UK ecommerce continues to grow, driven by improved online shopping experiences and widespread internet and smartphone proliferation. As customers choose the convenience of deliveries straight to their door, last mile logistics enjoys a boom and companies in this area expand. However, scaling up is not without challenges. Prime your logistics business for future growth with a strong digital infrastructure, ensuring you can meet growing customer demand without sacrificing profitability.
E-commerce drives last mile demand
The entire logistics industry is growing, but the outlook seems particularly sunny for last mile delivery; the leg of the logistics journey that involves shipping directly to final location. While last mile does encompass transportation from warehouse to retail outlet, its surge in the past few years has been driven by the rise of online shopping and direct to consumer shipping. Taking purchases directly to consumers proliferates the end points of the supply chain – meaning last mile deliveries increase exponentially.
As a result, delivery companies are hot property for investment. Take the recent takeover of Evri by private equity firm Apollo Global Management, which comes with plans for 9000 new UK hires.
However, though the story seems promising, the relationship between customer demand and profitability is not always a direct positive correlation...
The expensive final leg
Unlike the middle stages of a supply chain journey, where bulk transportation and large shipments decrease overheads, efficiency decreases as products reach their destination. the last mile can make up to half of a product’s delivery costs, especially when shipping direct to consumers, where the goods are of small value compared to the expense of drivers, vehicles, packaging and fuel. Revenue margins on packages are notoriously low. Therefore, whilst the growth in e-commerce and deliveries might seem like an unmissable opportunity, businesses must be cognizant of ensuring this translates to profit in this operationally expensive line of business.
Scale up efficiently
There is no one easy answer to maximising last mile profitability. Success will be a culmination of savvy forward planning, uptake of innovative new technologies and carefully chosen areas for expansion. For example, growing organisations might choose to build new last mile hubs in densely populated areas, or invest in technologies like drone delivery.
Businesses embarking on an expansion journey must ensure their digital infrastructure is primed to power growth. Strong, unified software solutions should handle operational processes like procurement and workforce management, allowing staff members to focus on the strategy of scaling up. They also gather and store data in a single source of truth, facilitating informed decision making when investing for growth, and providing clear oversight of any inefficiencies. The right software reduces mistakes and wasted time when conducting the inevitable operational tasks involved with rapid progress.
When recruiting new staff, for example, it is vital that payroll is streamlined, HMRC compliant and fit for purpose; ready to onboard new employees quickly and easily and ensure that payments remain watertight. More deliveries mean more staff schedules that need to be spun up, fast and efficiently – which is where investing in auto-rostering can be the difference between hiring new operational managers or thriving with a streamlined team.
As a business expands, it is vital to have full oversight of costs, to decide where investment is required and ensure new projects meet past standards. A strong time and attendance software solution with job costing functionality allows you to compare planned tasks and budgets with those already achieved, and cost control over multiple contracts and sites.
Preparing for growth without investing in a strong digital infrastructure is a false economy, as a portion of rising revenues will be lost to preventable inefficiencies.
Scaling up last mile logistics requires a strategic approach that balances expansion with profitability. Investing in digital infrastructure and leveraging technology is key to achieving success. By focusing on efficiency and resilience, logistics operations managers and C-suite executives can push their businesses forward in the competitive e-commerce landscape.