Same Day Delivery: Viable or Not?

May 13, 2014

As consumers increasingly shift loyalties towards businesses that provide immediate gratification, companies should nevertheless examine the data before committing to this trend.
Human beings have never been very patient. In fact, I'm sure that there were complaints about the wait for dinner on the day that fire was discovered. So it's not entirely surprising that one initiative that's been gaining momentum in the retail environment is same-day delivery.

Delivery times have been dropping for years, and companies are beginning to take notice of the potential to not only offer more customer convenience, but to find another way to set themselves apart from their competition. Companies are looking at a wide variety of options for same-day delivery, which range from traditional delivery methods to (strangely enough) the use of drones. Though it would seem that the convenience of same-day delivery would be a major selling point to increasingly demanding and time-crunched consumers, most don't seem to be buying into the concept, yet.

A recent survey by The Boston Consulting Group found that among 1,500 U.S. consumers, only nine percent noted that same-day delivery was "a top factor that would improve their online shopping experience." That's compared with 50 percent who said that lower prices and 74 percent who said free delivery would be an improvement.

In today's economy, the cost factor of a service, no matter how convenient it may be, is still a sticking point with many consumers. There is one market segment that seems to like the idea: affluent millennials (18 to 34-year-olds with household incomes over $150,000). That seems to be enough to make large corporations begin working on it.

The trick to making same-day delivery work and succeed is not just in selling the idea to consumers, but in making sure that the process is run as efficiently as possible. The old adage "a lot of plates spinning" couldn't be more relevant in this situation. Efficiency will not only benefit the balance sheets of companies offering this new service, but will also ensure that consumers are satisfied - a must when trying to sell a new concept.

Data, particularly real-time data, is imperative in order to monitor inventory, track trucks/transportation systems, and to track orders from shipment to delivery. While monitoring all of this data, businesses must also make a number of choices, such as the products to offer for same-day delivery. That's a lot of data and decisions to keep track of.

One issue that arises along that chain will throw everything off, with the end result of customers not receiving the "immediate" service they're paying for -- not a situation for any business to be in, ever. Part of this information comes from the supply chain, but other important information comes from the customer and forecasting side of things.

Businesses need to get as much information as possible about their customers and the products they're buying. With that information, they're able to answer some of the important questions that arise when investigating the use of same-day delivery:

What's the sensitivity of various consumers and products with regard to delivery speed?
It pays to know your customers. Different groups of people may be more apt to take advantage of a service like same-day shipping. You should also make sure that particular products would be right for same-day shipping. If it doesn't make sense for the product or for the customers you're marketing it to, then what would be the point in investing your time marketing the service?

Who are the consumers and what are their buying habits (i.e. where are they located, where are they placing their orders, and which products are they purchasing)?
This information can affect not only the cost to the customer, but also your logistics. It would be helpful to know if the majority of your customers are based in California and your warehouse facility is in Boston. In that situation, same-day shipping is improbable and wouldn't make sense to pursue as an option to offer customers, unless it's geared directly at those within your local area.

What does demand look like throughout the year?
Your ability to same-day ship successfully can hit a snag if it's a period during the year when shipping services are in high demand (visualization can be helpful to see these trends). For example, think about the period of time between Thanksgiving and Christmas. There is a reason why shipping businesses warn that it may take longer to receive your shipment during that time.

What is the value delivered to specific customers by same-day delivery?
In short, why should customers pay for the service? There must be a reason that motivates them to pay for the service and knowing that reason can be helpful for marketing the service.

These are just some of the questions to ask. Keep in mind that every business is different and the questions that need to be answered will be specific to the business and their products. While monitoring all of the data that's collected, businesses must also make a number of choices, such as the products to offer for same-day delivery.

That's a lot of data -- Big Data -- and decisions to keep track of. This is where the utilization of data discovery and analytics software will make the difference. The software can comb through data and provide analyses that will prove invaluable when making final decisions about the true feasibility of same-day delivery initiatives.

The jury is still out with regard to how successful same-day delivery will be. The only certainty is that companies will have to gain a great deal of control over their supply chains and the data that they are utilizing with them. With that control, the data can yield valuable insights that will give any company venturing into the realm of same-day delivery a leg up on their competition.

Get more information about what TARGIT Decision Suite can do for your manufacting and supply chain business.