A Study of the Fulfilment of Last Mile Delivery in Food Delivery Service

Abstract

Last mile delivery is the last stage goods go through before they reach the consumer. Despite being a great determinant to consumer contentment, last mile delivery is expensive and a tedious phase of product distribution. Last-mile delivery in the food sector experienced more changes when the COVID-19 pandemic struck. Before COVID-19 struck customers were used to the convenience of digitization. The pandemic intensified this granted safety dominance. Despite this last mile delivery still faces numerous logistical issue. Nonetheless, these challenges can be overcome by optimizing the last mile delivery to reduce the general transport costs. Companies can also assess the following indicators to manage these challenges exhaustively; contactless food distribution, impacts of third parties in the last mile, and increased perishability. HK delivery companies can pool these indicators with digitization to create a sustainable last-mile delivery system

Introduction

1.1 Background information

Last-mile delivery is the last phase of the shipping process that goods go through before getting to the consumer. Last-mile delivery is a significant determinant of consumer contentment. It’s usually expensive and a tedious part of the product shipment process. Persons who have tracked shipments online understand the uncertainty and pressure that last-mile creates. At this shipment stage, the process encompasses multiple stopovers with product drops. For example, the drop of points in a rural area could be miles apart. A similar situation can be replicated in an urban area when traffic congestion quashes drop-off points. The expansion of e-commerce has made challenges associated with last-mile delivery more complex due to the rise in retail sales. The rise in retail sales has led to a corresponding rise in the number of parcels distributed daily, altering consumer anticipations to include fast and free delivery.

The expenditure spent on last-mile delivery accounts for 53% of the entire shipping budget. Since delivery is increasingly becoming free, consumers are reluctant to foot this bill, leaving it a responsibility to retailers and logistical colleagues. Therefore last-mile delivery is an area that companies are keen on and are willing to change.

1.2 Objectives of the Study

• To critically assess the significance and influence of delivery and fulfilment in food delivery service.
• To detect the delivery and fulfillment concerns faced by Hong Kong food delivery firms.
• To extensively and intensively evaluate the efficiency of present logistics models for delivery and fulfillment.
• To determine ways of meeting consumer needs comprehensively in the food and beverage sector.

Literature Review

Initial delivery model

According to Iwan et al. (2016), before last-mile delivery, transport of the food industry consisted of the; kitchen, marketplace, feedback, and logistics. These components collaborated to meet consumer needs and enhance profitability. Therefore providers focused on assessing these components to generate profits and preserve the business’s name. Businesses interacted with their clients via white-label channels. Saguna et al. (2021) argues that gradual technological advancements ushered most of these clients into e-commerce forcing providers to turn to last-mile delivery for competitive advantage. Organizations started creating and testing various supply chain models to amplify parcel capacity and meet consumer needs. Unfortunately, last-mile delivery for all these models continues to face numerous issues.

Importance of last-mile delivery

In 2018, e-commerce experienced explosive growth in sales, creating competition among retailers in the contest to reach consumers. Sellers are under pressure to fulfill their obligations within a reasonable duration. Getting last-mile delivery right remains the solution to this pressure. Previously, brick and mortar were the order of the day; online purchases were still available, although shipping took almost two months (Orjuela, 2019). Presently customers expect their deliveries at least the same day after request. As technology advances, the demand for e-commerce sales is also rising, and sellers have to develop mechanisms to cope with this demand. The retail sector is changing rapidly, and traders are improving their last-mile solutions to remain competitive. For instance, in 2018, Amazon dominated the American retail market due to its prime next-day and same-day distribution service. As more customers turn to e-commerce for their purchase needs, fast delivery will be a competitive point and an expectation from all online shoppers.

Hence if sellers and their logistic associates seek to gain a significant market share, they ought to prioritize last-mile delivery. Contemporary sellers need last-mile solutions that can make deliveries within two hours. Last-mile stores enhance the movement of products within the last phase of the supply chain based on the studies by Zhou et al. (2020). Therefore being closer to the consumer reduces the time and cost required for last-mile delivery. Consequently, the time taken to deliver a package from a last-mile store to the consumer is more important than its actual mileage. The traffic situation in urban areas also determines the chances for success in last-mile delivery. Hence profound understanding of the transportation system is needed to determine a last-mile location (Iwan et al 2016). Sellers should strive to have high-quality logistic services which can allow them to serve consumers with different profiles.

