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Archives for January 2018

The next game changer? How crowdsourcing is transforming the face of final mile delivery

By Contributing Author | 01/26/2018 | 8:21 AM

By Itamar Zur, Veho Technologies and John Brown, Droppoint

 

The rapid growth of ecommerce and fast-changing consumer expectations require delivery companies to think and act out of the box. To win in tomorrow’s final-mile market, carriers will not only need to handle record peak volumes, but also master same-day, on-demand, and night-time delivery. How can delivery companies best capitalize on these trends while protecting their market shares from disruptive new entrants? We believe the answer lies in crowdsourcing.

While crowdsourcing is not a completely new phenomenon, few carriers other than Amazon have so far harnessed the model to final-mile delivery. A common conventional wisdom is that crowdsourcing works well in ride-sharing or point-to-point deliveries (as with restaurant delivery apps UberEats and Deliveroo), but that the model is unfit for large-volume distribution. We, however, hold a different view. Based on Amazon’s success with the model as well as our own experience, we believe that crowdsourcing presents one of the largest opportunities for package-delivery companies today. When properly understood and leveraged, crowdsourcing can yield major operational benefits, help provide exceptional customer experience, and enable delivery companies to better capitalize on the growing demand for final mile delivery.

 

The Economics of Crowdsourcing

Let us begin by addressing two misconceptions around the crowdsourcing model: First, that crowdsourcing is more cost-effective than traditional distribution models, since market rates for crowdsourced drivers are lower than those of professional drivers; and second, that crowdsourcing is disruptive to traditional delivery companies because it allows shippers to "cut the middleman" and connect directly with the driver. In reality, neither of these arguments is accurate.

In the U.S., ride-sharing platforms Uber and Lyft, or delivery platform Flex (Amazon’s final-mile crowdsourcing app) typically pay their drivers $18–25 per hour, depending on the market. Most on-demand restaurant delivery platforms pay about the same. While these rates are certainly lower than the hourly income of a unionized UPS or DHL driver, they are surprisingly comparable to what most regional carriers or local delivery businesses pay. Moreover, the competition for crowdsourced drivers — who are increasingly becoming the bottleneck for growth in the on-demand space — has constantly been on the rise. As a result, companies like Uber must spend heavily on marketing, referral fees, and other driver-retention bonuses to maintain and grow the size of their fleets. Crowdsourcing, in other words, is not always cheaper.

What about "cutting the middleman"? It is true that most crowdsourcing platforms have eliminated, at least to some extent, the role of the flesh-and-blood operator. However, the truth is that this has nothing to do with crowdsourcing itself, but everything to do with the automation technology that these companies have developed. For example, by leveraging machine learning algorithms, crowdsourcing platforms are able to automatically assign delivery tasks to drivers based on each driver’s real-time location and availability. These smart algorithms can also bundle delivery addresses to routes, determine the fastest way to complete a route, and provide the consignee with an accurate ETA and real-time visibility. All these tasks have been traditionally conducted by a dispatcher or operator, and their automation translates into higher productivity and margins. However, one does not need to run a crowdsourced operation to benefit from these technologies — as they work just as well with an employee-based delivery model.

 

Leveraging a Flexible Capacity Model

If cost savings or increased productivity are not the key benefits of crowdsourcing, then what makes it so attractive to Amazon and its retail rivals? the answer lies in the incredibly flexible nature of the model, and its scalability potential.

Compare carriers who utilize a "fixed" pool of professional full-time drivers, with Amazon Flex who utilizes a "flexible" pool of crowdsourced, part-time drives. When parcel volume spikes — as usually occurs during the holiday season — fixed-capacity carriers must extend their fleet and undertake the cumbersome process of recruiting and on-boarding temporary employees or contractors, who are not easy to find. Driver shortage has in fact become a major challenge for common carriers in recent years, not only during the holidays, but also on a weekly basis, as parcel volume and capacity needs tend to constantly fluctuate. Often this results in delivery delays, disappointed customers, and lost business opportunities. Amazon, on the hand, can instantly scale its capacity in times of high demand, simply by posting more routes on its Flex app to drivers who have already been vetted and are available for single-day tasks. This benefit also works at times of low demand: since Amazon does not have a contractual obligation to use its crowdsourced drivers, it can easily drop the number of active drivers whenever needed, and avoid the cost of underutilization. In other words, Amazon is much better positioned to "flex" its capacity and perfectly match its supply of drivers with demand for deliveries.

