November 3, 2021
Drop density is one of the most important metrics for any delivery operation – whether your team uses the latest, greatest last mile software, plans routes in their heads, or anything between…
The objective is always the same. To minimise the amount of time drivers spend, well, driving. And waiting. And unloading. And all the other things that create dead time between jobs.
A high drop density is good for business because it keeps cost down and helps you maintain margins. In the urban delivery game, margins are fine enough already. So anything you can do makes a difference. In the famous words of one well-known retailer, ‘every little helps’.
Effective last mile routing is arguably the cheapest, most straightforward way to increase the drop density of your deliveries. That’s why the market for delivery management software is projected to rise from $1.6 billion in 2019 to over $4 billion by 2027, growing at a compound annual rate of 12.7%. We’ll assess some of the specific methods to increase drop density using last mile optimisation software in this article.
But something to keep in mind at the outset. Optimisation is about making the absolute best of the hand you’ve been dealt. Orders come in and you shuffle them into the most efficient routes. New technologies open up additional realities for retailers on the cutting edge, allowing them to go further and directly influence the cards coming their way.
So we’ll also look at what you can do during this ‘pre-optimisation’ phase to give your fleets and 3PL partners a head start in the race for more efficient operations.
Whether you run your own delivery operation, outsource to 3PLs or manage a complex multi-carrier operation, chances are you’re already paying very close attention to your drop density.
Measuring the ratio between your deliveries and the area you’re covering is one of the most effective ways to see how efficient your last mile operation is.
Another reason to focus on it is that it directly impacts on many other KPIs including cost, total fleet mileage, and rate of deliveries.
Get your drop density moving in the right direction and most of your other metrics will start looking better over time as well. Keep it high as you scale your operation and your monthly reports are bound to make for happy reading.
This is especially true if you’re operating in a low-margin space like online groceries.
“In online grocery, delivery costs are the biggest hurdle to profitability”
Take the UK, for instance, where a typical van driver makes fewer than five deliveries per hour in this vertical. It’s a hurdle that isn’t insurmountable. Alternative delivery solutions, such as the ‘milkman model’, where retailers make deliveries to select areas only at specified times each week, are one approach..
A small Dutch grocer, Picnic, has achieved a drop density of 14 deliveries per hour with this model, according to McKinsey. But consumers have more demanding expectations of the largest retailers. So what can be done?
One of the most tried and tested methods of shortening the distance between goods and their recipients is to move your distribution centers closer to their front doors.
Demand for quicker, cheaper deliveries raises the requirements for local warehouse space. At the extreme end of the scale, these on-demand grocery companies that are popping up and promise to be at your door within 15 minutes need a really high density of dark stores. Let’s look at one of the hot, new players in this space Gorillas, which has been in the headlines of late.
In London, where they have a growing presence, one of their dark stores covers a relativley small delivery area. Even in Shoreditch, one of the densest parts of central London, the delivery area is fairly slight.
Across the city, it has 25 such pockets of coverage at present. Blanket coverage across a city like London would take many times that.
In our recent State of the Industry report on last mile logistics, we considered the slightly more viable scenarios for two-day and next-day deliveries. The research we looked at suggested that even this requires at least five distribution centers across an urban environment, while reducing the delivery window to next day sees this figure rise exponentially to as high as 40.
According to the cofounder of one sustainable delivery company, the effective range of micro-hubs is smaller than you might think, with Sam Keam of Zedify suggesting that, beyond a 3.5 mile service area, it becomes quite inefficient.
This is due to the fact that drop density in highly populated areas is rising over time just by nature of the uptick in ecommerce and demand for last mile deliveries. Speaking to Sifted, sustainable delivery startup Hived’s cofounder Murvah Iqubal said that the company’s drivers typically spend “nine hours operating within a 15-minute walking radius” each day.
Of course, it’s worth pointing out that zero emission delivery services tend to be most viable in densely populated centres of the world’s biggest cities. Furthermore, a logistics firm like Hived can to some degree ensure a consistent parcel density by the types of local senders it partners with.
But outside of city centers, and for retailers with customers spread further apart, managing drop density becomes a more pressing issue – especially if the goods you supply don’t lend themselves to a frequent purchase cycle.
A grocery retailer might see a high degree of predictability in their routes on a given day because people tend to have preferred slots for such deliveries. But a fashion retailer might find that their delivery routes look very different every day.
