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Transportation
strategy for last
mile delivery
George Kochumman
Senior Manager, Transportation
Chainalytics
August 21, 2015
Chainalytics
Introduction
Carrier Selection for Last Mile
TMS for Last Mile
Last Mile Strategies
Sample Projects
Co...
Chainalytics
Survey Question
You would like to place an order for grocery at 10:30 AM on a
given day at online website ABC.com. The del...
Introduction
Last Mile delivery ranked high in terms of complexity because of the
high number of customers who need to be ...
Types of Carriers
Shipper tenders
individual
loads/multiple loads
to a logistics
provider. Costing
done at a per
load/per-...
Advantages
1. Allows you to focus on core
competency and not
Transportation Management
2. No headache managing fleet
opera...
Last mile – private vs dedicated vs common carrier
• Private fleets ranked high when it comes to better service and
lower ...
Gartner Magic Quadrant - TMS
TMS Selection – Important points to consider
1. Seamlessly integrate with your existing order management system
2. Generat...
Last-Mile Strategies
 Optimize your last mile delivery using a
transportation software like JDA Transportation
Modeler/ M...
Fleet Analysis
 Change modes
 Change size of fleet
 Cross-divisional consolidation
 Consolidation strategies
 Demand ...
Fleet Analysis Inputs and outputs
Inputs
 Demand forecast (transaction-level data)
 Carrier tariffs, fleet costs, capaci...
Last mile strategies - continued
• Postponement
• Wait till multiple shipments are available and they can be shipped at an...
Last mile strategies - continued
Use private fleet for reverse logistics
A recent project where a company wanted to
use it...
Last-Mile and Local Fleet Projects
COMPANY OBJECTIVE RESULTS
Foodservice
Distributor
 Realign service territories to DCs
...
Fleet Strategy Case Studies
COMPANY OBJECTIVE RESULTS
Grocer  Determine fleet savings from better planning in one
region ...
To summarize
Select a TMS that would work for you
Decide on the type of carrier you would want to service your network –
f...
For more information on e-commerce and technology solutions
from selecting the best TMS to transportation optimization
Con...
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[SCPC 2015] Transportation Strategies for Last-Mile Delivery

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Originally presented by George Kochumman, Senior Manager of Transportation at Chainalytics during the Supply Chain Practitioners Council in Bangalore. Presentation explores how e-tailers are meeting the transportation challenges of last-mile of delivery to customers in real time and key transportation strategic approaches.

