“The delivery economy” describes the transformation of retail, driven by customer demands for the highest possible level of service. But can companies provide it in an economic fashion? Christian Piller, vice president of value engineering with Project 44, offers a perspective.
SCB: How you define the “delivery economy”?
Piller: The delivery economy was the subject of a study that Project 44 did in 2019 to understand the sentiments of marketers, customers and transportation professionals, specifically around service expectations and the delivery experience.
SCB: Driven, I take it, by e-commerce.
Piller: Primarily, yes. But it’s becoming broader than that. E-commerce is generally B2C, but it’s increasingly also becoming B2B. Businesses are expecting the same experience in the office that they get at home. And it becomes an increasingly bigger challenge to meet those expectations.
SCB: Delivery promises have gone from a few days to same-day and even on the hour. Just how intense is it getting?
Piller: Sometimes it’s a couple of hours, where I order something in the morning and I expect it in the afternoon. In some cities, if I don’t get it in two hours, that’s somehow upsetting to me.
SCB: In order to make this delivery economy work for the service provider, who should be your partners, both internally and externally?
Piller: Internally, it’s always important to start off with marketing and sales. What are your particular customers looking for, and why? Then it’s partnering with transportation or distribution providers to make sure you have the capabilities to meet those expectations. Am I partnering with those who are going to help me meet my strategic goals, and ensure that my customers are serviced correctly?
SCB: It seems like companies are still very challenged by the first thing, the internal part. You have a lot of corporate silos that make it difficult to align different disciplines within an organization. Do you find that to be an issue, and does it need to be solved?
Piller: Absolutely it’s an issue, and absolutely it has to be solved. Data silos make it challenging. Whose data is right? Sometimes there are issues of the trust in the data. So finding the right data source, providing something that’s of high quality, complete and accurate, is definitely the first step in having those internal conversations.
SCB: The external part is a challenge in and of itself. In your survey, were a lot of companies finding it difficult to achieve alignment with their external partners?
Piller: They were. There are a lot of gaps in visibility. If I’m a transportation professional and don’t know that my truckload of product isn’t running on time, I’m not meeting expectations.
SCB: What are companies doing to enable this alignment, to deliver on customer expectations in the delivery economy?
Piller: One of the most important things is real-time visibility. It’s partnering with companies that are changing the way visibility is provided to transportation professionals as well as the broader supply chain. It’s connecting with carriers in a new way, through ELD [electronic logging devices] and telematics, taking things off spreadsheets and e-mails. Going from reactive to proactive.
SCB: Companies have claimed for years that they either have or are seeking end-to-end visibility in exactly the way you described. What makes it possible now to finally achieve that goal?
Piller: There are two things. One is the data. For the first time the data and technology are available to do that. The second piece is the delivery economy itself. Customers in the office are demanding the experience they have at home. And that experience is continually being improved — by Uber, by Amazon, even Domino’s Pizza.
SCB: Service providers are in business to make a profit. Yet we hear that a lot of one-day, next-day or same-day services aren’t bottom-line profitable — that companies are losing money on every one of those deliveries, but need to keep doing it to secure market share. How can the economics be improved to the point where it’s actually profitable to deliver at this high level of service?
Piller: It’s a great question. One of the answers is having true visibility into on-time pickup and delivery performance, and transit time. That all ties into inventory optimization models. With higher-fidelity data, companies are able to be more efficient than ever before. So they might take a dollar loss on a package, but if they know they can make it up in efficiency gains elsewhere, that could become a profitable enterprise, so long as they’re meeting their customer’s high expectations.
SCB: Some customers have said that speed isn’t the number-one priority. It’s visibility — the knowledge of when something is actually going to arrive.
Piller: It’s a menu of options. Everyone wants a different buying experience, and the providers that are able to offer a menu of services and deliver on them are the ones that will succeed.
SCB: What shape will the delivery economy take in years to come?
Piller: Companies are going to have to fundamentally change the way they do business. E-mail and spreadsheets will no longer work, and that’s going to take a lot of change management. With younger employees coming into the workforce, there’s going to be a big move toward digitization. And I do expect drones to be part of this at some point in time. Offering a one-hour delivery experience is fairly easy in the city, but if you’re delivering out to the suburbs, it’s maybe not so easy. It will be interesting to see how drones can bring suburban and even rural customers into the delivery economy.