As providers strive to meet the growing demand for fast delivery, consumer expectations increase while their experiences are declining. Even though fast delivery is essential, consumers have suffered a lack of accuracy and professionalism during delivery. Hence the firms seeking to gain consumer loyalty can tap into this opportunity, consumers seeking quality and professionalism (Iwan et al. 2016). Increased demand for same-day deliveries has also compounded the effectiveness and reliability of last-mile delivery. F&B companies located near big cities need to invest in the following features to ensure that last mile deliveries are successful:

The correct positioning. Last-mile facilities near major roads and bridges can deliver to more consumers than those on a city’s outskirts. These facilities can be more advantageous in cities where boroughs are interconnected and within close proximities (Saguna et al. 2021).

Perfect building quality. Majority of logistics departments in other sectors are located in ancient buildings. These buildings often have limited structural and electrical capacities. The structures were designed to suit business needs in the past and can barely support the load of goods shipped today. Since last-mile delivery in the F&B sector is a relatively new venture, providers should learn from other industries and select buildings that can suit current business needs (Kiba et al. 2021). For instance, a building with reasonable ceiling heights can allow the storage of vertical racking systems. With an appropriate speed bay, these racks enhance the flow of goods.

Cross-dock potential. By optimizing this, potential F&B providers can tackle one of the significant issues facing the last-mile facilities in this industry. The researches of Zhang& Lee, (2016) denotes cross-docking as receiving products via one door and then shipping them out almost immediately via another door. This practice allows for the adequate transportation of perishable goods by eliminating storage and preservation. With an influential loading dock ratio, consumers can load F&B on every dock without using an elevator. A floor capacity of up to 800 pounds can meet all the food and beverage sector needs.

Prospective planning. Since technology is rapidly evolving, last-mile facilities need to have elements such as electric charging stations, which shall be of importance in the future. The last mile also accounts for 30% of the delivery cost and is mainly dependent on gas and labor; providing an eco-friendly option can make F&B facilities more competitive (Shaheen et al. 2020).

Technology solutions to better last-mile delivery

The rise of the gig economy has allowed many consumers to access crowdsourcing facilities through applications such as Uber. Many establishments have turned to location-based crowdsourcing that allows customers to use their services via mobile applications according to Puram et al. (2021). This model has also been adopted in the food and beverage sector. Providers prefer to use this model since it requires little capital to start and offers customers memorable shopping experiences. Crowdsource technology pools all stakeholders, thereby enhancing their interaction (Orjuela, 2019). For instance, a consumer can interact with domestic couriers to facilitate parcel delivery through this platform. Consequently, organizations can use this technology to deliver goods faster at the desired time.

Last-mile backdrop in the food and beverage industry

The last-mile delivery model is extensively advanced in the food industry. This model has witnessed tremendous evolution in this industry in the last decade. The onset of coronavirus turned this transformation into rapid growth to cater to the rise in consumer needs. Before the pandemic, consumers were used to enjoying the convenience of digitization (Saguna et al. 2021). Nonetheless, this debate shifted from convenience to safety when the pandemic struck. Therefore providers focused more on safety other than just delivering goods. This led to an increase in the need for fresh products, which is likely to persist even after the pandemic due to changes in customer primacies, including;

• The transformation from delivery for suitability to emphasis on safety
• Increased comfort and willingness to have essential commodities distributed.

The performance of this model may vary across different geographies. Hence providers in the F&B industry need to continue investing in after-sales experience.

Significant trends in the F&B last-mile setting

At the pandemic’s peak, last-mile providers in the food sector focused on meeting the service demand. Since the pandemic has subsided, the last mile is likely to experience tremendous growth, creating more opportunities. Nonetheless, the opportunities also present challenges such as stiff competition, which may trigger rapid evolution in the industry (Lin et al. 2022).

Changing expansion primacies. Currently, hybrid models are the most favored approaches to expansion. Food providers vary their takeout and delivery channels to cope with changes in demand. Some hybrid models in use include ordering online and collecting in-store, delivery to the consumer, and subscription model (Altenried, 2019).

Assuring safety. After the pandemic safety of the foods delivered has become more paramount. A survey by Deloitte shows that after the pandemic, a particular portion of people is still unwilling to visit the store (Lin et al. 2022). Hence safe deliveries are a priority for providers who intend to capture this market share.

Renewing customer trust through a lasting customer experience. As establishments seek to generate a lasting home experience for clients, consumer experience will be a crucial determinant for success among food providers.

Increasing food delivery. During the pandemic, businesses with the established delivery system had an advantage making their competitors appreciate the importance of this add-on service (Srinivas& Marathe, 2021). Firms without an in-house delivery provider had to rely on third-party providers, thereby driving inter-sector partnerships. Customers choose the F&B providers who can get goods to them safely and quickly with flexibility.

