Top E-commerce Companies Losing Money but Still Winning the Last Mile

In ten years, Amazon’s fulfillment and shipment costs jumped from a collective share of 16.6% share of total logistics costs to 26.4%. The company had $25.2 billion in fulfillment costs and $21.7 billion in shipping expenses, in 2017.

This is the case with all major retail and e-commerce players. Yet they have an unwavering focus on last mile delivery success. They are continually working on the magic combination to beat last mile hassles and turn it into a primary customer retention tool.

Amazon commented in their 10-K report,

“We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. If we are not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact our operating results and customer experience.”

It’s clear that the logistics cost is taken as an ambitious investment to win customer satisfaction.

Amazon’s prime day upped the utilization of their fulfillment centers by over 25%. They have made their logistics leg into a powerhouse which they keep leveraging to get ahead of the competition. Early this year they indicated a possible launch of a delivery service offering completer shipment and package movement solutions. It didn’t come to much but now it Amazon is stuck in a two-way race (the other one being Apple), to reach the $1 trillion valuation mark. It does seem offbeat that at one hand they are losing money and on the other, they are continuously building value, much more than any other company. What’s the key here?

Yes. Its Technology Backed Last Mile Delivery Optimization

The idea is simple. Offer the customer a stellar promise of fast and on-time deliveries with superior delivery movement visibility so that they know the exact time they would receive their order. Customers have matured, even if their product experience isn’t up to their expectations, they are less likely to blame the e-commerce or retail player for that. These players would be judged on their ability to hold THEIR promise, which was fast, safe, on-time delivery with timely order movement updates and visibility. This would make the customers come back more often than not.

The way to do this, as we have said many-a-times before, is technology-backed last mile delivery optimization. Last mile deliveries aren’t as simple as pick up and drop of a single item. There are millions of orders moving at any point and large companies like Amazon, Walmart, Target, and Alibaba, manage their diverse distribution networks to move the packages quickly without any detention.

With LogiNext’s delivery scheduling and route planning they have a system which assigns the right package to the person and vehicle best-suited to delivery it on-time, optimizes the capacity of the vehicles to carry more packages in a safe manner, sets a delivery route which covers more orders in a single trip along shorter routes avoiding local traffic, cutting down on overall turnaround time, and then running the same process better each time. The last part is due to the fact that LogiNext’s proprietary planning algorithms are infused with machine learning capabilities. This means that the system betters itself each time it is run.

The results are pretty clear. The companies utilize their resources far better, move more orders along shorter and faster routes, saves cost and time, delivers more, and has complete visibility and control over the logistics movement. The customers get what they were promised, timely deliveries and a pleasant experience. Moreover, the live tracking and notifications give the companies the necessary responsiveness to be agile in a dynamic last mile delivery world. They can reroute active trips, update ETAs, manage random pickup requests or service disruptions like vehicle breakdowns, etc. All this is communicated to all stakeholders immediately through notifications and alerts.

Proper Logistics Optimization is a Long-Term Winning Strategy

The technology is sound. Companies that inculcate them better, win more often. They go on to take in rising logistics costs as an advantage to perform against the odds. This gives them the highly desired ‘edge’ over the competitors who didn’t use technology that well. You see the logistics costs and last mile delivery complexities are the same for all, companies that solve them more efficiently would get ahead.

It should not be considered a problem for logistics managers, but an opportunity for the entire company. If you are focused on serving the customers better with a quality delivery experience, it takes a thought and tech alignment of the entire company. A winning strategy, in which last mile delivery tech is a key part, is best applied when all the internal stakeholders of a company are equally invested in it. So, it’s important to know that WHY this tech is so important to the well-being of the company. It adds to its overall vision and mission.