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The majority of established enterprise businesses involved in the delivery of products or services to end consumers are rational, logical and economic.
That is, they have structured their businesses, supporting processes and structures to optimise their efficiency by delivering in the most logical order; maximising the usage of their scarce and expensive delivery or service personnel. They do this because they want to make the most amount of operating margin possible to what is usually a fixed amount of income to deliver that service.
These businesses have been honing these processes and operations using lean principles, six sigma reviews and other continuous programs for years. It’s ingrained into their DNA that this is how it’s done. This is the most efficient and economic way possible for us to deliver this product and service to our consumers.
So far so good. Unfortunately not, because these businesses are no longer in control.
The consumer is now in control.
The challenge is that the end consumer is increasingly irrational, emotional, uneconomic - and now in control. They no longer accept waiting to be told when a delivery is going to be made. Consumers won’t wait in for more than an hour or two, let alone half a day. They get very upset if you miss a time slot you were aiming to make, often taking to social media to broadcast their disdain about how you’ve ruined their day through your inept management of complex logistics.
Your contact centre is rung incessantly, costing you a small fortune in the process, just to double and triple check that you’re still on your way, even before you were meant to arrive. They certainly don’t give a shit that changing where they want something delivered in the last 30 minutes before delivery is simply uneconomic for you within your fixed cost structure and tiny operating margin. That’s your issue.
Unfortunately they’ve learnt that there are other companies out there, even ones who aren’t direct competitors to you, that can deliver to this challenge. So they now expect it from you.
“But [insert upstart high growth unprofitable company name here]’s business is unsustainable and uneconomic” you cry. Again, unfortunately this is your problem. High growth companies have investors with no expectation of receiving a return or a profit anytime soon. They value growth and market share above all else. They know that at some point in the future, these businesses will have killed off incumbents; attacking their inability to adapt, flex and change due to an investor set that does still expect an annual dividend.
For, once the old-guard competitor is dead, margins can be gradually recovered at a volume scale that was not previously available. These mega-sized companies are rapidly emerging in different segments. The category kings who dominate and suck all the economics out of a sector.
So if you’re sitting in a company that is dealing with these issues now, what can you do?
The good news is there’s a short window of opportunity to up your game; to bring transparency to the end consumer, even though you may not (yet) be able to give them control.
Give them the tightest ETA time slot you can reasonably achieve 90% of the time. Then allow the consumer to keep constantly updated on their terms, through their preferred channel of communication, be that messaging apps, text messages or emails. Ensure it’s possible to receive a response from them through that channel (because email@example.com indicates you're not someone they’ll ever want to do business with again) and otherwise they’ll call you; they really don’t want to and neither do you.
Bringing this real-time transparency and continuously improving it will save you millions in costs per year. It’s at this point when it’s crucial to reinvest those savings into looking to restructure your operations, shift patterns and processes so that you can deliver when your customer actually wants you to, not where you’re forcing them to.
You’ll be pleasantly surprised by the convenient patterns for delivery timings that emerge as humans are very habitual characters. If you orient your business to these patterns, you’ll find that it is indeed possible to service the irrational, emotional customer in a sustainably economic way.
Tim Andrew, Co-founder & CEO Localz
Download our 2018 State of the Last Mile research here.