There are two other important benefits that make the flexible-capacity model highly attractive to Amazon. First, from a service-level standpoint, crowdsourcing allows Amazon to protect itself from last-minute dropout of drivers, and ensure that there is always a driver available for any delivery task. Amazon can do so because it only pays its crowdsourced drivers when assigning a route. Therefore, it can practically recruit and on-board an unlimited number of drivers without bearing high employment costs (and indeed — in the U.S. alone, Amazon has already on-boarded more than 100,000 crowdsourced drivers in only two years since launching Flex). Second, from a scalability standpoint, Amazon can easily launch new delivery markets, simply by turning on its app and enrolling new drivers, while circumventing lengthy recruiting processes. This is how Amazon has rolled out Flex to over 50 U.S. markets (and more recently — 7 new UK markets) in only two years. The scalability of crowdsourcing gives Amazon an immense competitive advantage over fixed-capacity carriers when capitalizing on the fast growth of ecommerce and need for final mile delivery.

 

The Customer Experience Advantage

Perhaps of the highest importance to Amazon, owning a flexible fleet allows the company to offer customers a variety of delivery services that fixed-fleet carriers traditionally found expensive to provide. Two-hour, same-day, and night-time deliveries are all made possible with crowdsourcing: Amazon can always find an available driver at any hour of the day, and enable the customer to choose her preferred delivery window while minimizing the likelihood (and cost) of failed delivery attempts. This gives Amazon another powerful way to delight its customers and further increase trust, loyalty, and customer lifetime value.

 

Can Crowdsourcing Be Harnessed by Traditional Delivery Businesses?

In light of these benefits, we believe that crowdsourcing should not be the sole domain of disruptive technology companies such as Uber and Amazon. Yet, implementing the model in more traditional delivery companies requires a change in mindset and proper investments in technology. The key to harnessing final-mile crowdsourcing is the need to simplify and standardize delivery tasks such that almost anyone could complete them in their own vehicle, just as well as a professional driver.

To demonstrate this latter point, take ride-sharing platforms, for example. Companies like Uber were able to replace taxi drivers with "anyone in their own vehicle" by leveraging the proliferation of GPS apps such as Google Maps and Waze. With GPS technology, an Uber driver does not need to know every street and shortcut like a professional taxi driver, yet she can still drive passengers to their destination just as effectively.

The implementation of crowdsourcing to final-mile delivery requires additional considerations. For one thing, GPS locations are not always accurate, especially outside of city centers. While an Uber driver can ask her passenger to show her the exact drop-off location, delivery drivers cannot do the same with packages. Second, delivery drivers must also learn how to enter buildings that require an access code; where to park the car on a busy street; and which commercial deliveries should be prioritized. To become efficient at running a delivery route, most drivers need a few weeks to learn and adjust. Unfortunately, this "adjustment period" is far too long for any gig-economy driver, who could simply opt to drive with Uber and start making money from day one.

                    To truly enable final-mile crowdsourcing, delivery companies must help
                    
drivers jump over the lengthy "learning curve." Rather than give the driver
                    
a manifest and expect her to figure out the route on her own, carriers
                    should provide the driver with technology that takes her step by step
                    through the delivery process and eliminates any opportunity for error.

The good news is that such technologies already exist in the market. Dynamic routing, geofencing, an online routebook to correct any GPS errors, and a photo database of all drop-off locations — are all features of smart mobile apps that provide drivers with easy step-by-step instructions. Live tracking, chat tools, and an instant settlement system can help operators gain control over any crowdsourced operation while removing unnecessary friction. These technologies can also be adapted for any kind of operation regardless of crowdsourcing. It is only a question of whether one is willing to make the investment, and there has never been a better time to make it.

 

The Bottom Line: It is time to re-think innovation

The benefits of crowdsourcing do not lead to the conclusion that companies should completely replace their existing fleets with crowdsourced drivers. After all, the cost of maintaining a large crowdsourced fleet can be cumbersome, and experienced delivery drivers will still perform better at customized, bulky, or "white glove" deliveries. Yet, we believe that carriers can no longer afford to ignore the success of crowdsourced programs like Amazon Flex, or else they risk being left behind. By understanding the economics, key benefits, and the technology required to harness crowdsourcing, carriers too can use the model as a means to complement their existing fleets, differentiate on customer experience, and better capitalize on the growing demand for drivers in the final mile.

 

About the writers 

John_Brown
John Brown is a former director of strategy and marketing at UPS, and the co-founder of Droppoint, with over 40 years of in logistics and supply chain management.

