Think You're Ready for Same-day Delivery? Three Considerations for Retailers

Big Data, expanding at a 95 percent compound annual growth rate. is real. It's not a trend — it's the phenomenon of our time. But maximizing the value of Big Data simply won't be possible without employing Big Calculations in your processes.

What are Big Calculations, you might ask? It is what makes Big Data actionable. Big Calculations are all about helping you optimize the results your business achieves, in real time, while making your production processes more agile and efficient.

Think of Big Data and Big Calculations in terms of a spectrum, with each at opposite ends of that spectrum. It's as simple as taking steps from one end to the other. How much time you have, and how urgent it is that you take those steps, will determine how long it will take. But committing to the process will reap untold benefits for your customers, and therefore, your business.

There's no doubt that the world of business is speeding up every day, and it's critical to keep up in order to maintain relevance. One new area where both physical and online retailers are now fiercely competing and differentiating themselves is with same-day delivery. Amazon, Google, eBay and even traditional brick-and-mortar retailers are all experimenting with same-day delivery to meet consumer demand for real-time fulfillment. However, entering into same-day delivery is a complex process – especially if you're not a multi-billion-dollar technology company. Big Data can help, but despite the many headlines, by itself Big Data isn't very useful. It's just an enabler rather than a solution. Big Calculations are what takes Big Data and turns it into something valuable.

What are some of the issues facing retailers who want to engage in same-day delivery? One is conquering the slot assignment puzzle. When and where a product is delivered on a delivery route is one of the most important puzzles to be solved. And what about the limitations, such as legal ones, that are placed on same-day delivery? Did you know that some products are only allowed to be delivered by drivers with certain certifications? And yet, same-day delivery is the direction in which retailers are moving. It is the next step.

So how do companies overcome these obstacles and deliver what their customers want in a more timely fashion? How can Big Calculations help?
As a retailer, using the wrong approach to implementing same-day delivery means exploding operational costs, and this is likely to result in events that could cause delays and failure to meet customer commitments. Failure to deliver on time might result in customers jumping ship in favor of other retailers. With that said, here are three items retailers should be aware of as they consider launching same-day delivery.

1) Solving the slot assignment puzzle is the largest hurdle
Slot assignment is simply a term to describe the time and place where a parcel is delivered in a delivery route. It also happens to be the biggest hurdle retailers need to overcome when assessing how they will handle same-day delivery. Most retailers are still using traditional slot-assignment methods. These methods tend to favor either cost savings or customer satisfaction and are unable to satisfy both requirements. For instance, companies may opt for a static-round assignment, which allows for fixed schedules that are predictable, both for the vendor and customer. This approach offers no flexibility, and it increases costs. The methods are impractical for even two- to three-day delivery and entirely ineffective for same-day delivery.

The starting base for same-day delivery slot assignment isn't actual orders. It needs to be based on the best estimate of representative forecast orders for a particular day. Typically, this is based on historic data. Big Data can offer overwhelming information on what you already have, but it's static and doesn't offer anything actionable. Big Calculations are what will enable you to take historic data and not only estimate forecast orders for a particular day, but also process updates and disruptions in real time in order to maintain optimal delivery times.

2) Same-day delivery has many constraints
Retailers are dealt a considerable number of constraint parameters when they venture into same-day delivery. For example, some items – by law – can only be delivered by specific types of vehicles and drivers with specific certification. Those considering same-day delivery need to be alerted immediately if any constraint is violated. There are also soft constraints that retailers need to have a plan for dealing with. Big Data may present planners with these restrictions; Big Calculations are what allow the planners to perform smart scheduling.

For example, even if a customer specified a 4:30 p.m. to 5:00 p.m. slot, a retailer with a same-day delivery offering might approve a 4:25 p.m. delivery if it results in a more efficient delivery route. This is because same-day delivery planners or managers know that most customers will probably be home before the start of the time window and are likely to welcome early delivery – especially if they have received a text alert notifying them of the new time.

3) Implementing same-day delivery can improve the entire retail delivery chain
Integrating a new end-to-end solution for visibility and control over the same-day delivery chain can offer many additional benefits to retailers that offer all types of deliveries. With same-day delivery, every delivery slot assignment is the result of quickly calculating and orchestrating all assets and processes. Furthermore, retailers implementing same-day delivery can collect relevant data from various points: processing, sourcing (from the most economic distribution point), item preparation, collection and delivery. Big Calculations can also assist the retailers in assessing the effects on routes as well as available resources such as on-site workers, drivers, vehicles, etc.

Implementing same-day delivery requires a good deal of investment and a change in typical retail delivery philosophies. Big Data fuels this revolution and Big Calculations will propel retailers to the forefront. By asking the right questions and solving the right problems, it's possible to improve the customer experience and gain traction with a key new retail differentiator. Today's shoppers want their orders delivered at a time that is convenient to them – not to be inconvenienced by vague delivery promises such as "somewhere between 9 a.m. and 5 p.m."

Dr. Victor Allis is CEO of Quintiq.
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