Changing consumer behavior. A report by Deloitte shows that at the peak of the pandemic, customers were willing to pay high premiums for safe and fast delivery. Nonetheless, with the easing of lockdowns and other COVID restriction measures, consumers opt for cost-efficient approaches such as self-pickup from convenient points (Saguna et al. 2021).

Similar to other locations, the last mile environment in Hong Kong appears to be reasonably mature and growing in a direction that is innovative and full of opportunities. New ideas such as the adoption of cloud kitchens or autonomous deliveries may be essential drivers in the future (Lin et al. 2021). While these innovations are slowly being adopted in the F&B sector, full adoption of these technologies will better consumer standards by enhancing flexibility and safety.

Last-mile delivery role in HK food sector.

Last-mile delivery was a bonus, but presently it’s a must-have for all businesses, primarily in the food industry. The coronavirus pandemic changed the last mile logistics in the food industry by making customers eager to pay a premium for last-mile services. The pandemic containment measures forced businesses to turn to doorstep delivery to remain competitive. This adjustment paused an imminent threat to the food industry. No matter their size, all restaurants had to develop a delivery system of their own to remain in the market.

Despite the food delivery system being in place, several logistical challenges still exist in the food industry. One of these is the worry of keeping up with consumer expectations. Many consumers have access to food delivery apps; they expect providers to deliver fast and efficiently (Lin et al. 2022). Nonetheless, this is a hurdle that many providers are yet to overcome. Additionally, the potentially missed deliveries is a big challenge. Missing a delivery is possibly one of the significant risks in the food industry. With orders consistently coming in, it can be challenging to determine the pending orders and those already delivered. The constant flow of orders also increases the chances for human error when multiple restaurants are yet to install digital systems to manage this data.

Also, the inefficient management could cost the business dearly. Many restaurants are yet to adapt fully to the delivery system. Hence their employees lack the skills to manage orders efficiently, thereby creating risks in the food industry (Lin et al. 2022). Poor management leads to delays in deliveries and is also a quality compromising factor. Any restaurant associated with poor management is likely to lose potential clients. Last is the challenge of tracking orders as outlined by Viljoen et al. (2014) in their study? Tracking is an essential part of the food delivery system. Consumers want to track their orders in real-time to determine when they will arrive exactly. Nonetheless, this is a consumer need that restaurants are yet to meet.

Discussion and Management Implications

Over the last ten years, the last-mile delivery has undergone significant changes on the back of technological applications. The F&B industry has adopted these technologies to enhance service delivery. The pandemic pushed people to new ways of managing food by altering consumer behavior and ushering more people into e-commerce. In a study conducted by Deloitte in 2020, most respondents reported ordering food via delivery services. Nearly half of the respondents stated that they would stick to these habits even after the pandemic (Puram et al. 2021). Apart from takeout and delivery options, consumers also turned to cashless payment and end-to-end transparency of their orders. During the pandemic, transparency updates also captured the health status of delivery personnel as a precautionary measure. Consumers also desire to have a flexible shopping experience where they can edit shopping lists at will (Altenried, 2019). Any brand that meets all these needs stands a chance of creating a loyal customer base.

Following a change in the market scenario and consumer behavior, it’s safe to say that the global online food industry is on a growth trajectory. Estimates show that this market could reach $192.16 billion by 2025 from $126.91 billion in 2020. Like other locations in the world, HK’s food delivery industry faces an array of challenges down the entire supply chain (Lin et al. 2022). These challenges make the implementation of this system more expensive. Nonetheless, these challenges can be overcome by optimizing the last mile delivery to reduce the general transport costs. In addition to this, the following indicators can be further looked into to overcome these issues.

Impacts of third-party providers on the last mile

Presently, most HK consumers are willing to pay extra money for faster deliveries. Restaurants and food delivery companies in HK can hardly keep up with consumer needs; therefore, they turn to third-party providers for delivery services. The introduction of third parties often compounds the existing challenges due to disorganized routine practices, which creates the inability to estimate turnaround time (Naumov& Pawlus, 2021). The breakdown caused by third parties during last-mile delivery jeopardizes the entire shipping process and shrinks the profit margins. This challenge can be overcome by adopting a comprehensive network model which covers the entire supply chain. Alternatively, these entities can create an internal delivery system that supports the present and future business expansions.

