Northwestern University Transportation Center Hosts ‘The Fight for the Last Mile’

Global e-commerce business to customer sales exceeded $1 trillion in 2012 and are a driving force behind the competition to capture last (or final) mile goods’ delivery to customers.  With this transformation underway, retailers are working to optimize supply chains for omni-channel retailing (in-store, online-direct to home or business, and in-store pickup of online purchases), while online-only retailers seek to improve their distribution channels as well.  In parallel, steady technological advances in mobile communications, cloud-based computing, computing power, real-time information systems, and real-time routing systems, among others, are enabling incumbent delivery services to improve operations and offer new services (FedEx, UPS, etc.), information technology companies to offer same-delivery services (Google, EBay, etc.), and new entrants to offer competing services (Zipments, Instacart, etc.).

On October 29, Northwestern University Transportation Center Business Advisory Council member, Lee Clair, chaired the Center's The Fight for the Last Mile Industry Workshop brought together faculty, students, and industry partners to discuss start-of-art technology, operational strategies, and forward-thinking ideas guiding the last mile challenge. 

Hani Mahmassani

Hani Mahmassani

While highlighting novel last-mile delivery services around the world including bikes, motor-scooters, and trolley-pulled cargo trailers, William Patterson Distinguished Professor of Transportation at Northwestern and director of the Transportation Center, Hani Mahmassani, showcased the value of predictive analytics in urban routing for time-sensitive pick-up and delivery, and the ability to change routing in real-time based congestion, disruptions, weather, and changing customer demands.  The potential benefits of predictive, real-time routing include: improving information utilization; reducing operation cost; increasing customer satisfaction; and continually evaluating the efficiency and effectiveness of city logistics services.

In contrast to the potential efficiencies to be gained during the final delivery process, John Fitzgerald, Global Business Development for GTNexus, proclaimed, “actually the first mile matters too.”  He pointed out that a majority of supply chain management is not yet real-time, but based in reality on spreadsheets, emails and phone calls.  He described GTNexus’ web-based information platform, which enables communication among warehouses, distribution centers, and stores among different companies, thus providing visibility further back into the supply chain. 

Fitzgerald provided an example in a retail setting (such as Pottery Barn). With full supply chain visibility, a store sales representative can give a customer the exact manufacturing stage or shipping location of a product order (for an out of stock, back-ordered item) and a reliable delivery date – a customer service proposition that requires a connected information system.  Getting to the last mile, according to Fitzgerald, will require “agile commerce – flexibility using real-time information.”

Jeff Starecheski

Jeff Starecheski

Is the new norm going to be free or cheap?,” asked Jeff Starecheski, Vice President of Logistics, Sears Holding Corporation.  Time for delivery (same-day, next-day, or deferred) is less important than free or low cost delivery in the realm of “the anything, anytime, anywhere commerce experience,” according to the logistics leader.  

Buy-online-pick-up-anywhere, tablet and smartphone shopping, faster delivery, and blurred lines between social and commercial experiences are the trends in retailing witnessed by Sears.  Although faster delivery may be the trend, Sears does not see customers clamoring for it.  Therefore, rather than following the “shiny” objects such as same day delivery or delivery lockers, Sears instead is focusing on customer service and process improvement strategies: ship to home; buy online, pick-up in stores; and online order fulfillment speed.  For the last strategy, Sears is turning 25 stores into fulfillment centers, and expects to provide 86% of customers with 1-day ground delivery, or 99% of customers with 2-day delivery via UPS from these “Cheetah” stores. 

Garrick Pohl, CEO of Zipments, is confident in his company’s service. He describes Zipments as “Fedex’s younger, faster, better looking sibling.”  Zipments is using crowdsourcing to re-invent the courier delivery business in urban areas by creating a network of individual couriers and courier companies.

Zipments’ technology platform connects couriers with customers, enabling direct point-to-point delivery that relies on the ingenuity of the couriers themselves to find the optimal paths – no routing network analysis required…yet.  Pohl claims that in urban settings this is more efficient and cost effective than the hub and spoke delivery networks used by the traditional parcel carriers.  Not only does Zipments hope to reinvent the urban delivery experience, it also hopes to help local courier companies remain competitive and economically viable in a dynamic service segment. 

The Workshop’s last speaker, Maciek Nowak, Associate Professor, Quinlan School of Business, Loyola University and faculty affiliate of the Transportation Center, focused on human resource strategies.  His thesis is that service quality and driver efficiency in the delivery industry may be enhanced by increasing the regularity with which a driver visits the same set of customers. 

As demonstrated by Nowak, some industries, such as home health care, value driver familiarity more than others.  In other industries, daily customer variation is mixed or quite high, time delivery windows vary, order mixes may vary, and each may value consistency of the delivery driver differently.  With this in mind, Nowak showed that multi-objective routing models can achieve a balance between workforce management and travel distance goals and that workforce management principles (driver consistency) may be successfully applied without sacrificing other operational objectives.   As companies navigate among different categories of customers or delivery mixes, he noted that companies must deploy work around software or change software to deal with real-time changes. 

Even with extended horizon planning advocated by Professor Nowak, there remains an opportunity to further develop techniques to deal with dynamic changes in a real-time environment, as highlighted by Professor Mahmassani at the outset of the program.