The real costs of poor delivery management. Major impacts due to bad delivery planning

With the rise in e-commerce and cross-border transactions, managing an increasingly complex supply chain is a major challenge. A fluctuating global business climate and increasing customer expectations only add to this challenge. According to a Deloitte survey of C-suite executives, 53% of respondents said that supply chain disruptions have become more costly in the past 3 years while 48% said that they had become much more frequent.

Poor delivery planning plays a big role in such supply chain disruptions. These include missed delivery deadlines, damaged goods, and cost overruns. Proper delivery planning has a number of interrelated and complex elements, from managing the logistics fleet to collaborating between different delivery stakeholders, ensuring quick turnaround time, and living up to customer expectations. This is why any business that does a lot of shipping and wants to optimize costs of operation has to focus on delivery planning.

Poor delivery planning doesn’t just affect supply chain dynamics negatively. It also has a ripple effect across different facets of the business like poor productivity, customer churn, increased fleet management costs, inefficient reverse logistics and inability to scale.

Loss of productivity is one of the biggest by-products of poor delivery planning. This loss of productivity can manifest itself in a number of ways:

• Inflated labor costs as shipments get delayed and overtime is needed to handle last-minute shipments.
• Sub-optimized freight runs due to poor delivery scheduling.
• Loss of productivity and an increase in costs as items sit in the warehouses waiting for pick-up and delivery.

Since the advent of Amazon, logistic services have gone to the next level in terms of greater visibility and faster turnaround. Over time, this has resulted in a huge shift in customer expectations. In fact, nearly 90% of the respondents in an IBM and Total Retail survey felt that Amazon had radically enhanced their expectation around timely and inexpensive delivery. Not only do customers expect cheaper and faster delivery, but they are also looking at other aspects like convenience and personalization. In such a scenario, sub-par delivery services can really become a deal breaker. Items getting delayed or not arriving as per the customer’s availability or arriving damaged all create a negative impression in the minds of the consumer. In fact, given the sheer choice that today’s customers have, timely delivery has become a key to customer retention.

In a Deloitte survey of 600 C-suite executives, 53% of the respondents felt that margin erosion was one of the costliest bye-products of supply chain disruptions. This margin erosion is because of improper fleet management which results in things like higher fuel costs and delayed arrival at ports which means higher transportation fees. Since logistics costs account for anywhere between 5 to 50% of the total landed cost of the product, these inefficiencies can have a huge impact on the ultimate bottom line.

With the advent of e-commerce and the easy returns policy, reverse logistics has also seen massive growth. In 2015, for instance, the total return delivery costs amounted to $246 billion in North America alone and more than $600 billion across the world. Reverse logistics is altogether more complex and requires even more thorough planning, especially because it is relatively new and unfamiliar. A returns process that is poorly planned and manually executed leads to a whole range of hidden labor costs, from customer service labor costs to financial reconciliation costs to sales labor costs. Poor returns processes can also have other negative consequences like sale of products in the ‘grey market’, lack of visibility for customers, inability to forecast correctly, and brand toxicity.