Image by Flickr user Tristan Honscheid

Same-day and home delivery–the technological hurdles

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Image by Flickr user Tristan Honscheid

A recent large-scale consumer survey by Ernst and Young found that the single greatest influencer to purchase for today’s consumers was delivery terms, beating even influencers such as promotional offers, physical store design, and strength of website.  Furthermore, almost 1/3rd of consumers were willing to pay a premium for instant or swift availability.

The Challenge: A Multi-Party Problem on a Massive Scale

It seems clear that eventually competitive differentiation and market pressures will require retailers to offer delivery that reaches from the local store to the home. This will require the ability to plan, collaborate, and coordinate with fulfillment partners & retail locations on different levels. To keep service levels high, retailers must be able to rapidly create the optimal plan for home-customer fulfillment, track shipments across multiple partner networks, and instantly share this data with their customers. Yet one of the biggest challenges to implementing a successful home delivery service for today’s global retailers is that traditional technology systems are ill-equipped to meet the problem.

The first technological limitation comes from the fact that successful home delivery requires multiple participants in the supply chain to transact and collaborate. It’s a complex operation: to be effective, the home delivery system should be able to track and manage customer orders, inventory in stores and distribution centers (DCs), a private delivery fleet, third party parcel carriers and logistics providers, and even “white-glove” installation and service partners—and do all of this  with minimal system latency.

Yet because retailers maintain separate vertical systems and databases, they can’t effectively integrate the critical demand, supply, and logistics data that home delivery requires. The result is lack of visibility and the inability to plan and coordinate with the customer as well as third-party delivery, fulfillment, and installation partners.

In addition to the inherent multi-party nature of a home delivery service, traditional systems also struggle to scale to meet the huge data volumes associated with online orders. It is nearly impossible for traditional supply chain management tools to sense and manage ever-changing demand signals in a home delivery model in real time.

Editors Note: This is an excerpt from a new whitepaper “Home and same-day delivery: how retailers can win on the next big battleground“.

Aaron Pittman