Top

How Innovations in Logistics Fulfill the Experience Demand

Service Design

Orchestrating experiences in context

A column by Laura Keller
August 8, 2016

At the risk of dating myself, when I purchased my first computer for graduate school, I recall using my friend’s dial-up modem to connect to AOL. Then I pulled up the UPS.com Web site to track its delivery status. I refreshed the status and, when the screen finally read, “Delivered,” ran down to the lobby of my apartment building in Boston to retrieve my precious package before someone tried walking away with the large Dell box. Ignoring the fact that shipping and delivery took over a week at that time, I was thrilled that I could instantly see the status of my package, then have it in my hands five minutes later. I appreciated this service-experience win years before I ever cared about service design as a profession.

The service experience that connects our desire or need to have a product and the speed at which we can get it has come a long way since those early AOL days. Today, we expect free shipping for the things we buy online, and we want them at our door within one or two days. We also want easy returns, in case we don’t like what we bought. But the behind-the-scenes complexity that’s involved in fulfilling of these needs and desires cannot be overstated. In this column, I’ll explore how and why the shipping, delivery, and logistics industry is evolving to be more customer centered and what this means to us as experience design professionals.

Sponsor Advertisement
Continue Reading…

The Elephant in the Room: Amazon

Initially, I had naively thought that I could write this article without being affected by my infatuation with Amazon. With this hope in mind, I started researching online phrases such as innovations in shipping and delivery, industry trends in logistics, customer experience and packages. But, lo and behold, every single search led to Amazon. So I’m going to embrace my personal bias toward Amazon, consider it well founded, and describe just how important the company is as a disruptor in the industry of shipping and delivery, supply-chain management, and logistics—not ecommerce, the industry with which we most commonly associate Amazon.

I buy 70 to 80 percent of what I need online. Of that, I make 90 percent of my purchases on Amazon. Years ago, I used Google as a way to find ecommerce sites selling what I needed. Now, I go to Amazon by default. The reasons for this are numerous and have been covered well by UX professionals writing about ecommerce effectiveness—things such as ease of searching, feedback and reviews, and their gold-standard checkout experience. I won’t belabor those well-worn truths in this column. However, one of the main reasons Amazon is my go-to ecommerce site is because of Prime—and I’m not the only one for whom Amazon’s $99 membership has been a life-changer.

Of Prime Importance

While online shopping had become standard practice across all demographics by the early 2000s, people still found it difficult to grapple with the need to pay for shipping. Amazon introduced Prime ten years ago as a way of addressing that barrier, offering free, two-day shipping to customers who paid the then $79 annual fee. I recall my husband saying, “You should sign up. It’ll pay for itself in a few months.” He was right. Plus, my Prime membership actually changed my behavior. Beyond Prime’s providing fast, free shipping for the items I happened to buy on Amazon, as I had thought it would, the service made me choose Amazon for purchasing almost everything. I was not alone in this. As David Gewirtz of ZDNet has written:

“With its large selection of goods and services, it quickly became irresistible, then indispensable, to busy families like mine…. Because of that free shipping, many customers looked to Amazon before other providers…. Consumer Intelligence Research Partners (CIRT) estimates that the typical Prime customer spends almost twice as much—$1,100 a year [versus] $600—as the non-Prime customer…. CIRT also reports Prime membership grew by 35 percent last year, to 54 million members who are literally and figuratively bought into the Amazon ecosystem.” [1]

Supporter Advertisement
Continue Reading…

The Need for Speed

So, while free shipping is one clear advantage of using Amazon, the speed with which you get your packages is the other. Free, two-day shipping is the default for Prime members. However, Amazon continues to innovate its service offering to address customers’ increasing demands to receive items faster: “‘Customers love fast delivery,’ [wrote] Amazon senior communications manager Kelly Cheeseman…. ‘Since day one, we have been building the infrastructure to support super-fast delivery, and customers love our delivery offerings—whether it’s two-day delivery through Amazon Prime, same day delivery, or Prime Now, our ultra-fast, 1-hour delivery service.’” [2]