 

Itamar_Zur
Itamar Zur is the founder and CEO of Veho Technologies – a technology and crowdsourcing platform for final mile delivery. Veho is winner of the 2017 Harvard Business School New Venture Competition.

The Trucking Revolution: Long Haul Trucks & Logistics

By Contributing Author | 01/19/2018 | 9:58 AM
By Gavin Parnell, Go Supply Chain Consulting
 
Elon Musk and Tesla are paving a new future in logistics. Their applications in manufacturing make them a strong market contender for disruption.
 
Diesel trucks still have the advantage of range and ease of use. This can make or break some logistic routes, making them an obvious choice. Volvo and Scania have made good progress with biofuel alternatives, making their vehicles more competitive. 
 
Go Supply Chain have created an infographic comparing the new Tesla Semi to diesel trucks.
 
Tesla
 
The rush for the most efficient truck has started - only time will tell a winner.
 

GavinParnell

Gavin Parnell, BA (Hons) MSc. MILT MCIPS, is a Director of Go Supply Chain with over twenty years’ experience in logistics.  Since 2004 he has worked in consultancy with retail, FMCG, fashion and industrial clients.  Go Supply Chain works to improve clients’ supply chains and logistics operations through design and optimisation of distribution networks, warehouses, transport operations, inventory policies, international logistics and more.

Forklift Acquisition Options: Is Leasing or Buying Best for You?

By Contributing Author | 01/12/2018 | 7:54 AM

By Marcus Warner, Director of Strategic Accounts, NITCO

Leasing vs. buying. What’s the smartest way to go when your business needs a key piece of materials handling equipment? One of the challenges when weighing various leasing options against the benefits of purchasing a forklift outright is that the decision hinges on both financial and operational factors.

Companies with lighter workloads are sometimes encouraged to buy their materials handling equipment rather than lease; but so are large, profitable companies that have plenty of access to capital. So generally speaking, there is not always a cut-and-dried answer to the lease-vs.-buy question.

To determine what will work best for your company, it’s a good idea to seek input both from your accountant and from your forklift dealer. In addition to offering a diverse lineup of forklifts and materials handling equipment, top dealers will be equipped to provide detailed quotes and give you a clear breakdown on the financial benefits of leasing versus buying a particular lift truck.

Leasing

Forklift leasing can give you greater financial flexibility to adapt or grow your fleet as the needs of your business evolve. Large, growing firms tend to lease their materials handling equipment because preserving access to capital is crucial as they grow. Leasing can also ensure that your fleet features the latest in forklift safety and technology.

Some of the chief benefits of forklift leasing include:

  • Use the newest state-of-the-art equipment
  • Expend minimal cash upfront
  • Enjoy the benefits of a predetermined replacement cycle
  • Avoid the responsibility of ownership
  • Pay only for what you use

A trend in the materials handling industry is toward forklift leases with guaranteed service contracts. This helps the company budget a fixed monthly cost, knowing the equipment will be covered by warranty as long as it is operated within specified usage and properly maintained.

Here are several different types of forklift leasing options:

  • fair market value lease (also called a residual lease or operating lease) will generally have the lowest payments. But if you plan to keep the equipment when the lease concludes, you’ll pay its fair market value so this can be more costly in the long run.
  • full payout lease (also sometimes called a dollar buyout lease or capital lease) comes with higher payments, but you’ll own the equipment at the end of the lease term.
  • full-service lease works somewhat like a long-term rental in that you make a monthly payment and the forklift provider is responsible for reliability and repairs.

Typically, the monthly payment is reduced as you lengthen the duration of the lease. This means a longer lease may work best for those who are looking to keep the payment as low as possible. However, be sure not to extend the lease past the point where the benefits of a smaller payment are canceled out by increased maintenance costs.

Ownership

Obviously, there are distinct benefits to ownership as well. Your accountant can help advise you on whether the ability to claim deductions for depreciation and interest on a forklift purchase will end up delivering a net savings at tax time.

Many forklift lease agreements place limits on hours of usage (for example, 2,000 hours annually, approximately 40 hours per week) and can therefore end up costing extra. One advantage to buying outright is that it relieves the owner of such limitations on the equipment’s workload.

Buying may also make the most sense for a business that has lighter forklift usage and therefore expects a longer equipment life, according to one school of thought. For example, one scenario in which buying might make more sense would be when your company’s forklift usage is limited (perhaps less than 1,000 hours per year) and you can expect to operate the equipment for seven to 10-plus years while keeping maintenance costs under control.

