Screenshot from home page of Front Door CollectiveScreenshot from home page of Front Door Collective

Front Door Collective, a new last-mile provider, offers franchises to independent delivery companies. FDC provides uniforms, branded leased vans, and operational technology.

According to Front Door Collective, these small companies believe they can do better financially outside of Amazon’s DSP program. They will have ownership in the umbrella company and better growth opportunities. Amazon does not restrict DSPs from delivering for other companies, but it can limit a DSP’s growth by restricting the number of routes or trucks it operates.

Front Door Collective hopes to expand its network to 300 franchisees by the end of 2021. The company claims it can deliver over 1 million packages per day and offer same-day and next-day service. Most of the companies that have joined FDC employ up to 120 drivers running from 20 to 60 routes daily.

The leadership of FDC has plenty of logistics expertise. Co-founder and CEO Dan Bourgault worked at Instacart and now participates in the Amazon DSP program. Penelope Register-Shaw, who worked for Amazon Logistics and helped launch its DSP program as well as Walmart’s last-mile program, is FDC’s chief strategy officer. Other executives come from the Amazon DSP program, FedEx, Instacart, and the U.S. military. The company believes it will soon compete with both FedEx and UPS, according to Business Insider.

FDC will also compete with Shipt, DoorDash, Uber, and Instacart. According to the company, many retailers that need items retrieved from their stores or warehouses for consumer deliveries have shown interest in its service.

The FDC has committed to sustainability and has partnered with manufacturer Canoo to furnish electric vehicles for its delivery drivers. FDC has agreed to purchase 10,000 Canoo vans by 2024, with the rollout starting in the second half of 2023.

Other Services

UPS is testing same-day delivery to compete with Amazon and FedEx, which offer same-day delivery in select markets. UPS said it might go outside its driver network, using third parties.

This week Walmart introduced a program to offer delivery services to other U.S. businesses. Called Walmart GoLocal, the service will utilize Walmart’s Spark network of third-party drivers to pick up items at merchants’ stores and deliver them to customers. Drivers are paid per delivery and work in more than 500 U.S. cities. Walmart will act as a white label provider, meaning that the merchants’ branding will remain intact.

Smart Lockers Are Upending Parcel Delivery

The growth in ecommerce has fueled the demand for sophisticated delivery options.

Consumers are not always at home or at work to accept packages. Many seek contactless alternatives. Parcel pick-up facilities are increasingly common in malls, gas stations, transport hubs, and large retail stores. A driver can deliver multiple parcels to a secure location where recipients can collect their parcels at any time.

Pick-up facilities:

  • Lessen the burdens of door-to-door delivery.
  • Eliminate theft from so-called “porch pirates.”
  • Save fuel and maintenance expenses.
  • Reduce traffic and CO2 emissions.

In the U.S., FedEx, Amazon, UPS, DHL, and USPS together offer over 70,000 access points — drop boxes, carrier shipping centers, and third-party retail stores.

But smart lockers are driving much of the innovation in parcel delivery.

Smart Lockers

Smart lockers are similar to traditional mailboxes but with electronic access, security cameras, and cloud-based software. Online shoppers select lockers as the delivery method during the checkout and then receive access instructions — usually a QR or SMS code — to open the locker electronically.

Smartmile smart locker in the Netherlands. Source: LogmoreSmartmile smart locker in the Netherlands. Source: Logmore

Netherlands-based Smartmile provides smart lockers for delivery carriers and merchants. Image: Logmore.

“Parcel lockers are becoming popular because of the convenience,” says Tessa English, director, industrial and logistics, at Jones Lang LaSalle, a global real estate services provider. “Consumers have more control over when they pick up their shopping, rather than having to wait for deliveries or risk parcels being left in the wrong place.”

Global Rollout

Singapore, at just 281 square miles, will have 1,000 smart locker stations by the end of 2021. China has over 800,000.

DHL has 340,000 lockers in Germany, accessible by 90% of the population, and more than 3,700 in Spain and Portugal.

Across Europe, retailers have partnered with logistics firms for delivery to lockers. Decathlon, the world’s largest sports retailer with 1,500 stores, recently signed deals with Cleveron and Cubee (part of Belgium’s Bpost, the national postal service) to install parcel lockers.

