In response to changing consumer markets, retailers are moving to an “omnichannel model,” combining inventory in the physical store with a webshop and home delivery and installation.
Delivering and installing heavier products at consumers’ homes is a specialty in the home delivery market like furniture, white goods, and electronics delivery. Dutch web stores deliver consumers 8 to 12 million two-person deliveries a year. Daily, 5.000 to 8.000 vehicles and 10.000 to 16.000 delivery drivers are on the road to keep customers happy.
The two-person delivery market is growing 10 to 20 percent a year. Fewer and fewer people drive to a store to pick up large products. About 10 percent of Dutch consumers are in the Greater Amsterdam region alone. Some 500 to 800 delivery vehicles drive in and out of the Amsterdam region daily. Now they still run on fossil fuel, but that too will change.
Home delivery companies need to move to zero-emission city logistics. However, this step alone might be a too big step for some retailers and webstores. And zero-emission does not solve all issues in home delivery. The delivery sector has to deal with more and more demanding consumers. They want their deliveries more often, faster, and at a specific time of the day. And, of course, seamless return of old products (circular supply chain). The final price must remain low, the service perfect, and the delivery sustainable. You are a guest in the customer’s home.
Also, the inventory used for fulfillment is no longer in the physical stores only. Inventory must be virtually managed on all levels of the supply chain. In particular, fast-moving items are not first moved to stores for delivery to consumers’ homes. Increasingly, these products find their way direct to consumers through the omnichannel retailer’s regional or central distribution point.
A larger scale of operations is not the one single solution.
The need for two-person delivery is growing rapidly. While growth is usually positive, taking advantage of scale in its current ways of working is impossible. Unlike parcel delivery, an increase in the number of deliveries leads to almost proportional growth in the number of vehicles and drivers because many companies arrange delivery themselves or have outsourced as their own network (so-called “dedicated”).
With two-person delivery, due to the distances (including between delivery addresses) and the limited number of deliveries a vehicle can make in a day, the CO2 emissions per delivery are significantly higher than for parcels. Smart and dynamic planning is a prerequisite for success and profitability in two-person delivery.
Delivery drivers face more complex city traffic. With two-person delivery, the consumer also requires more time: installing a washing machine or placing furniture on an upper floor takes a while and is difficult to predict. Therefore, delivery companies often schedule more time for delivery than strictly needed, so-called “slack,” to complete scheduled deliveries to consumers (as well as business customers) on time despite intra-city traffic. Unpredictability is a margin killer for delivery companies; delivery could perhaps be done with half as many vehicles.
Many stores still perform deliveries themselves, and some work with professional delivery third partners. A day in advance, these parties make their schedules. Deliverers then leave a distribution point for their own round within a delivery area and return.
Zero emission zones in 2025
In over 30 Dutch city centers, no vehicles will be allowed to run on fossil fuel starting in 2025. Five years later, the city centers (and sometimes the whole city) will only be open to emission-free vehicles. This zero-emission zone will be expanded in the coming years.
Simply renewing the fleet with electric vehicles, investing in charging infrastructure, and then making the exact same delivery rounds is not a future-proof solution. More innovative vehicles are needed within the city, dynamic scheduling, and city hubs are in the right place for sustainable delivery and consolidation.
How to realize efficient zero-emission two-men deliveries
- Collaboration in the hub network. One possible solution is collaboration in delivery. Finding a single point together at the city’s edge where storage space for the local market can be smartly divided and tailored to the needs of the two-person delivery companies. This space is scarce, and existing locations are not always suitable for modern distribution. Especially around Amsterdam, supply is limited.
- Shared transport and charging. Costs can be reduced when partners work together, drive more efficiently, share vehicles, and share facilities and charging infrastructure.
- Smarter route planning. Improved information is an essential operational condition for reliable deliveries. This allows smarter planning, loading, and driving with shared capabilities and using the right high-quality ICT support for dynamic planning for multiple shippers simultaneously. These shipments are then bundled and delivered according to the most efficient route.
- Shared workforce. The route can be shared, and well-trained staff can simultaneously hit the road for multiple providers. At a time when there is more demand than supply for well-trained delivery mechanics, collaboration may well be the answer here.
- Put the customer in control of the customer journey. Involving the consumer works better, requires less planning time, and improves customer satisfaction. Customers can specify when delivery is most convenient for them. Intelligent software then ensures that an optimal schedule rolls out. At that moment, the presented time blocks result from dynamic planning based on the most optimal appointment in the delivery schedule. How can you stimulate the customer to choose an efficient and sustainable time slot from the supplier’s perspective?
Walther Ploos van Amstel.