Increased perishability

During the COVID-19 pandemic, delivery companies were extra cautious about safety to avoid contamination. As a result, a portion of the public earned trust in the food delivery systems, which has led to an increase in demand for foodstuffs and other fresh items. To guarantee the safety of fresh products, delivery companies have adopted technologies that can monitor operations at a cost (Castillo et al. 2018). These technologies allow companies to cope with increased demand using crowdsourcing, transforming every shopping experience. The technologies offer distribution companies automated allocations, constant tracking, and route optimization. These processes make the delivery process easy and reduce the risk of spoiling fresh products.

Contactless food distribution

During the pandemic, some delivery companies adopted contactless deliveries to cater to the needs of people in isolation. They could distribute food using robots and drones. Out of these approaches, drones received the most excellent attention. Moving forward, food distribution companies can adopt this technology, although it necessitates that the firms should be financially stable (Osakwe et al. 2022). They should also observe all the government regulations before using this technology entirely.

Enhancing last-mile delivery to beat rivals

Rivalry in the food delivery sector has increased rapidly, especially after COVID-19. Therefore F&B companies in HK are keen to better their last-mile delivery. These firms need to use end-to-end technologies with features like constant tracking, fleet monitoring, dispatch organization, and analytics to excel in this field (Viljoen et al. 2014). With this technology, administrators can constantly monitor the delivery representatives. The end-to-end toolkit recommends the best route to the delivery personnel and notifies their superiors immediately when unnecessary stoppages and diversions are made (Lin et al. 2022). The system also optimizes delivery routes concerning traffic and weather updates and the delivery’s urgency, thereby keeping drivers informed all the time.

On the other hand, the automatic dispatch system plans the routes and allocates the tasks to drivers based on their location. It optimizes the available drivers and prevents disorganization, which can otherwise result from human error. It simplifies the delivery process and aids in reducing final mile delivery costs. Likewise, these agencies can also adopt a proof of delivery to ensure the entire process remains transparent (Altenried, 2019). Proof of delivery is a document with the recipient’s signature and other details which affirm that an order has been delivered. This document is pooled with a mobile application that allows the driver to collect a recipient’s details.

Delivery companies can also monitor the crucial business indicators to assess their performance in the market. These indicators include consumer ratings, the performance of delivery personnel, and the number of incomplete deliveries (Saguna et al. 2021).

As food delivery firms in HK continue to compete firmly, concentrating on consumer experience will be the key to success. These companies ought to have a simple and transparent system with open communication channels. Allowing consumers to send real-time feedback is a great strategy that strengthens the distribution channel. To create a loyal consumer base, these companies can also conduct periodic surveys to collect consumer feedback, after which the firm should resolve these complaints (Zhou et al. 2020).

Recommendations

Last-mile delivery is yet to reach maturity; therefore, food delivery companies in HK have opportunities that they can exploit to ignite growth. These opportunities include:

• Invest in digital technology such as delivery bots and drones.
• Build warehouses around HK to enhance the faster delivery of products.
• Invest in intelligent tracking technologies to keep consumers informed about delivery status.
• Deliver orders as soon as possible after request.
• Delivery drivers can also work as sales representatives to boost company sales.
• Companies can embrace electric cars since consumers are aware of environmental issues. This would make the last mile carbon delivery eco-friendly.

Conclusion

Over the last decade, the last-mile delivery has undergone momentous transformation. The food and beverage industries have been the greatest beneficiaries of this transformation. Last-mile delivery in the food sector experienced more changes when the COVID-19 pandemic struck. Before the pandemic struck customers were used to digitization and convenience. The pandemic augmented this leaning and improved the focus on safety via distribution. The most recent last-mile advancements in the F&B sector circle around digital customer engagement, automation, and Industrial Corporation. Even after the pandemic, the delivery of fresh and cooked foods is likely to increase due to two main changes in consumer behavior. One is the shift from delivery for convenience to the focus on safety. Second is enhanced comfort level and the preparedness to deliver basic needs. Despite being an essential fragment of the distribution procedure, the last mile delivery process faces several logistical challenges. One is the constant pressure to meet consumer needs. Second is the probability of missed deliveries due to human error or increased workload. Last is inefficient management since most restaurants are not fully digitized.

Nonetheless, these challenges can be overcome by optimizing the last mile delivery to reduce the general transport costs. Companies can also assess the following indicators to manage these challenges exhaustively; contactless food distribution, impacts of third parties in the last mile, and increased perishability. HK delivery companies can pool these indicators with digitization to create a sustainable last-mile delivery system.

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Appendix 1.

Working timeline