Speaking at last week’s The Delivery Conference 2023, Relay Technologies founder and CEO Jonathan Jenssen explained that technology will be critical to extracting efficiencies in the last mile. DeliveryX spoke to Jenssen after his presentation with Uber Eats…
In your presentation you spoke about wanting to break away from the traditional delivery model. A term you used was bi-directional, what does that actually look like? What does it consist of?
If we look at the traditional delivery networks that exist, they were mainly from a historical point of view predominantly built to restock stores. So taking inventory from a Nike warehouse and then putting it into a Nike store, very much a one way journey. Then they evolved into delivering for ecommerce but with this store restocking model, it’s the underlying layer. That last mile is always about delivery, delivery and delivery.
Now, if we looked into 2023 what we have now is a much more complicated ecommerce landscape. You have customers who want deliveries. But right next door, there might be a seller from eBay or a seller from Vinted. It might be a consumer who wants to get a return taken. And there’s nothing that stops you ultimately from integrating all of these deliveries into one driver route.
It’s delivery last mile, but it’s also a collection and return first mile. Integrating all of these, that’s where we’re talking about bi-directional because it’s the same last mile route that’s also integrating the first mile.
So we’ve got these existing big warehouses/DCs out on the outskirts of cities and towns, but there are also micro-fulfilment hubs or “pit stops”. Are these a way to streamline the last mile – make it cleaner and more efficient?
In a way we very much need to respect what the retailer’s capabilities are, and where their inventory sits. If a retailer has a big warehouse we can’t expect them to go “we need a whole new warehouse” as they’ve invested millions or 10s of millions into it. We need to ask – with that positioning of their inventory and warehousing how do we maximise the delivery experience from whatever possibilities that they have.
So then we collect from those big warehouses, and the pit stops is one part of our journey that allows the route to be much more efficient and much more environmentally friendly. That’s ultimately how we just moved from the retailer’s warehouse to the consumer to their consumer’s door. The pitstop is a key element in that chain. But it’s all about making sure that we’re maximising the efficiency and then the experience for the end consumer.
To bring it back to that sustainability element, what sort of solutions and technology do we need to make that sustainability journey and targets achievable?
We’re really excited because of the positioning of our pit stops, it’s hyperlocal to you as a customer. It could be a local store that we’re collecting packages from and we’re delivering really in the neighbourhood that enables you to access a whole new pool of drivers. If you’re collecting from a suburban depot 10 miles away in or out of town, you can’t send a bike there to collect packages, it is impossible.
We unlock a whole new pool of drivers that can do ecommerce package delivery and that is really aligned with the sustainability element because we want to use more bikes. Bikes are better in cities, they have faster parking – half of the time in an area is spent parking.
If we can reduce that parking time, now it has a huge impact on our efficiency. What does that mean – the retailer can have a lower cost because we’re more efficient. Then they can choose to either retain that cost advantage or pass it on to lower the price of shipping at checkout for their customers, which then drives growth. That’s what’s so important.
If we’re able to improve more, and increase that pool of bike drivers, that has a huge impact on sustainability, but everything is aligned so there’s no conflict on costs and trade offs on expense or expansion because there are bike bike couriers in all major urban cities.
To use London as an example, we’ve got the extension of congestion zones, we’ve got low traffic neighbourhoods, these bikes can go places that cars and vans can’t. Are cargo bikes the future of urban delivery?
It’s really rethinking the entire system of delivery from the retailer’s warehouse to the consumers – pit stops as opposed to the suburban depot. We have decentralised depots to move to packages across the journey, we also want to work much more closely with retailers in the future around packaging as an example. Now, if there’s 50% air in a parcel that means 50% less parcels can go in a bike backpack, which means that we’re missing the opportunity to increase the number of bikes on the streets, and the number of parcels delivered in a much more sustainable way. It is that sort of system thinking with the retailer that we’re really excited about.
From a sustainability point of view the shipping of air, half empty vans, that has an impact doesn’t it?
That’s becoming more and more of an issue because 80% of packages are less than two kilos now. It goes back to those vans that were built predominantly for store restocking where the parcels were a lot bigger. Now it becomes even more nonsensical to use vans, when there’s so much air in the van. That’s why we want to use all vehicles for that last mile.
If we look at the trends, a lot of what we’ve done is leverage the know-how of how China operated their delivery networks. China is by far and away the biggest leader in ecommerce – 110 billion packages are delivered, 46% of all sales are now online. While in the UK, its only around 20%, in the US, it’s in the teens. A big reason for that has been the delivery networks in Asia powering a more efficient delivery system.
In China there is a much more flexible, convenience store network, you have that ability to leverage smaller vehicles and a more distributed fleet. There’s a lot more collections of returns, because it goes back into the network faster. If you can integrate, that’s exactly that bi-directional point.
We want to make it frictionless from a consumer point of view. How do you reduce the labels on the return? There’s a lot of technology now around, looking at how AI can help – if you write a code on a parcel, and you have AI read that and then absorb that as the new label. From a consumer point of view, they don’t have to print something out, you don’t necessarily even have to have a QR code on it, you can just be given a few numbers that you put on a package, and that becomes your identifier.
If you can then streamline that friction that the consumer has to get it back into the network faster and back to the retailer, so they can sell it again, now that has a huge value. And that’s where we’re really, that’s why we’re taking this position that we need to go full stack and rethink the entire network and the technology underneath it together.