Do you wish to drive greater operational efficiency through higher drop density? Or lower your emissions by building a more sustainable delivery operation? Most likely, you want to do both. And slot steering can go a long way towards accomplishing these goals before an order has been placed.
The fundamental premise isn’t new. In effect, it’s finding ways to influence the delivery slots that consumers choose to book. But the technologies available to make this happen are. Smart scheduling is a way to build a very accurate picture of your future delivery activities in the context of an impending order. What does this mean?
By interconnecting your order management system with your last mile software and integrating that in turn with the systems of your 3PLs, you can surface a complete picture of your future delivery windows in real-time. And you can do this within the order confirmation flow of your website or app.
This is incredibly powerful. If you know that one of your drivers will be in the vicinity of a consumer about to place an order tomorrow at 3pm-4pm fulfilling an already confirmed delivery, promoting that delivery window is a great way to ensure that your jobs are naturally clustered together.
You might do this by ranking the slot to show it’s more environmentally friendly (a green timeslot), or offering a discount on delivery costs. The opportunities are endless.
At its core, a last mile delivery platform or last mile delivery software works to keep costs down and efficiencies up by providing an automated approach to things like delivery scheduling, task allocation, routing, real-time tracking, tracing and more. It’s effectively those eyes and ears you need to track where your drivers are and how they could be driving and delivering more efficiently.
With last mile optimisation software, it’s possible to automate labour-intensive processes around the planning and allocation of jobs. Today, the algorithms can account for hundreds of variables, each weighted based on your company’s own business logic. It delivers efficiencies and high drop density by:
Route optimisation is key to higher drop density.
The reason that last mile delivery can be so cost-inefficient is because finding efficient routes between a large number of stops in unpredictable urban environments is incredibly difficult.
Without effective optimisation, drivers end traveling longer distances than they need to, and end up wasting time sitting in traffic instead of actually delivering.
Today, algorithms can do all that heavy lifting. But algorithms are only as good as the data you feed them. So data becomes more important than ever.
According to Accenture, when data is used for intelligent route optimisation and applied with local fulfilment, delivery vehicles drive 140 million kilometres less.
Good data means you can find the right balance between delivery assets and drivers, reducing costs and improving operational efficiencies. It also means you can make better forecasts about anticipated volumes and route issues. And it means you can ensure a good end customer experience without creating excess capacity.
Optimising drop density is all well and good if you’re a small operation focused on specific locales. But what happens when your deliveries start to mushroom and business booms even more?
Luckily, last mile optimisation software is perfect for scaling businesses – in fact, it’s built with them in mind!
There are two main reasons for this. Firstly, automation. Last mile software is built on the premise of automation – the algorithms that sit within last mile software programmes can start out learning on small data sets, and then expand very quickly to much larger data sets when required. This is a key step for scaling delivery operations and creating an agile business model.
It’s therefore important to select your last mile software based on the tasks it can automate and that you predict will increase in volume as your business grows.
Some of these we’ve covered above, but here’s a handy features checklist listing all of them out together:
By automating a lot of these tasks and processes, businesses can quickly see a decrease in the time and costs required. Over time, however, they are also crucial for scaling operations so that business growth and expansion isn’t held back.
In addition to this, most last mile software solutions are cloud-based, meaning you don’t have to worry about scaling your on-site tech infrastructure to cope with increased demand. On-site solutions require on-site servers, which means that increasing your bandwidth for routing or other functionality requires you to add more physical servers.
In contrast, however, a cloud-based solution enables you to increase data usage as needed. It’s a much more cost-effective choice, as you’re not paying for unused computing power but equally you can easily ramp up your usage during seasonal spikes. Finally, as the rest of your IT infrastructure scales, a cloud-based solution allows for much easier integrations, minimising those dreaded data silos and making sure you’re getting the most out of your data.
Optimising last mile delivery operations is no longer a ‘nice-to-have’ for retailers and delivery businesses worldwide. As part of this, monitoring and improving drop density has become a key performance indicator for many tech and ops teams tasked with meeting demand. Subsequently, businesses without a proper system in place to manage and track the last mile will have a difficult time meeting consumer expectations, and will ultimately die in today’s competitive environment.
Thankfully, last mile software can help you not only increase your drop density and improve operational efficiencies, but it can help your business thrive. What’s more, it’s perfectly placed to help you scale your operations easily as your business grows and evolves.