Open links to jump to page content
Final Mile

Cutting supply chain costs with technology - To deliver real savings in the last mile you need a smarter way of working

Time. Efficiency. Workforce management. Keeping the supply chain running smoothly is never easy. For many, it’s the hardest part of running an entire organisation. Each step of the supply chain is important in its own right. But they all contribute to the one thing that every business needs to control: cost.

The most effective place to make savings is the last mile. It accounts for 41 per cent of supply chain costs.

 

 

For companies that rely on their deliveries arriving on time, this could save thousands of pounds – if not millions.  But choosing the right technology can have a huge impact. From cutting drive times and vehicle wear and tear to reducing the weight of what you carry, even little wins can make a big difference across the board. But how can technology actually help businesses make these changes? And how much of an impact does it really have on cost?

 

Small changes, big results

Across the supply chain, optimisation plays a key role in reducing costs. When everything is running as smoothly as possible, it‘ll drive down expenses. That might mean putting important parts and tools closer to the engineers that need them to reduce time on the road. Minimising the number of empty vans moving around. Or finding the fastest routes for drivers, so they get to their next stop sooner. 

 

Whatever it is, it can make a difference to costs. Managing time is the biggest and best way to make an impact. But if you’re trying to hit a two-hour delivery slot, or deliver something the day after a customer or engineer orders it, it’s harder to optimise. That’s why many companies offer free delivery with longer lead times, but customers pay extra if

they need an item the next day.

 

When a business knows upfront where and when they need to deliver something, they can plan driver journeys, they can group deliveries together, and even pack delivery lorries and vans more efficiently. These steps bring two major benefits. Engineers can spend less time being van drivers and more time being engineers. And fewer miles on the clock means savings on fuel.

 

Simplifying returns

Optimisation can also help with managing the returns supply chain, which is particularly important for business-to-consumer companies. “For some organisations, 50 per cent of what they send out is then returned,” explains Richard Wilding, Professor of Supply Chain Strategy at Cranfield University. “So, your biggest supplier becomes your returns supply chain.” Business-to-business customers might also send back old warranty parts after a replacement, or extra equipment and tools they didn’t need for a job. Working out how to handle returns is an important part of simplifying your operations.

 

The power of artificial intelligence

It all comes down to the algorithms. And they’re powered by artificial intelligence and machine learning. “What you’re trying to do is optimise the variables within the algorithm,” says Professor Wilding. “The algorithm is always looking to meet a particular goal, and they’re always looking for the best overall ‘score’. ”There may be many parts of the process to think about – from travel time to inventory. The algorithm will use these to find the best way of achieving a particular goal. “But these are learning algorithms,” continues Professor Wilding. “So, it’ll look at how it’s performed over a time and adjust the variables accordingly. What we’re finding now is that it might even start changing the equations so it can achieve the objective more effectively.”

 

If the business wants the outcome to be lower costs, the algorithm can suggest different options. It might be that the most cost-effective solution will lead to a trade-off in travel time, affecting service quality – unless you can find ways to keep your customer informed. Making these changes could also have their own costs, such as buying new equipment or training staff in new ways of working. Finding the right balance between these factors is key, and that’s down to the business to decide.

 

See more, save more

“Aside from optimisation algorithms, the critical thing about technology in the final mile is transparency,” says Professor Wilding. “For business customers, you’ve got to make sure you know where things are. That means you need to have GPS on that final mile, and real clarity on when it’s going to arrive. That helps in terms of serving the customers’ expectations. And by having that data, you can be more adaptive in terms of where you want to take things, and how to ensure that a delivery is taking place. It gives businesses an opportunity to plan the best route in that final mile.”

 

But to improve, it’s really important to understand the link between time, transparency and trust. Supply chains are carefully balanced and run effectively when they can predict behaviour. But when that behaviour changes, they can’t adapt easily – and that drives up costs. “Visibility and transparency are absolutely crucial,” says Professor Wilding. “Having transparency builds trust. If you don’t have trust, people start to do strange things.”

