The eCommerce era of four-hour delivery
June 08, 2021
June 08, 2021
Why your online order is coming faster than ever and what that means for design
You and your neighbors have no doubt been ordering what you need online during the pandemic months. As you run out of supplies, you hop online and order what you need—from toilet paper to laptops. Statistics say you’re doing this more than ever, for more items than you were, say, five years ago. But how these items get to your doorstep has changed significantly in the past five years. And that is changing the buildings infrastructure for shipping.
Let’s go back half a decade, before the days of “fulfillment,” and look at old-school logistics of online retail. At that time, you went to your computer or device placed an order and whomever you ordered it from fetched those items from their warehouse and passed it on to a third-party logistics company. The logistics company would fly or truck your order until it could reach a regional distribution center for that company. There, another truck would pick it up and bring it to your residence. It required three to five or more steps to get to you. A certain number of hand offs were necessary and delivery times were two to three days or more. It was difficult to imagine things arriving much quicker—but now they do.
Today, a quest for speed and convenience that can translate into market share for retailers has seen the goods-distribution network change rapidly.
Micro fulfillment, a submarket of logistics, has exploded for online retailers and everyone else who delivers their goods to your home or business. There’s one sure way to speed up delivery: start with the goods closer to their destination. Fulfillment as an online retail activity requires the product to be closer to wherever you are. The model was set up so that delivery times to your business or home are reduced significantly to overnight, 24 hours, and, in the newest part of that business, under four hours.
If you order something and it arrives in under four hours, it is already in the same region as you. In the old-school model for express delivery, products might be shipped via air and arrive in a day. But the four-hours-or-less model means your item can’t get on a plane, that takes too long. For this model to work, the item needs to be about two hours away.
What does the new fulfillment model mean for logistics facilities?
The four-hours-or-less model means your item can’t get on a plane, that takes too long.
Logistics networks require more real estate to hold those products before delivery in each region and metro area. These centers are small but dynamic, constantly receiving bulk orders of popular items and items the retailer anticipates selling. This is where the last mile begins. Expect to see more fulfillment centers within cities to meet the same-day demand.
More retailers than ever are offering online ordering and delivery. According to IBM’s U.S. Retail Index data, the pandemic has accelerated the shift away from physical stores to digital shopping by roughly 5 years. Ecommerce in the US grew by 44% in 2020.
Also increasing is the need for air cargo carrying bulk shipments of products to every regional fulfillment center to meet that four-hour demand.
Traditionally, products come into large distribution centers from air shipment via truck, are routed via conveyer, then go out on another truck, often in a matter of minutes. From there, they go to regional centers or are delivered to their end destination.
With more regional fulfillment and faster delivery, however, we don’t need as much space at these hubs.
The biggest players in third-party logistics have seen a huge increase in volume during the pandemic. Their profit per package from delivery to homes, however, hasn’t budged. Therefore, they are looking at opportunities to do last mile differently, to decrease costs and increase reliability.
Some are streamlining to gain efficiencies, while others are positioned to experiment with last mile a bit more. Their strategy is to reduce the number of steps and stops a package takes to reach you. If it can reduce a package’s route from four locations to two, it will likely bring its cost-per-package down.
We’re seeing an increase in automation and that’s been directly affected by the pandemic. A desire for reliability and resiliency is driving the industry toward automation, especially in regions where staffing for fulfillment is challenging. The automation doesn’t, however, mean less staff. Automation handles repetitive jobs and frees people up for other tasks.
Third-party logistics companies and online retailers are now in the business of anticipating demand, so they’re shipping the right items to fulfillment centers. Retailers are, naturally, using analytics to forecast what they need to stock, but they can’t always predict the future. They want some built-in flexibility and elasticity so they can reconfigure these fulfillment centers as needed.
Consumers will likely grow to expect same-day delivery in their eCommerce experience. To meet these expectations, retailers and logistics will continue to employ new technology—perhaps even autonomous vehicles and drones. They’ll continue to refine their systems and facilities all in service of getting the goods from your mouse click to your front porch—as quickly as possible.