As if 1-hour delivery wasn’t on demand enough, Amazon has also patented “anticipatory delivery,” which allows “Amazon to predict a consumer’s future purchase and prepare it in advance for shipping—even before the customer clicks … the word Buy.’” Also, let us not forget Amazon’s investment in drones, which could reduce delivery time to 30 minutes once they’re approved for use by the Federal Aviation Administration. Finally, Amazon is exploring perhaps the most on-demand approach to the delivery of products, 3D printing. “Amazon’s most recent move in the delivery space is its patent application for creating 3D-printed products in a truck as the merchandise is being delivered. This would allow Amazon to deliver products even faster. It would also alleviate the need to stock a large amount of inventory, because the products could be printed as needed.” [2]

While these explorations of future services may or may not turn into reality, it’s clear why Amazon is the front-runner in the industry: “‘I think the key takeaway is [that] Amazon is thinking about logistics and delivery so far ahead of the curve, and … no matter what direction [delivery] goes in the future, Amazon is going to have thought about it and be a big part of it,’ Morningstar’s R.J. Hottovy said. ‘The fact that they are on their eighth or ninth generation of testing drones shows how much thought they’ve put into it, and even if it doesn’t turn into anything, I think it shows their commitment to logistics and improving customer experience,’ said Hottovy.” [2]

The Supply Chain and Customer Experience

Through Amazon’s never-ending quest to get products to its customers more quickly and cheaply, they continually reset customer expectations, disrupting the logistics and supply-chain industries. Once customers have had the wonderful Amazon—and Zappos—service experience, they begin to expect the same from every company—and this is turning these industries on their head.

As a customer, you probably don’t typically think about all the activities that must happen behind the scenes to let you order something on a Tuesday and have it the next day. But, as a service designer, all of those processes, systems, communications, and people involved in getting your purchases from point A to point B are important to understand. The way this happens is called the supply chain. A supply chain is “a network of linked operations processes that work together to supply goods and services.” Supply-chain management (SCM) is the “practice of planning, implementing, and controlling the operations of the supply chain with the purpose of satisfying customer requirements as cost effectively as possible.” [3] A typical supply chain involves a fulfillment or distribution center where products are warehoused—often far from the customer. A shipping, delivery, or logistics company such as UPS, USPS, or FedEx completes the final step: delivery.

This was how Amazon operated almost 20 years ago when it had just two fulfillment centers that totaled 295,000 square feet. However, as Amazon began expediting shipping and delivery, it needed to push fulfillment centers closer and closer to its customers. Now, Amazon has 115 million square feet, allowing them to house their 480 million products in closer proximity to their customers, and we can get what we need more quickly. [3] Even though Amazon has become a fulfillment behemoth, housing products closer to their customers, they’ve still historically relied on UPS, USPS, and FedEx for delivery. But, now, Amazon is beginning to own even that part of the supply chain, so it’s become critical to consider that final step, which is known as the last mile.

Challenges of the Last Mile

The concept of the last mile is common across industries: “In the telecommunications field, the last mile refers to the provisioning of high-speed, high-capacity information to every household…. The supply-chain last mile … represent[s] that very important last step required to get a delivery into the hands of the … customer.” Even though the distance an item travels may be significantly longer prior to this final step of delivery to the customer, the last mile presents major issues: “Honeywell, which estimates that the last mile makes up 50% of total logistics costs on any shipment, says this segment of the supply chain is fraught with challenges, including congestion in urban areas, distance in remote areas, invalid or incorrect address details, hard-to-locate destinations, a lack of human presence to sign for deliveries, and even out-of-service elevators. Issues with the last mile can also be traced back to the warehouse and [distribution center], both or either of which play critical roles in the smooth, overall running of the supply chain.” [4]

Adding to the supply chain’s typical last-mile challenges is the sheer volume of ecommerce sales, the nature of the goods being delivered, and elevated customer-experience expectations. In 2015, e-marketer projected that worldwide ecommerce sales would increase by 20%, reaching $1.5 trillion, meaning more items than ever would get processed through complex supply chains and the last mile. [5] In addition to increases in the volume of ecommerce sales, the types of goods consumers are purchasing online have changed dramatically. In the past, many of the goods being delivered were large or bulk items. Now, people are ordering items of all sizes—often with customizations—adding to the complexity of the supply chain. [4] And, of course, customer expectations have progressively increased.