Other providers are emerging. Netherlands-based Smartmile offers a network of lockers that sync with retailers and carriers. Customers choose their preferred delivery option at checkout and then collect their items via a text message code from their selected parcel machine. Smartmile’s CEO and co-founder Aku Happo said, “Our goal is to offer customers an easy and sustainable way to receive, return and ship all of their parcels from one location. Parcel lockers offer a contactless and convenient way to do it and are preferred by customers.”

DSV, a Denmark-based global logistics company, has installed 400 smart locker banks in South Africa. Customers are notified by SMS and email when parcels are ready for collection and can access GPS maps for directions.

Even Smarter

Autonomous ground vehicles equipped with parcel lockers will likely become commonplace. AGVs can deliver parcels without human intervention. AGVs loaded with parcels could park in designated delivery districts and otherwise function like stationary lockers. AGVs could reduce the high rental cost of fixed lockers and even provide Sunday delivery.

Refrigerated lockers for food orders are coming. New residential developments will likely include a block of lockers accessible by all residents. The lockers will resemble postal mailboxes, just bigger, more secure, and made for shopping.

Warehouse Automation Starts with Picking, Sorting, Packaging

Your fulfillment warehouse is growing fast. More orders are arriving in increasingly varied dimensions and quantities. Systems and processes are struggling.

Sound familiar?

You may be considering additional employees and space. Both are expensive. An alternative is improving productivity by automating some manual tasks.

The Case for Automation

Improving efficiencies and reducing the cost of human resources are the main reasons to automate.

Speedy movement of goods means lower management costs, improved revenue, and satisfied customers. Thus automation can start with materials handling, such as picking, sorting, and packaging. More than half of employees at a typical distribution center are involved with those functions.

Picking. Mobile robotic “shuttle” carts can automate the picking process. They travel the depth of racks to pick up or deposit pallets and can store and retrieve stock totes, trays, or cases.

Most shuttle systems are adaptive and scalable, making it possible to expand incrementally by adding additional aisles. Modern mobile carts greatly increase speed, storage density, accuracy, and throughput in ecommerce warehouses. Fully automated pallet shuttle systems using cranes can manage all types of storage and retrieval.

Here’s an example. Klingspor, a U.S. manufacturer of high-quality abrasive products, was quickly outgrowing its manufacturing and distribution center in North Carolina. The planned facility expansion was an ideal time to automate it.

Working with an equipment supplier, Swisslog, Klingspor deployed 16 automated guided vehicles supporting 962 storage racks, two pick stations, and one replenishment station — all using Swisslog’s CarryPick system, which integrated with the client’s warehouse management software. The setup has increased productivity and eased the demands of employees, who are now welcome automation.

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Sorting. Pocket sortation systems are not new, but they can streamline high-volume ecommerce facilities. They are especially suited to apparel, accessories, and most general merchandise.

The idea is based on a hanging garment sorter and adding a pocket to carry non-hanging goods. The system can sort and sequence pockets containing the exact order items delivered to the packing station in the desired order. It works well for orders of multiple items. The pockets and hanging garments can be mixed to serve apparel retailers with both garments and flat accessories.

Decathlon, a leading European sportswear company, needed a high-volume, compact sorting system as ecommerce sales increased.  The company chose a pocket sortation system from Düerkopp that extends across two halls and three floors.  The system can accommodate in pockets non-fashion items such as small rucksacks and camping articles.

Image of Düerkopp's EcoPocket pocket sorting systemImage of Düerkopp's EcoPocket pocket sorting system

Pocket sortation systems, such as this example from Düerkopp, can accommodate hanging garments and non-hanging goods.

Packaging. The manual process of packaging items for dispatch can be assisted by automatically applying labels and dropping the bags into a container. This semi-automated method can be replaced by a fully automated system when volumes demand it. Automated Packaging Systems and others offer inline solutions that include consumables such as environmentally friendly bags-on-a-roll.