For additional information visit http://www.chainalytics.com

Published in: Retail

[SCPC 2015] Transportation Strategies for Last-Mile Delivery

  1. 1. Transportation strategy for last mile delivery George Kochumman Senior Manager, Transportation Chainalytics August 21, 2015
  2. 2. Chainalytics Introduction Carrier Selection for Last Mile TMS for Last Mile Last Mile Strategies Sample Projects Conclusion Agenda
  3. 3. Chainalytics
  4. 4. Survey Question You would like to place an order for grocery at 10:30 AM on a given day at online website ABC.com. The delivery windows that ABC.com provides are 6 AM-10 AM, 10 AM-2 PM, 2 PM-6 PM and 6 PM-10 PM. Assume that your order is not urgent. Which option below would you choose? 1. Time window of 2 PM- 6 PM on the same day – 0 % discount 2. Time window of 6 PM - 10 PM on the same day – 5 % discount 3. Time window of 6 AM - 10 AM on the next day – 10 % discount
  5. 5. Introduction Last Mile delivery ranked high in terms of complexity because of the high number of customers who need to be serviced within tight delivery windows. Think about this as doing a “continuous optimization” Hit density – how many deliveries can be made within a given timeframe Lessons learned from our consulting engagements; I would like to cover 3 aspects: 1. Type of carriers best suited for last mile 2. Transportation Management System (TMS) for last mile 3. Last Mile strategies
  6. 6. Types of Carriers Shipper tenders individual loads/multiple loads to a logistics provider. Costing done at a per load/per-km basis For-hire carriers Shipper owns the fleet. They buy the trucks/trailers and have to pay wages to drivers Private fleet Shipper enters into a contract with a third party logistics provider to provide transportation services. Trucks/trailers/ drivers are leased by the shipper Dedicated fleet
  7. 7. Advantages 1. Allows you to focus on core competency and not Transportation Management 2. No headache managing fleet operations 3. Can easily handle seasonal spike in volumes Disadvantages 1. When there is a capacity crunch in the market, you may not find a carrier to haul your load and even if you find one, it could be very expensive 2. Service levels lower compared to private/dedicated fleet Advantages 1. Don’t have to bother about Transportation Management 2. “Flex” capacity available, can take care of seasonal spikes 3. Service levels similar to private fleet Disadvantages 1. Expensive compared to private fleet Advantages 1. Better customer service 2. Guaranteed capacity 3. Scheduling flexibility Disadvantages 1. Capital intensive 2. Fleet operation management 3. Human resource challenges Private fleet Dedicated fleet Common carrier For-hire carriers Types of Carriers What type of carrier do you think is best suited for last mile delivery ?
  8. 8. Last mile – private vs dedicated vs common carrier • Private fleets ranked high when it comes to better service and lower cost • For-hire carriers ranked high when it comes to higher capacity and less effort • Dedicated fleet sort of in the intermediate. You pay a margin to the provider so usually not as cost effective compared to private fleet Chainalytics previous consulting engagements have shown that for last mile delivery private/dedicated carriers tend to win when the average Length of Haul (LOH) is short and when a backhaul is usually available. And for-hire carriers tend to win when the average LOH is long.
  9. 9. Gartner Magic Quadrant - TMS
  10. 10. TMS Selection – Important points to consider 1. Seamlessly integrate with your existing order management system 2. Generate optimized routes respecting time windows, capacity constraints etc. 3. Reduce overall transportation costs using efficient route planning 4. Better reporting that gives total miles traveled, total costs, total time 5. Visualization aspect – can project the routes on a map
  11. 11. Last-Mile Strategies  Optimize your last mile delivery using a transportation software like JDA Transportation Modeler/ Mercurygate Optimizer  Use a multi-drop strategy for one-to-many (DC to customers)  Use a multi-pick strategy for many-to-one (vendors to DC) – think reverse logistics  Use consolidation strategies (combine multiple small shipments into a single large shipment)  Use a consolidation/deconsolidation center (Hub) Can we reduce costs or improve service using an alternative shipping strategy? Fleet Analysis vs.
  12. 12. Fleet Analysis  Change modes  Change size of fleet  Cross-divisional consolidation  Consolidation strategies  Demand shifts  Adjust delivery windows  Open and/or close facilities  New service requirements What-if Analysis Considerations  Network and cost trade-offs  Numerous potential assets routing possibilities vs. the one-way carrier costs  Must look at both cost optimisation and repeatability of asset utilisation to ensure value through the year  Costing and analysis need to be objective and free from bias of the outcome (De)ConsolidationPoint-to-Point Rates Private/Dedicated Fleet ?
  13. 13. Fleet Analysis Inputs and outputs Inputs  Demand forecast (transaction-level data)  Carrier tariffs, fleet costs, capacities and service levels  Business constraints  Equipment and facility profiles  Potential routing and carrier options Output Examples  Total transportation costs  Mode selections  Detailed loads and trips  Fleet capacity usage Optimization Engine
  14. 14. Last mile strategies - continued • Postponement • Wait till multiple shipments are available and they can be shipped at an overall lower cost • Peer-to-Peer Collaboration • Identify like minded companies and figure out lane matching opportunities • Transportation Management System (TMS) • Select a TMS that can handle your network complexity • Fleet sizing • Determine optimal number of fleet assets you should have • Fleet location • Determine domiciles or depots where you should be locating your fleet • Centralized logistics planning vs decentralized • Determine whether centralized planning or decentralized planning would work for you • If you are starting out fresh in fleet operations for last mile – determine a location that would serve as a POC before implementing the strategy over your entire network
  15. 15. Last mile strategies - continued Use private fleet for reverse logistics A recent project where a company wanted to use its private fleet to pick up vendor products • The fleet was going to a location, delivering a load and coming back empty • There were vendors on the way who were shipping products directly to the company • The cost paid to the vendors included the cost of the products plus a cost component for transportation • Company saw an opportunity to save on these vendor shipments by using its private fleet
  16. 16. Last-Mile and Local Fleet Projects COMPANY OBJECTIVE RESULTS Foodservice Distributor  Realign service territories to DCs  Identify opportunities to consolidate DCs  Identified millions in savings using multiple strategies Medical Waste Disposal  Identify a routing and scheduling solution to optimize routes of its fleet in metro areas while meeting strict time windows  Develop requirements and demo scripts; host RFP  Identified two viable solutions with which to conduct a Proof of Concept  Client selected the tool which met its needs Wood Mouldings  Select a routing system that handles complexity, including Sales & Merchandiser routes  Develop requirements and demo scripts; host RFP  Identified routing solution to coordinate the sales and merchandiser routes Natural Gas Distributor  Develop territory plan for technician network  Evaluate requirements for demand over five years  Re-aligned network for future demand with 4%+ savings Furniture Manufacturer  Select a TMS to manage operations, including white glove, LTL, TL, parcel, and cross-docks  Develop requirements and demo scripts; host RFP  Client implemented a TMS and realized the value it identified Architectural Products  Assess process, systems and organization to reduce LTL network damage  Developed a multi-stop TL solution
  17. 17. Fleet Strategy Case Studies COMPANY OBJECTIVE RESULTS Grocer  Determine fleet savings from better planning in one region as a POC  Identified savings from shifting CC loads to Fleet Food Manufacturer  Find value of current private fleet add value  Potential to increase fleet value by $1.5M by resizing Food Manufacturer  Find optimal size and location for fleets  Identified $7-13MM in savings by re-aligning the fleet 3PL  Select a TMS that handles fleet complexity  Determine requirements and host RFP  Client selected tool to meet its various needs Paper Manufacturer  Assess practices, rates, and model the network  Identified $8-10MM in annual savings Discount Retailer  Perform diagnostic analysis potential future state  Identified $15-20MM in savings Forest Products  Determine impact of centralizing logistics planning  Implemented numerous initiatives Food Wholesaler  Determine savings from changes in practices  Compare current practices and systems to best-in-class  Identified $4.5MM in savings Snack & Beverage Manufacturer  Analyze benefit from centralized transportation planning across divisions  Significant savings by shifting to more dedicated fleets
  18. 18. To summarize Select a TMS that would work for you Decide on the type of carrier you would want to service your network – fleet versus for-hire carriers If you choose fleets, determine optimal size of fleet and fleet location Look at different optimization strategies – including fleet analysis and consolidation analysis Look at postponement and peer-to-peer collaboration
  19. 19. For more information on e-commerce and technology solutions from selecting the best TMS to transportation optimization Contact George Kochumman gkochumman@chainalytics.com or visit www.chainalytics.com

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