Earlier, I wrote that the speed of delivery and price of shipping are key when ordering online. But many more factors in ecommerce have direct impact on the supply chain, logistics, and the last mile. “Whether consumers are researching, evaluating, or purchasing products online or in a store, their expectations about product availability, delivery charges and flexibility, return policies, and payment options are on the rise. To complicate matters, these preferences can vary by region, demographics, and a myriad of other factors that will continue to evolve over time. Behind this ecommerce conundrum lies a mass of fulfillment, inventory deployment, supply-chain network design and omnichannel distribution challenges. Even gargantuan high-profile etailers—while having succeeded in offering customers inexpensive and same-day delivery options—are still struggling to maintain efficient last-mile solutions in a cost-effective and profitable manner.” [5]

Opportunities the Last Mile Presents

Despite the challenges I’ve described, the supply chain’s last mile is the area where companies can be most innovative—thinking of new ways in which to improve their customer experience and affect their bottom line.

For Walmart, groceries account for 50 percent of their revenue. They’re now piloting a grocery delivery service in a few cities through a partnership with Uber and Lyft: “This innovative move by Walmart provides convenience to the consumers without the need for the company to create a delivery infrastructure around last-mile deliveries. If the company is able to effectively leverage the network of services such as Uber and Lyft, it can lower its delivery costs without compromising on consumer convenience.” [6]

In the same way Amazon has come to own more and more fulfillment space over time, The Home Depot is using more of its own stores as fulfillment centers, moving fulfillment closer to their customers for quicker delivery of online orders. [7] However, this move by The Home Depot is creating more demand for delivery trucks. Luckily, transportation, freight, and trucking companies are also changing their business to address this shift. “Companies from XPO Logistics to Schneider to Estes Express Lines are expanding or adding last-mile services. ‘It’s definitely where the customer is taking everyone,’ Smith said. ‘Last-mile delivery requires more than garden-variety truck capacity. The service requires more than vehicles that can handle oversized loads and deliver them to residential addresses. It requires drivers that not only drive vehicles, but can install products.’” [7]

Finally, Amazon has been able to expedite delivery times through AmazonFlex, using “gig economy” workers to deliver packages during their preferred work times by using an Amazon app. [3] If you’ve seen those white vans with the Amazon logo, you’ve seen AmazonFlex.

The Experience-Design Opportunities

I really love unraveling and solving complex, multifaceted, wicked problems. That’s why I’m interested in logistics and all the behind-the-scenes activities that are involved in getting a product from point A to point B. It’s also why I believe the logistics industry has a great need for our experience-design expertise.

Consider the technologies that these industries will begin using over the next few years. They’ll require the employees for a whole sector to learn new tools as part of their jobs. “At least a dozen companies are in the hunt to develop and promote ‘smart trucking’ apps that provide an all-in-one solution for freight shippers and carriers: fast, automated load matching based on location and equipment; turn-by-turn route planning and shipment tracking; algorithm-based instant pricing; and seamless proof-of-delivery, billing, and payment. These apps [will] replace fragmented, … time-consuming legacy processes such as the countless hours truckers often spend trying to find loads by calling freight brokers and checking load boards.” [8] Ease of use and learnability will be critical to the successful adoption of these new tools within logistics and transportation companies, and the contributions of UX strategy and design professionals are necessary to achieve that.