Other technologies automate the boxing of items and the erection and closure of cartons. Machines can cut a box to size and automatically lid it. For example, WestRock’s BoxSizer is a smart packaging machine that automatically downsizes multiple footprint boxes, reducing packaging and dimensional weight, which saves labor, materials, and transportation costs. Highly fragile and high-value products can benefit from machines that scan the item in three dimensions and then build packaging around it!

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Sustainable Packaging Is a Competitive Advantage

Consumers concerned about waste in landfills and oceans are demanding sustainable product packaging. Environmentally responsible packaging can be just as cost-effective as conventional methods but may require a change in thinking.

Packaging is sustainable if it meets eight criteria, according (PDF) to the Sustainable Packaging Coalition:

  • Beneficial, safe, healthy for individuals and communities throughout its lifecycle.
  • Meets market criteria for performance and cost.
  • Sourced, manufactured, transported, and recycled using renewable energy.
  • Optimizes the use of renewable or recycled source materials.
  • Manufactured using clean production technologies and best practices.
  • Made from materials healthy throughout the lifecycle.
  • Physically designed to optimize materials and energy.
  • Effectively recovered and utilized in biological or industrial closed-loop cycles.

Why Sustainable Packaging?

Sustainable packaging can help your business reduce costs. The need to store materials is lessened if packages are designed and manufactured to fit your products. The same goes for shipping: Smaller parcels mean less space, leading to lower logistics expenses. And sustainable packaging can lead to loyal customers.

To implement:

Look at your current packaging. Can you use a smaller container, bag, or box and less filler? Overpackaging is a major complaint of consumers. Streamline your packaging and pallet designs using software from Esko’s Cape Systems, Tops Pro, or similar. All can help create optimal packaging sizes and shapes for your products.

Screenshot of Tops Pro software page from Tops SoftwareScreenshot of Tops Pro software page from Tops Software

Using Tops Software can optimize product packaging, saving materials and transportation needs.

Reuse and recycle packaging materials. Select packaging that uses recycled materials. Recycled cardboard and new paperboard (made from wood pulp) are lightweight. Both are easy to cut and form for making boxes. Bubble wrap made from corrugated paper can replace the plastic version. Consider cartons made from bamboo and sugarcane as well as containers made from recycled plastics.

Ritual, the multivitamin company, uses 100% recycled materials for all bottles. In 2020 Ritual recycled an amount of plastic equivalent to roughly 3 million water bottles. “We’re able to virtually ‘erase’ the shipping footprint from our warehouse to your doorstep via carbon offsetting,” states the company’s website.

Consider compostable mailers and plant-based packaging. Sustainable packaging from biological sources uses cornstarch, mushrooms — you name it. The T-Shirt Mill, an Iowa-based screen printer, ships orders in 100% compostable mailers made from wheat, straw, and other biomaterials. Jute and cotton make excellent reusable bags to deliver apparel and home accessories, for example.

SupplyCompass, a U.K.-based provider of sustainable supply-chain goods and software, states, “Our bio-based polybags have a shelf-life of 12 months and are 100 percent home compostable, disappearing in 6 months when disposed of in correct composting conditions.” Some packaging is even plantable — wrapping materials are embedded with seeds for planting at home.

Move away from plastics. Single-use virgin plastics can take up to 1,000 years to biodegrade. That is not sustainable. A much better option is biodegradable plastic, which breaks down from heat or light. However, it still uses petroleum, which makes it non-compostable. Air pillows made from recycled materials can protect delicate items and come in a variety of sizes. Sealed Air, a provider, encourages consumers to recycle its packing pillows at 18,000 retail store drop-off locations across the U.S.

Suppliers

There are many suppliers of recycled and biodegradable packaging. Look for providers that use raw materials from equally committed sources and otherwise seek to minimize their impact on the environment.

Ask for evidence of a potential supplier’s claims. Confirming those claims is important as communications to your customers must be true. Work with your chosen supplier to create unique solutions for your products.

TempGuard, a Sealed Air brand, provides 100% recyclable packaging for shipping temperature-sensitive goods. The product is constructed from heavy-duty craft paper with inner padding for superior insulating properties. Sunbasket, a San Francisco-based meal kit provider, uses TempGuard for its halibut and shrimp packaging. Adopting TempGuard has lowered Sunbasket’s shipping temperatures while reducing carton dimensions by almost 25%. The reduction enables 30% more boxes per shipment, cutting Sunbasket’s carbon footprint in distribution.

