Yes, Virginia, There Is A Santa … And Free Shipping … And One-Hour Delivery

Richard Howells

In 1897, an eight-year-old girl wrote to The Sun – a prominent New York city newspaper at the time – with an inquiry about whether or not Santa Claus existed. The paper responded with a now famous editorial that said: “Yes, Virginia, there is a Santa Claus.”

Logistics you can believe in

What does this have to do with logistics, you may ask? The point of the editorial was to give children of all ages a reason to believe – and I see a link to today’s retailers and manufacturers who are in a similar position as they compete to keep their customers believing in them.

At no time is this truer than during the holiday season, when retailers feel the demand for better customer outcomes more acutely than any other time of year. From what I can see, it looks like the field of competition this season is all about fast and free delivery.

Amazon, of course, offers free two-day shipping year-round as part of its Amazon Prime offering. But at a cost of $119 per year, Prime is hardly free. Seeing an opening to one-up Amazon, Walmart and Target are offering free shipping (with no yearly charge) for the 2018 holiday season. Amazon has responded by extending the same to non-Prime customers. The biggest players, it seems, are all striving to send the same message: Yes, Virginia, there is fast and free shipping.

The question is, as competition heats up, how will companies keep pace? Let’s a take a look.

Delivering across the last mile

As with Santa himself, getting the goods under the tree – or at least to the front door – is the name of the game. One advantage that Walmart and Target have over Amazon is that their physical retail outlets can act as distribution centers. Walmart says its network of stores puts the company within 10 miles of 90% of the U.S. population. Its associates, moreover, can be repurposed to provide service not only in-store but on the road as well – delivering packages to customers as needed. This is the kind of approach that ensures not only same day but same hour delivery.

To support the associated logistics, companies are moving to a range of intelligent technologies: Internet of Things (IoT) to track vehicles, machine learning to predict demand, integrated business planning to meet that demand – the list goes on.

Drones and robots

Many of these technologies play a role in an important trend for last-mile delivery: the rise of autonomously navigated drones and robots. While still in the earliest stages of adoption, advances are being made. Amazon has secured a patent that enables drones to detect screaming voices and flailing arms, which helps on the safety front. Meanwhile, one group already has a drone delivery pilot program up and running in Loveland, Ohio. Expect more advances.

Robots are further along. Take Kroger, for example. The grocery chain uses an autonomous robot vehicle shaped like a large toaster with wheels to deliver groceries to customers. Equipped with cameras and sensors, the 1,500-pound unit can carry 243 pounds of cargo. And because groceries need to be kept cool or hot, the unit includes IoT sensors to monitor conditions.

Some organizations envision a two-stage system for last-mile delivery. The idea involves a larger delivery van that acts as a roving hub in a dense population center – with robots deployed from the van for last-mile delivery. Who can say which kind of approach will take hold, but efforts are underway.

Fixing returns

A big part of Christmas is returning gifts – and for many consumers, a big part of free shipping is free returns. But for items such as clothing and shoes, free returns can be a losing proposition for companies footing the bill. It doesn’t help that some customers (no finger pointing here, you know who you are) intentionally order multiple sizes of the same item and return the ones that don’t fit.

Strategies such as minimum purchase amounts seem not to work all that well, and charging for returns is a sure way to send customers to the competition. What to do?

Many companies are turning to intelligent technologies. Some use sizing apps that create 3D images of the customer’s body. Others can get results from asking height, weight, and body type –  then analyzing this data in the context of other sizing data on file. Shoe companies, meanwhile, can build a database of shoe measurements and ask customers what size of a certain shoe they currently wear – then map the right size to the shoe they’re considering. Getting the size right up front helps cut down on costly returns.

Anticipating demand

Amazon is taking the idea of understanding demand to new heights with something the company calls “anticipatory shipping.” Recently, Amazon filed a patent for this new approach where it uses analytics to predict what customers will order in the future. Already, the company uses predictive analytics to provide recommendations on potential purchases based on order history. Why not take the next step and send the product along?

Not that Amazon plans on shipping unordered products to your house. The idea is to station popular products at local hubs – or on roving delivery vans. When you ultimately order the product – as predicted! – Amazon can get it to you for same-hour delivery.

I wonder if something similar was at play a few months back when I had to return a faulty laptop. I filled in the return form online and before I even packed up the original computer, a delivery person appeared at my door with a replacement. Was there a roving van nearby that received data on my replacement request? Do they really know when I am sleeping, and know when I‘m awake? Hard to say, but I can tell you I was turned into a believer. Indeed, with service like this, it’s easy to believe. Yes Virginia, there is a Santa … and free shipping … and one-hour delivery.

If you’re looking to perfect your supply chain for 2019, register for our on demand webinar Connect Digitally to Perfect Reality.

Happy holidays to all. Best wishes for the new year.

About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.