 

The expert says we saw this at the start of the coronavirus outbreak in March 2020. Consumers, worried about what might happen to supermarket shelves in the midst of a global pandemic, took to their local shops and cleared out the toilet roll supplies.

 

In the supply chain, there were no concerns about a shortage. Everything was still running on-time, but once people started panic-buying lots of rolls in a single visit, demand soon outstripped supply. Professor Wilding thinks the problem was a lack of transparency. Consumers couldn’t see that there were no issues with timing in the supply chain – that toilet rolls would keep turning up on shelves as normal – so they panicked. That led to companies having to ramp up toilet roll production, bring in more staff, and flood the supply chain to meet demand. In situations like this, when the crisis dies down and people stop panic-buying, there is usually a surplus. “That puts a lot of extra costs in the supply chain,” says Professor Wilding. “You’ll find that you get these oscillations. If you have end-to-end supply chain visibility that leads to trust.”

 

While the pandemic is an international crisis, supply chains experience similar surges on a much smaller scale every day. An engineer might need a part by Friday, but they’ll order it for Monday in case it doesn’t arrive. Or they need 100 items, but they order 120 because they don’t trust they’ll get them all. With better supply chain visibility, those fears wouldn’t be there. It would build trust. These three elements – time, transparency and trust – are all closely linked. The more we understand about time, the better the transparency. And that helps to build more trust. Bring all these together and it’s easier to keep costs down.

 

Location, location, location

Today, one easy way to help users understand timing and improve transparency is with location and positioning services. It could be as simple as giving drivers smartphones with GPS switched on. Or guaranteeing a delivery time and sending messages to engineers when their parts arrive at their pick-up locations, with directions to help them get there faster. Once a business has this information, it’s easier for engineers to work more efficiently – by bringing the parts they need closer.

 

That’s why smart lockers, like those run by BT Final Mile, can help. The team has lockers at more than 1,800 locations across the UK. Engineers are only ever 15 minutes* away from the nearest one. That means journeys can be shorter, and because the drivers get messages when their parts are ready, they don’t make pointless trips before what they need has arrived. Plus, the team can deliver parts before 8am, so engineers know that they’ll have what they need for their day. 

 

This is a perfect example of the link between time, transparency and trust. With guaranteed 8am delivery, and clear directions to where their parts are, engineers can use their time more effectively. And because they can see that they’ll have what they need, they trust the supply chain to deliver.

 

Optimisations like this have already helped companies cut costs. EDF Energy is using Final Mile lockers to roll out millions of smart meters to customers across the country. “We had to move away from the old way of engineers picking up equipment – by going to a depot or going to a wholesaler,” says Jim Poole, EDF Energy’s Director of Customer Operations. “The solution we got from BT was the ability to take all of the stock in and be able to get that delivered to the right location. So, it was easy for our engineers to pick it up, then get on and do their job".

 

Separate research also backs this up. If businesses routed 30 per cent of delivery and returns through pickup/ drop-off services like Final Mile’s smart lockers, it could boost the profit margin by eight per cent.

 

The future of the last mile

Technology has huge potential to cut supply chain costs.  “I really think there’s going to be a drive now to address the issue of how we can make our operations less dependent on people” says Professor Wilding. “If you’ve got a highly automated facility that doesn’t have many people, it’s far more resilient than our current facilities.”

 

This drive for automation could also help drive efficiency during normal working. Automation has the potential to change every part of your supply chain strategy. “When we talk about smart lockers, you might have small additional manufacturing facilities positioned near the lockers to make certain components,” says Professor Wilding. “If an engineer needs a specific part, it can be 3D-printed in a short lead time for them, and then picked up.” This kind of technology could help speed up delivery, reduce carbon emissions and reduce the number of delivery vans on the roads. Whatever the future holds, it’s clear that taking control of your supply chains today is key.

10 September 2020