Screenshot of TempGuard from Sealed AirScreenshot of TempGuard from Sealed Air

TempGuard from Sealed Air provides 100% recyclable packaging for shipping temperature-sensitive goods, such as meal kits.

Emerging suppliers are doing more than provide the packaging. Many manage the entire logistics process, including returns. LimeLoop, for example, offers durable shipping pouches from recycled billboard wraps that can be reused as many as 2,000 times. Co-founder Ashley Etling says it is “essential we reimagine the packaging experience” for an ecommerce economy. Merchants ship orders in LimeLoop’s reusable packaging; the customer then returns the empty packaging via USPS to reuse.

Many consumers will pay more for sustainable packaging. Although Fiona Salter at Tiny Box Company, a U.K.-based sustainable packaging provider, says the costs are affordable. “Recycled packaging doesn’t have to be expensive, quite the opposite,” she said. Her company’s small craft boxes start at just £0.28.

Taking the first steps to sustainable packaging can seem daunting. Start slowly. Order samples within your budget to test against damage. Use with a few customers to establish practicality and ease of disposal. Evaluate the results, tweak as needed, and proceed.

How AI Powers Distribution, Logistics

Artificial intelligence is a list of instructions and rules that a computer needs to complete a task. Ecommerce examples include site search, product recommendations, and chatbots — all increasingly rely on AI.

But the distribution and logistics industries use AI, too.

AI in Distribution, Logistics

Procurement. AI is being used in procurement to lower costs. Large companies need to understand who spent what and with whom. AI algorithms are used in historical spend analysis to review, cleanse, and classify overall expenditures for improved sourcing decisions. Benefits include obtaining company-wide volume discounts, better supplier selection, and efficient timing of purchase orders.

Fulfillment. In distribution centers, AI-enabled inventory management aids decision-making on optimum stockholdings based on:

  • Sales trends over the previous years,
  • Projected or anticipated changes in product demand,
  • Seasonal fluctuations,
  • Potential supply-related constraints.

AI algorithms can forecast when orders will arrive, which means pallets can be placed in readiness in the most efficient positions.

  • Problem: Too much inventory.
  • Solution: Use AI to predict market demand and optimize stock levels.
  • Result: Lower holding costs, fewer disposals, more on-time deliveries.

Shipping. Leading distributors and transporters UPS, FedEx, and DHL use AI-powered tools to determine the most efficient routes for their fleets based on historical data. The tools forecast loads and streamline route planning and vehicle scheduling for faster deliveries. The result is faster deliveries, lower fuel costs, and fewer vehicles on the road.

  • Problem: Inefficient transport processes mean wasted time and money.
  • Solution: Optimize delivery routes for more on-time deliveries.
  • Result: Lower cost of fuel, reduced CO2 emissions, satisfied customers.

Sustainability. Fashion retailers strive to reduce the volume of returned goods from online sales. Inditex, a Spanish clothing company, is deploying AI capabilities for its Zara brand to suggest at the time of order the right apparel size based on a customer’s measurements along with his style preferences, such as loose or tight clothing. Reducing product returns means fewer items in landfills and a greener planet.

In the grocery sector, U.K.-based Ocado uses AI tools to prevent food spoilage. Food waste is a huge global problem. The United Nations’ Food and Agriculture Organization estimates that 1.3 billion tons of food are wasted every year, nearly one-third of all food produced. The Ocado Smart Platform applies AI to assess 20 million forecasts each day to maximize freshness and availability while reducing overstock and waste. AI also helps determine the optimal time for offering discounts.

Job Losses?

AI-driven solutions improve productivity and release people from mundane and unfulfilling tasks. But many observers worry that applying AI in warehouses and logistics may result in job losses. Not true. Any losses are likely balanced by new roles needed for the human touch. Thus AI will improve customer service while driving backend efficiencies.

