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Last Mile of Delivery is Focus of New JLL Study

Time:2016-03-15 20:36 Source:Supply Chain Management Review Writer:admin Click:Times

In the fast-paced world of e-commerce, timing is everything, more specifically timely delivery is. And there are few places that come to light more than in the context of last-mile delivery, which continues to be driven by mobile and online shopping, with consumers expecting tight delivery times whether it be same-day or 1-2 hours in some cases. And while the delivery-related aspects of last-mile delivery has received a ton of attention, an offshoot of that posited by global commercial real estate firm JLL is if retailers’ real estate, regardless of size, is a pro or a con in last mile processes.

 

That is a key theme from research issued today by global commercial real estate firm JLL.

 

“For retailers and pure-play e-tailers, getting closer to the end customer involves a heightened focus around cost and service and this means real estate decisions are critical,” said Kris Bjorson, Head of JLL’s Retail e-commerce Distribution group, in a statement. “The stakes are high and the right strategy has a heavy impact on a company’s overall brand identity. In order to achieve competitive advantage and refine the customer experience during the delivery phase, retailers need to refine their real estate strategies.”

 

In its research, JLL identifies four distribution real estate models geared towards omnichannel shipping and last-mile delivery, including:



-traditional fulfillment and delivery, or “shipping as usual” through traditional parcel carriers like FedEx, UPS, and DHL to deliver e-commerce orders, or outsourcing to a 3PL to handle fulfillment processes in which the 3PL manages inventory, fulfillment facility and warehouse management information technology that helps retailers focus on their core business. Another option it cited was what it called “warehouse direct strategies” in which a large retailer manages the direct-to-consumer relationship and fulfilled orders directly from their warehouse network through a parcel carrier or the USPS for deliveries;


-Dense, urban CBD delivery or branded delivery offerings like Amazon’s offerings like Amazon Fresh to its Prime Now quick-delivery service and Google Express, which JLL described as “infrastructure intense” in that they require vehicle fleets to make deliveries and small warehouses near dense population centers to minimize transportation costs. Other examples cited by JLL include Uber-fast delivery in Washington, D.C., in which it uses its driver fleet to deliver goods, and eBay now, which is comprised of local or regional courier companies;


-Shipping from stores and maximizing existing real estate by large global retailers that have the scale, system of stores and SKU volume to reach customers, and a “dark store” turned into a fulfillment center and is becoming an emerging concept in the U.S.––these locations provide a pick up location where customers pick up their orders and essentially becoming the last mile of delivery; and -future concepts like locker pick-up systems that are being tried out by retailers and online players and require heavy infrastructure to quickly fulfill orders from stores and fulfillment locations, and drone deliveries, which need to get regulatory clearance and pass operational-related obstacles

 

Aaron Ahlburn, Senior Vice President and Director of Research for the industrial and retail property markets for JLL’s Americas region, explained in an interview that the timing was right for this research, given that the topic of same-day and next-day delivery is very much in the headlines, as well as a consumer-centric topic. And in speaking with clients on both the retail and investor side have been inquiring about what they can do on a real estate basis to help enable them to meet heightened consumer demand.

 

“You see headlines about drones, next-day delivery, and next-hour delivery, which helped to get the wheels turning on this,” he said.

 

Another key theme of JLL’s research was for retailers to maximize the customer experience through delivery in a cost-effective manner through new real estate models.

 

In order for that to come to fruition, he explained that JLL will talk with customers about what their transportation costs are, as they are a heavy driver of a company’s total landed costs for any delivered product and outweighs a lot of real estate costs, as transportation, labor, and inventory costs can significantly outweigh the costs of warehousing and real estate.

 

“This leads to different retailers looking at different strategies, but it is really about how close they can get to their end consumer and customer in a cost-effective way,” Ahlburn said. “A retailer that is delivering a lot of soft goods that needs to have next-day delivery to really be competitive in a marketplace that has big players in it like Amazon and other big retailers with more scale in that case needs smaller distribution centers that are closer to bigger population centers to get goods to the end consumer very quickly.”

 

Establishing operations closer to key transportation hubs like intermodal centers and ports was also cited as a strategy for enhanced last-mile delivery, according to JLL.

 

Ahlburn said that in retail distribution this concept is very valid, especially with more activity occurring in close proximity to retail sortation centers that have access to air cargo.

 

“This has been happening for a while as retailers recognize the need for a strong parcel presence near airports,” he said. “That is why there has been a lot of activity in recent years on that front in places like Memphis and Louisville, which are secondary cities but have the benefit of being close to major airports.”

 

When it comes to the myriad strategies being deployed to become more efficient in last-mile delivery, Ahlburn explained there is still a lot of trial and error occurring in the industry, with retailers trying different models and seeing what works, what can be scaled up and what can be applied in different areas.

 

“They may not be able to deploy any one particular model but may end with a number of different models for consumers across the country,” he said. “A lot of retailers are figuring out what works for them so there is some of that trial and error, as well as finding what works best for them and building off of that for a long-term e-commerce strategy and what it takes to get to the end consumer. It is not necessarily a one size fits all concept. It really depends on the retailer and on the product and delivery to consumer more than anything else. That is why these different models really apply to any one particular retailer.”

(Editer:admin)

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