One of the most critical components of the supply chain is the last mile. A key factor in impacting customer satisfaction and loyalty to your brand or service, last-mile delivery execution is not only an important but an extremely nuanced undertaking for LSPs.
Philippine industry is experiencing rapid growth. This has been driven by factors such as increased demand for food, beverages, and manufacturing products; the rise in internet users — 73.9 million recorded in the Philippines in 2021; and investors like China, Japan, Taiwan, and Holland being attracted to the market.
A Ken Research report estimated that the Philippine Logistics Market will grow at a CAGR of 8.2% between 2022 and 2027.
In such a scenario, freight forwarders and other LSPs must realize the massive market potential and find ways to optimize last-mile delivery processes. Digitalization will play a key role in navigating the challenges posed by regional conditions, and help businesses that adopt it stay ahead of the game.
Let’s explore some of the challenges faced by logistics providers that obstruct efficient last-mile delivery:
Complex Geography
The Philippines is an archipelago, comprising a group of more than 7,000 islands. Oftentimes, waterways have to be used to reach last-mile destinations. Such archipelagos also mean that there are a lot of remote areas, where delivering goods at the doorstep is a massive task.
Incorrect Addresses
Delivery addresses not being specified correctly lead to failed deliveries. Re-deliveries also raise the cost per delivery. The situation is further complicated when, as is the case with e-commerce deliveries around the world, customers opt for a return/exchange of the product. Although there seems to be no official data for the Philippines, the issue of incorrect addresses is not just limited to the Philippines. A Logistics Middle East article stated that incorrect addresses affect 7 billion of e-com revenue in the Middle East.
Poor Road & Traffic Conditions
While the national highways and expressways have been developed under government initiatives, last-mile deliveries mean that vehicles have to take ‘the road less traveled’. Some areas may not have the desired road quality to facilitate smooth deliveries. Additionally, traffic congestion in major cities hamper the speed of deliveries. A 2022 report by TomTom Traffic Index ranked Manila 2nd in the list of cities with the worst traffic congestion.
Much like a mathematics question containing some ‘given’ information that cannot be changed, so, too, does the Philippine landscape hold some unalterable challenges. Given these circumstances, adopting digitalization in resolving these last-mile challenges is all the more important if companies want to thrive and earn the satisfaction of the Filipino consumer.
Let’s explore the benefits that digital transformation brings to businesses and consumers with respect to last-mile deliveries:
IoT
IoT devices such as GPS trackers can be used by companies to obtain much-needed visibility on the precise location of their goods, in real-time. With customers also able to track shipments from their end, they can make suitable arrangements to ensure successful deliveries from their end. An increased sense of satisfaction is a natural by-product.
In addition to goods, IoT also helps maintain vehicle safety – known as Asset Tracking Solution. ‘Condition Monitoring’, which observes the health levels of sensitive and perishable goods, is another advantage that is possible through IoT.
AI & ML
Many logistics management software have provisions to delve into route optimization techniques via AI and ML. With these in place, on-the-fly adjustments according to factors like traffic, weather, or any such event are undertaken, improving speed-to-door and delivery costs.
Utilizing Artificial Intelligence and Machine Learning algorithms also analyze delivery volumes according to location, and filtering through multiple parameters such as seasonal patterns, customer preferences, etc. This allows companies to accurately forecast demand for a region and thus allocate delivery resources accordingly, improving the demand-supply match and optimizing resource utilization
Data Analytics and Predictive Insights
Subsets of AI, data analytics and predictive insights give companies a deeper look into important last-mile delivery aspects, such as assessing the risk associated with specific delivery locations or customers. Apart from physical safety measures, online security can be maximized by identifying data anomalies and detecting fraudulent activities.
Blockchain Technology
Blockchain creates a decentralized information recording and tracking system where every step of the delivery process, from package pickup to delivery, is recorded. Blockchain allows for secure recipient authenticity verification and keeps digitized records of all transactions, improving the security, transparency, and documentation of last-mile deliveries. An example of a blockhain technology is TradeChain, which facilitates seamless data connectivity as well as integrations with payment portals, e-invoices, GST Filing, Customs, Freight Forwarding Shipments, Bank Invoices, etc.
Conclusion
Last-mile delivery is a key differentiator for your customers. It can even be argued that the entire perceived value of the brand resides in the effectiveness, or lack thereof, of the last-mile delivery. From the macro outlook, the Philippine logistics market is set to grow rapidly. From the zoomed-in perspective, capturing market shares may well boil down to things like last-mile deliveries, and it is imperative that businesses take the assistance of technology to optimize it, especially considering some of the unchangeable dynamics of the Philippines.
PREVIOUS COLUMN: Going Digital: What it Means for the Philippine Freight Forwarding Industry