10 Autonomous Robots for Last-mile Deliveries

The future is here, sort of. Companies have staked out urban landscapes to test autonomous last-mile delivery systems on the streets and mobile food delivery robots on campus sidewalks. Ultimately for ecommerce merchants, the results could mean faster deliveries with more options for their customers.

Here is a list of companies developing autonomous delivery robots and systems. Nearly all of these companies currently have live beta programs.

Starship Technologies

Home page of Starship TechnologiesHome page of Starship Technologies

Starship Technologies

Starship Technologies offers autonomous robots for stores, restaurants, and campuses. Starship robots can carry items within a 4-mile radius. Starship’s robots weigh no more than 100 pounds, move at pedestrian speed, and navigate around objects and people. The cargo bay is mechanically locked throughout the journey and can be opened only by the recipient with their smartphone app. The location of the robots is tracked, so customers know exactly the location of an order and receive a notification at the time of arrival. Services have been launched for Arizona State University, University of Wisconsin, Modesto (California), and Northampton (U.K.).

Nuro

Home page of NuroHome page of Nuro

Nuro

Nuro produces custom autonomous delivery vehicles for neighborhoods. Its main vehicle, the R2, features 360° cameras, Lidar, short and long-range radar, and ultrasonic sensors. Nuro has formed several partnerships in Houston: Domino’s for pizza deliveries, CVS for prescription deliveries, and Walmart for grocery deliveries. Recently, FedEx has made a long-term commitment to use Nuro’s autonomous bots for last-mile delivery at scale. Testing has already begun with FedEx in Houston.

Udelv

Home page of UdelvHome page of Udelv

Udelv

Udelv completed its first autonomous delivery on public roads in January 2018. Since then, it’s been developing automated delivery vehicles for retailers and shippers. The automated vehicles can drive on highways, carry over 800 pounds of payload, and gather operational data to improve logistics. Udelv recently partnered with Intel’s Mobileye, incorporating Mobileye Drive into the next-generation Udelv autonomous delivery vehicles called “Transporters.” The companies plan to produce more than 35,000 Mobileye-driven Transporters by 2028, with commercial operations beginning in 2023.

Kiwibot

Home page of KiwibotHome page of Kiwibot

Kiwibot

Kiwibot produces automated robots for a food delivery urban infrastructure. Initially, the startup provided food deliveries for the University of California, Berkeley. Now, the company also delivers to parts of the city of Berkeley, on the Stanford University campus in Palo Alto, and in San Jose. Since its start in 2017, Kiwibot has made over 150,000 deliveries. Its goal is to bring the cost of delivery down as low as possible and ensure that any product purchased can be delivered within an hour or less.

Eliport

Home page of EliportHome page of Eliport

Eliport

Eliport is a Barcelona-based start-up tackling last-mile logistics by providing fleets of small ground-based, robotic delivery machines for urban areas. These robots are autonomous, and they travel on pavements and in pedestrian zones at walking speed. Eliport robots can load and unload without human interaction.

TeleRetail

Home page of TeleRetailHome page of TeleRetail

TeleRetail

TeleRetail is a Swiss start-up developing Aito autopilot software and delivery vehicles, such as its Pulse 1, for automated urban, suburban, and rural logistics. The small Pulse 1 minimizes the energy and space requirements of local logistics while avoiding harmful emissions. The solar-powered Range+ version covers almost unlimited distances. TeleRetail’s main objective is to help main street shops and small businesses offer the same level of convenience as ecommerce giants such as Amazon. TeleRetail has been financed, in part, by grants, including $2 million from the European Space Agency.

Postmates Serve

Home page of Postmates ServeHome page of Postmates Serve

Postmates Serve

Postmates is a food delivery app and service owned by Uber. Its Serve robot is designed for safe, autonomous navigation on urban sidewalks. Serve navigates using Lidar and communicates with customers through an interactive touchscreen. Serve bots are all-electric with a 50-pound capacity. Serve’s initial launch has been in Los Angeles and San Francisco.

Robby Technologies

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Robby Technologies

Robby Technologies was founded by two PhDs, each with 15-plus years of experience in computer vision and robotics, and selected by accelerator Y Combinator in 2016. In 2019, Robby Technologies partnered with PepsiCo to deliver snacks and beverages via a fleet of self-driving Robby robots on the University of the Pacific campus in Stockton, California.

