Behind the Same Day Eight Ball
Speed and technology are the two ingredients that companies compete on when it comes to the last mile. UPS’s investor and analyst virtual conference a couple of weeks highlighted these two ingredients. But will it be enough?
Investments in tracking, automating sorting facilities, and route optimization are among the technology enhancements the company has made to help improve efficiencies and speed.
For example, since 2017, 22.5 million square feet of automated sorting capacity have been added, allowing for 1.3 million additional pieces per hour of capacity.
In addition, UPS’s route optimization tool, On-Road Integrated Optimization, and Navigation (ORION) platform, has reduced more than 8 hours per driver per day. In 2020, UPS introduced a dynamic version of ORION, that is, real-time updates throughout the day based on various conditions.
UPS has undoubtedly benefitted from these investments and more. But the investments have not entirely translated into its last-mile offerings to shippers and consumers – yet.
During the Q&A session, towards the end of UPS’s investor and analyst virtual conference, a question on same-day deliveries popped up. Currently, UPS does not offer same-day service (For a price, yes, they do, but as a standard option, no, they don’t). However, they have a team analyzing the possibility, including testing various options – in-network and outside of their network.
Despite investments in its network, it is not set up for same-day deliveries, and given some of the commentaries during the conference; there is little interest to invest further in its network.
For example, the company is expanding its weekend deliveries and will lean on USPS as its Sunday delivery partner via its SurePost delivery option. According to UPS’ CEO, Carol Tome, this will create capacity without capex. But, if a SurePost package and a UPS package are destined to the same location, UPS will intercept and deliver it themselves as they’ve been doing for some time.
This logic will likely be followed if UPS decides to introduce a same-delivery product. It could partner with Roadie, an Atlanta-based crowd-sourced solution that UPS Strategic Enterprise Fund invested in five years ago. It could acquire Roadie or follow a similar path as Walmart and contract with several regional crowd-sourced platforms. However, UPS would need to invest in a tech platform such as Bringg to manage these services.
Same-Day Delivery Option - Expected
However, the question is really not if, but when, will UPS introduce a same-day delivery option. By prioritizing small and medium businesses and e-commerce, they need to offer an option.
Many surveys are floating around the internet, espousing the importance of same-day and how we, as consumers, want same-day deliveries. Among the latest surveys are from research and news publisher Digital Commerce 360 and market research firm Bizrate Insights. Based on a February survey of 1,052 online shoppers, 36% of online shoppers have ordered online for same-day delivery from a web-only merchant within the last six months, up from 24% of shoppers who placed an order for same-day delivery from a web-only merchant in the previous six months in August 2020.
In addition, 26% of shoppers ordered online for same-day delivery from a physical store in the last six months, up from 14% who said so in August 2020.
Last-mile options are important from a customer service perspective. Consumers may want to pick up an order from a store one day, and the next day they may want an item delivered to their home either same-day or in two days, depending on the circumstances.
Depending on circumstances, consumers want options and want to see their options and associated costs when they place an order.
Many retailers are already providing these options, including same-day delivery via crowd-sourced platform partnerships. In my opinion, though, UPS will need to offer a convincing solution to sway retailers away from their already established same-day partnerships.
And then there’s Amazon who is already aiming towards deliveries in five hours or less in various parts of the US.
Even UPS’s arch-rival FedEx already has a same-day service which is available in select areas, primarily in large US metro areas.
In perhaps another one-up, FedEx’s online platform, Shoprunner, acquired late last year, is partnering with the retailer, American Eagle, to provide free same-day delivery service in 50 US cities.
While the delivery provider was not named, I’m willing to guess and say it’s mostly FedEx doing these deliveries.
If UPS is serious about playing in the e-commerce space, they’re going to need to speed it up 😉 and introduce at least a same-day delivery option.
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- Cathy