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E-commerce Boom Making Last Mile In Supply Chain More Challenging

An increase in the use of e-commerce has asked questions of some delivery companies

12Sep

Dog attacks on US postal employees are on the rise. In 2015, officials say they increased 14% to 6,549. According to USPS spokesman George Flood, the reason behind this is a ’double-digit increase’ in the number of packages they are having to deliver for online retailers. The postal service delivered 4.5 billion packages last year - almost 50% more than the 3.3 billion they delivered in 2011.

As delivery companies seek to provide the kind of quick, secure, and personalized service that customers now expect, the entire industry is being reshaped. And dog attacks are not the only consequence of the online retail boom making delivery man look an especially unappealing career path at the moment. Delivery drivers are faced with falling pay, longer hours, and limited job security as logistics companies and retailers compete to get products to customers as quickly as possible.

Hermes in the UK is a recent example of a delivery company that appears to have lost its way amidst this competition. Hermes delivers parcels for major UK retailers including John Lewis, yet investigations by the Guardian newspaper have revealed that some of its delivery drivers are earning below the national living wage of £7.20 per hour for people aged 25 and over.

Hermes uses 10,500 self-employed drivers who it pays per parcel to deliver packages for high street retailers. Hermes argues that because the couriers are self-employed they are not legally obliged by the national living wage. This is one of the consequences of the so-called gig economy, where jobs are promoted as providing flexibility, but in fact offer no sick or holiday pay, employers don’t contribute to national insurance or pensions, and responsibility for any downtime or unexpected hitches is passed on to individuals, all of which is good for profits but makes for highly stressed and overworked employees.

The ‘last mile’ is vital for online retailers. Delivery is usually the only personal face-to-face interaction between the e-commerce merchant and customer, and is one of the few ways e-commerce merchants can differentiate. A highly stressed and overworked delivery person has a direct knock-on impact on the retailer. When the likes of Hermes leaves a package in your wheelie bin, it is not only them who gets the blame, it’s the company that outsources to them. When a delivery driver leaves a package on a roof, it is not done so out of spite, it’s done because many simply don’t have time. Equally, however, to say that is simply a case of profiteering would also be wrong. Even customers in remote areas now expect next day delivery, at a bare minimum, and they expect it for the kind of everyday goods that would once have seemed ludicrous to order online. The delivery cost involved in servicing these remote areas can often exceed the cost of the goods themselves, leaving them with a sort of Sophie’s choice between not delivering to sparsely populated areas and making a loss on a sale.

According to a recent eMarketer report, 2016 will see total retail sales across the globe reach $22.049 trillion up 6.0% from the previous year. Retail e-commerce sales in North America will rise 15.6% this year to reach $423.34 billion. Logisticians need to meet this problem head on and look to technology to provide the kind of lasting solutions that that will be ensure that they can cope with this uptick, If they are to continue to be trusted by the major retailers - as Yodel apparently still is by Amazon and Hermes is by John Lewis - they need to treat their drivers well, or customers will start moving to competitors that provide parcels where they need to be, when they need them to be there, and do so with a smile.

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