BoxBot

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BoxBot

BoxBot, founded by ex-Uber and Tesla engineers and backed by Toyota AI Ventures, is developing a last-mile delivery system for ecommerce packages and deliveries. BoxBot’s system includes self-driving delivery vans and automatic loading systems. Recipients can schedule their delivery at a time of their choosing (including evenings), giving ecommerce customers an option that helps them better plan their day and keep their purchases safe. When BoxBot’s autonomous vehicle arrives, customers receive a text message alert with a unique code they can use to retrieve packages from its parcel lockers. BoxBot currently has a partnership with logistics operator OnTrac.

Amazon Scout

Photo of an Amazon Scout vehiclePhoto of an Amazon Scout vehicle

Amazon Scout

Amazon Scout is an electric delivery system designed to get packages to customers safely using autonomous delivery devices. Scout bots are the size of a small cooler and roll along sidewalks at a walking pace. Scout initially launched testing to a neighborhood in Snohomish County, Washington. The autonomous delivery system has since expanded to Atlanta, Georgia, and Franklin, Tennessee.

Electric Vehicles Are the Future of Last-mile Delivery

The rise in ecommerce has catapulted electric vehicles to prominence. Concern about greenhouse gas emissions is driving the move away from diesel delivery vehicles towards trucks and vans using alternative power sources. Electric vehicles with a range of up to 150 miles are ideally suited to “last mile” deliveries, those with a limited radius.

The State of Washington has enacted ground-breaking legislation that sets a target for all model year 2030-or-later passenger and light-duty vehicles sold there to be electric. The new law is the most aggressive in the U.S. for moving to an all-electric future and puts Washington five years ahead of California’s 2035 mark. Fifteen other states, plus Washington, D.C., require all new trucks, vans, and buses to be electric by 2050.

EV Manufacturers

Auto manufacturers are competing with start-ups to produce the most efficient and “smart” electric delivery vehicles. Volvo, Freightliner, Tesla, and China’s BYD are among the companies producing heavy-duty semi-trucks for regional shipments. Volvo’s VNR design, engineered in Virginia, will have a range of 150 miles before needing a recharge of one hour.

Photo of a Volvo VNR semi-truck on a city highway.Photo of a Volvo VNR semi-truck on a city highway.

Volvo’s VNR semi-truck will have a range of 150 miles before needing a recharge of one hour. Image: Volvo.

Ford and GM are competing to launch the smaller electric vans for “last mile” delivery. Ford will roll out an all-electric version of its Transit van in 2022, and GM’s BV1 is slated for production later this year.

GM has launched a subsidiary, BrightDrop, to focus on last-mile products — vehicles, e-pallets, software. GM Chairman and CEO Mary Barra stated, “We are building on our significant expertise in electrification, mobility applications, telematics, and fleet management, with a new one-stop-shop solution for commercial customers to move goods in a better, more sustainable way.”

BrightDrop has reportedly received interest from multiple shipping and delivery services, with a firm commitment from FedEx.

A UPS subsidiary, UPS Ventures, is investing in Arrival, a U.K.-based manufacturer of EVs with advanced driver-assistance systems. UPS is buying 10,000 units from Arrival over the next four years for its North American and European fleets.

Rivian Automotive is a California-based start-up with direct backing from Amazon.

Amazon

According to Morgan Stanley analyst Adam Jonas, Amazon could become the world’s single biggest producer of CO2 emissions after China’s coal plants. However, Amazon claims it delivered 2020 more than 20 million packages in electric vehicles across North America and Europe.

The company plans to deploy 100,000 additional EVs by 2030, sourced from Rivian. It has started to road-test them in Los Angeles and San Francisco and aims to be in 16 U.S. cities by the end of 2021.

Amazon is working with Rivian to test the vehicle’s performance, safety, and durability in various climates and geographies. The current fleet of vehicles being tested was built at Rivian’s facility in Plymouth, Michigan, and can drive up to 150 miles on a single charge.

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