Of course, companies of all sizes and workloads find it difficult to put a price on the peace of mind and pride of ownership that comes with purchasing new. Plus, bigger, busier companies are often swayed by the tax advantages.

But the decision to lease vs. buy a forklift really comes down to crunching the numbers. Requesting quotes for two or more lease term options can make a big difference in helping you determine when rising maintenance costs begin to offset the benefit of a longer-term lease. (The potential benefits of renting forklifts and materials handling equipment is a topic for another conversation.)

Ultimately, you’ll be best served by working with a forklift dealer who understands that part of the job is to roll up their sleeves to help you fully consider both the operational and financial sides of the equation. So before you make a decision, be sure to ask for detailed price quotes that provide the information you need to determine whether leasing or buying is best for your company.

 

MarcusWarner
Marcus Warner Is Director of Strategic Accounts at NITCO, New England's leading provider of forklifts, material handling equipment and warehouse solutions. Marcus directs the Strategic Accounts team in maintaining, developing and securing business with larger/high profile accounts in target industries.

A beginner's guide to forklift safety

By Contributing Author | 01/05/2018 | 12:52 PM

By Prospero Girardi, Director, Hitec Lift Trucks

A forklift truck is a dangerous piece of machinery, and it goes without saying that you can’t just hop into a truck with no training or experience and drive it away. Every operator must have training and be fully qualified to drive and operate the lifting equipment. The operator must also have completed a training course. This is not just for operator safety, but also for the safety of other staff.

PPE and Hi-vis clothing

In most working areas, you’ll need to wear a hard hat and safety shoes, and a hi-visibility jacket will be required to ensure you can easily be seen.

The clothing needs to fit well, without any trailing ties or accessories, to prevent accidents that occur as a result of clothing being caught in the machinery.

Before starting up

Check that your hands are clean and dry - grease or damp hands could affect your grip on the controls.

Equipment check

While you might use the same forklift every day, you should still do a check of your vehicle before starting it. Look at the tyres, controls, check the steering, the brakes and the mast, and look at any warnings.

If anything is damaged, don’t drive the truck. Follow your company procedures and report it.

Load check

Don’t move off until you have checked your load to make sure it is secure, stable and positioned properly across both forks. Check the height of your load and make sure it is within the permitted height for your work place.

Seating yourself correctly

There are steps and hand grabs on your truck to help you sit in the correct position. Once seated, fasten your seatbelt, and adjust your position to ensure you can comfortably reach the controls. Check your mirrors are in the right position to give you a good field of vision, and ensure you are fully within the cabin of the forklift.

When moving off

Look around you and check for any members of staff within range before driving. Keep to the designated paths for the forklift, and ensure you know the site rules, your truck’s height in relation to entrance and exit heights, and the speed limit.

While moving

Be aware of your surroundings and other people working nearby, and keep your distance from other trucks. You can control what you do, but you can’t control other people.

Watch for signs such as load limits and clearance heights, and take note of any bumps in the road, debris or loose surfaces and drive around them.

Think ahead and make sure that you have enough distances to stop safely.

When handling the load

Check that you can clearly see what you are doing and that you can see the racking that you are aiming for. If you need to, reverse the forklift for better visibility. If visibility is extremely poor, stop driving.

Be safe

Keep your body clear of the mast, especially when it is being lowered, to avoid serious injury, and do not let anyone stand or walk under the machinery or the forks.

When driving on a ramp, drive forwards up the ramp and down in reverse.

If you need to step away for a moment, don’t leave your forklift running and unattended.

Keep focused, and constantly watch out for people, obstacles and other trucks.

Finishing up


At the end of your job, follow company guidelines and park your truck in the designated area. Ensure your forks are lowered completely to the floor and make sure the park brake is on. Turn your forklift off, and take out the key.

As long as you keep safety at the forefront of your mind, concentrate on what you are doing and take constant note of your surroundings, you will be able to do your job safely and without incident.

Prospero Girardi
Prospero Girardi is the Director of Hitec Lift Trucks, a supplier of forklift trucks for hire and purchase, as well as a provider of forklift training, and many other materials handling products and services. 

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About One-Off Sound-Off

Welcome to "One-Off Sound-Off," a blog page devoted to guest commentary on all things supply chain. This is a space where industry leaders can share their opinions and expertise with the logistics and supply chain community. If you have an article or commentary you'd like to share, please consider sending a guest blog proposal to feedback@dcvelocity.com.



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