FINAL MILE HOME DELIVERY: Employees or 3PL?
This year has been extraordinary in many ways. Unexpected challenges were thrown at large and small businesses nationwide, especially retail. First, the entire economy was impacted by a near-total shutdown of all business operations. As reopening occurred, significant pent up demand for home furnishings created a significant spike in retail sales. Many retailers and manufacturers had trouble keeping up with the demand that was placed on the supply chain.
E-commerce sales are still booming and by some estimates, they are up 400% (according to the HFA) creating significant demand on the retailer’s final mile delivery capacity. According to a recent McKinsey and Co. survey on US consumer sentiment, the change is referred to as the “HOMEBODY” Economy. The McKinsey survey shows that 68% of Americans are still not engaging in “out of home” activities. This is decreasing slightly as restrictions ease, but the vast majority of Americans continue to be cautious.
All this demand for stay at home activities will likely continue to boost Home Furnishings sales well beyond prior levels. Some forecasts call for this to continue well into 2021 or until a reliable and safe vaccine is available. Retailers will therefore need to continue placing a higher level of focus on how to enhance both delivery capabilities and their delivery capacity to meet this demand.
We believe the decision on how to execute final-mile delivery is one of the most important decisions a retailer can make. Furthermore, how you implement this change will have a profoundly positive - or adverse impact on your customer. With today’s enlightened consumer and their ability to share their experiences across multiple social media platforms, every company should consider making decisions in this area carefully.
As a business, your overall goal is to ensure delivery capacity, protect the company brand and earn repeat customer loyalty.
Whether you decide to either add a third-party logistics (3PL) provider to augment capacity or convert entirely to the 3PL delivery model, we think you should ask this question: “How will this change impact my customer and what steps can I take to maintain high quality?”
When you make the decision to convert to a 3PL model, it represents a major shift in your business strategy and delivery operations. Too often companies do not pay attention to the details and it can have serious consequences impacting both customer loyalty as well as the bottom line.
We would like to provide some insight and tips in three areas regarding your Final Mile home deliveries. Whether you deliver using a 3PL or with your own employee driver teams the Final Mile Delivery is the final touchpoint in the sales process.
Nothing tells your customer that you are a world-class company like a professional delivery experience.
1. What are the benefits of using a 3rd party Final Mile delivery service?
Here are just a few of the benefits:
You can free up working capital, as well as reduce truck and maintenance expenses
Your drivers become (IC’s) independent contractors (or employees) of a professionally managed third party.
You increase flex capability - the ability to scale up or down based on business requirements.
Expertise - if you hire the right 3PL who have been dedicated long term to Final Mile Home Delivery, you’ll be getting years of experience.
2. Thinking of outsourcing - What are some guidelines to follow?
Here is a quick list of things to consider before outsourcing:
Know how to set up the contractual requirements - the best way to do this is with a well written (RFP) Request for Proposal.
Interview and screen your 3PL much like any other business outsourcing contract.
Know what questions to ask. A well written RFP will include equipment, manpower, insurance, background screening and performance standards.
Managing the 3PL - even though you’ve outsourced your deliveries, you still need a dedicated infrastructure to interface daily with the 3PL and monitor performance.
3. What is the best way to measure your delivery service outcomes?
Here are a few things to consider when measuring your delivery outcomes:
Are your teams trained and dedicated to your account?
Are your delivery trucks branded with a logo - drivers in uniform with proper identification?
Is someone on-site - training, dispatching and monitoring stops and time window execution?
Are you using tracking technology to hit the required 2-4 hour window with real-time visibility and tracking?
Is a customer survey being taken by either your carrier, your staff, or online?
Is there a performance standard in place from the surveys and are they shared with the delivery teams?
Are you monitoring and measuring your Damage Claims and Returns Rate?
Many leading companies - large and small - are monitoring their Net Promoter Scores (NPS) or ratings from their customers at the point of sale. We believe this same level of focus needs to be applied to the Final Mile Home Delivery.
Measuring your in-home delivery experience through a formal survey process is key to maintaining overall quality and high customer satisfaction.
Profit Chain’s team of business advisors are here to help you get answers to your Final Mile Delivery questions. We have years of hands-on experience in successfully managing Final Mile Home Delivery operations while achieving Net Promoter Scores of 90+ at leading Top 100 furniture retailers.
We can help you turn your customers into Raving Fans!
If you have questions or need assistance evaluating your current Final Mile delivery operation, schedule a free consult now:
Profit Chain is a management consulting firm specializing in supply chain and logistics operations for the Furniture, Mattress and Appliance industry. We are helping clients across the country make informed decisions in Distribution, Home Delivery, and Customer Service. For more information please visit our website to schedule a free consultation.