Consider the customer-experience training that will be necessary for delivery employees who had previously been accustomed to a simple business-to-business model. Now, they’ll deliver products to people’s homes, which requires a different communication style and approach. “‘You can’t just take a regular delivery driver and put [him] in someone’s home…. This takes a different skill set. That set includes soft customer-relations skills. ‘It’s very different working with … [consumers], going into their home, than bumping a dock…. These people need to be the ambassadors for our customers’ brands, as well as drivers.’” [9]

For UX professionals who are helping organizations to become more customer centered, an opportunity exists for us to help the logistics industry as well. As logistics companies transition to a more customer-centered model, we can help them to figure out their employees’ skill-set gaps and recommend training and performance-management approaches to ensure they’re set up for success in their jobs.

Consider the inverse of delivering packages, the returns process, and how customers expect an equally easy experience when sending back products they don’t want. Companies are now trying to figure out how to handle this service. “At the end of the day, the only way to make the returns process efficient is to reduce the number of touchpoints. Returns efficiency can be addressed by having drivers who are located near customers pick up returns on their return routes or by encouraging customers to return items back to storefronts or strategic drop-off points. If all of this sounds overwhelming, that’s because it is.” [5] Customer-experience mapping and service-design expertise are critical to figuring out this complementary, complex process.

Lastly, consider that, as a society, we are beginning to care more about the origins of our products, how they’re made, and where they come from. People will want more transparency into the supply chain—much more than just knowing the price of the product and when it will be delivered. Consider the diverse data particular people may want, depending on what they feel passionate about—human rights, political affiliation, animal rights, or green manufacturing. Making the appropriate information seamlessly available to customers will likely be a future challenge for the industry. But for us in the design industry, the ability to make people happy—not only with the experience of receiving their products, but also by providing the visibility that lets consumers feel good about the products they purchase—is exciting. 

Endnotes

[1] Gewirtz, David. “Why Amazon Is the King of Innovation: Prime Power.” ZDNet, May 24, 2016. Retrieved July 6, 2016.

[2] Borison, Rebecca. “Amazon’s Delivery Innovations Will Be Retailers’ Worst Nightmares.” TheStreet, March 3, 2015. Retrieved July 6, 2016.

[3] Frazier, Eric. “At Amazon, Supply Chain Innovations Deliver Results.” Syracuse Online Business/MBA, February 26, 2016. Retrieved July 8, 2016.

[4] McCrea, Bridget. “From DC to Final Destination: Last Mile Dilemma.” Modern Materials Handling, June 8, 2016. Retrieved July 7, 2016.

[5] White, Burton. “Last Mile: The New Frontier in the Retail Supply Chain.” Industry Week, May 3, 2015. Retrieved July 8, 2016.

[6] Trefis Team. “Here’s How Walmart Can Benefit from Partnering with Uber and Lyft.” Forbes, June 8, 2016. Retrieved July 6, 2016.

[7] Cassidy, William B. “Home Depot Builds Last-Mile Capacity to Support Stores as Fulfillment Centers.” JOC, June 13, 2016. Retrieved July 7, 2016.

[8] Andersen, Birgit, Marc Meketon, and Bill Rennicke. “Make Way for Uber-Trucking with Smart Trucking Apps.” Forbes, July 13, 2016. Retrieved July 16, 2016.

[9] Cassidy, William B. “Facing Low Demand and New Rules, Truckers Pile into Last-Mile Logistics.” JOC, June 30, 2016. Retrieved July 7, 2016.

Champion Advertisement
Continue Reading…

Director of Strategy & Experience Design at NTT Data

Woodbridge, New Jersey, USA

Laura KellerLaura’s 10 years of experience have focused on representing the human element in any interaction with a brand through actionable, business-impacting insight gathering and design. At NTT Data, Laura leads cross-channel experience design strategy engagements for clients. Clients have included AstraZeneca, Hachette Book Group, GlaxoSmithKline, Prostate Cancer Foundation, Honeywell, and the NBA. In addition to her Service Design column for UXmatters, Laura has written articles for the Service Design Network’s Touchpoint: The Journal of Service Design, User Experience Magazine, Communication Arts, and Johnny Holland. She has presented on service design at SDN’s Global Service Design Conference, the Usability Professionals’ Association International Conference, IxDA New York City, and IxDA New Jersey.  Read More

Other Columns by Laura Keller

Other Articles on Service Design

New on UXmatters