The „Last Mile“ in Chemical Logistics
In logistics, the „last mile“ describes all the challenges that logistics service providers are confronted with on the last leg of the goods delivery. In the recent past, the last mile problem has mainly occupied companies in the B2C and C2C sectors. With increasing globalization and digitalization of the chemical industry, handling the last mile factor is becoming increasingly important for chemical companies as well. In this blog post, we explain why chemical companies should deal with the last mile problem and present appropriate problem-solving approaches.
The „Last Mile“ as a Result of Social and Digital Change
The „last mile“ includes the last stage of a delivery, from the arrival of the delivery address to the handover of the goods. For the first time, the last mile problem became particularly relevant in the B2C and C2C sectors. The triumph of the Internet makes it possible for private households to place orders from anywhere and at any time. The number of orders and e-commerce revenues have always increased from year to year. However, the high volume of orders and rising customer demands pose a problem for courier, express and parcel services (CEP). This is reflected in numerous small consignments of goods, which are to be delivered to the customer in the shortest possible time. Demographically determined factors, such as the increasing number of working women and increasing mobility, are also boosting online trading. At the same time, they contribute to the fact that the probability of a personal receipt becomes less probable, since the receiver is not at home. In addition to the high number of unsuccessful delivery attempts, the CEP service providers are also concerned with the high costs resulting from the small delivery quantities and the geographically, widely dispersed delivery points. As a result, the „last mile“ accounts for around 50 percent of total costs and is therefore the most cost-intensive stage in the value chain of a logistics service provider.
Last Mile: Delivery Problems in the Area of Fine and Specialty Chemicals
A similar development can currently be observed in the B2B area of fine and specialty chemicals. However, the reasons are different from those in the B2C sector. Companies are increasingly attaching greater importance to optimized procurement logistics and decide for just-in-time deliveries for goods that are required in high volumes and consumed regularly. In the case of just-in-time procurement, the customer dispenses with large-scale warehousing and the supplier delivers the materials required for production almost synchronously with production at a few intervals. The customer benefits from a reduction in warehousing costs, a reduction in space requirements, an improved process flow and, in most cases, a reduction in costs on the part of the supplier. However, this places high demands on the transport management of the suppliers, in particular on throughput times and order processing. Chemical companies have recently observed a trend towards higher delivery frequencies with a constant total delivery volume, which results in small dispatch sizes at distant supplier points. This in turn increases the costs per delivery over the last few miles.
Approaches to the Problems of the Last Mile Delivery
The change in the procurement behavior of chemical customers poses new challenges mainly for chemical companies focusing on fine and specialty chemicals. In order to meet the requirements of purchasers, modern IT systems with, which logistics processes can be monitored and coordinated, are of great importance. Experts see a great need for many chemical companies to catch up. There is also room for improvement in terms of route utilization. An analysis of past transports has shown that these are often subject to inadequate planning and, and thus, has great optimization potential. An underutilization of capacity, as can be found in the surveyed chemical companies, leads to inefficient transport tours. However, an overload is also not desirable, as it is accompanied by missed delivery times and dissatisfied customers. Therefore, it is important that the value-added process in logistics is limited to the essentials and made more efficient while taking the last mile into account.
Customer proximity, transparency and optimal process control, as found in highly specialized logistics companies, are still the most important factors for efficient and customer-oriented logistics. The changed ordering behavior has not only focused buyers‘ attention on product quality, but also on delivery quality and reliability. Purchasers of fine and specialty chemicals are now more interested in establishing and weighting logistics criteria and comparing chemical suppliers. For chemical companies, this means that they have to deliver reliable complete solutions that go beyond product quality. In other industries, this is achieved by interlinking company interfaces. Modern transport management solutions are already a reality there. These include real-time monitoring tools that go beyond the company’s own internal communication and inform customers continuously and automatically about deliveries. With the help of live coordinates and current traffic information, the chemical supplier can reliably and automatically predict an expected delivery date and promptly report possible delays. Furthermore, the company can effortlessly record and evaluate the transmitted data and take appropriate countermeasures in the event of frequent delays.
As a result of the changed procurement behavior, closer cooperation between customers and suppliers are apparent in other industries. Particularly in the automotive industry, it has been observed in the past that the number of suppliers has been reduced from many to a few key suppliers. These key suppliers were integrated into the customer’s processes by viewing stocks, shortfalls or critical quantities, preparing appropriate deliveries and then transporting them promptly. In the chemical industry, it is conceivable that selected chemical companies will be more closely integrated into the procurement policies of their customers. For the chemical companies, this would mean that they could adapt their processes to the customers‘ cycles and thus more easily coordinate efficient transport routes.
Logistics Outsourcing: Management by Fourth Party Logistics Service Provider
However, not all chemical companies have the necessary capacities and know-how to solve the last mile problem by themselves. It is not surprising that a trend towards logistics outsourcing can be observed in the chemical industry. The decision is increasingly being made in favors of fourth party logistics service providers (4PL for short). In contrast to third party logistics providers, 4PL service providers do not bring their own material assets such as vehicles, warehouses or other logistics equipment with them, but they take over control and integration functions within the supply chain in order to increase the efficiency of the supply chain. To this end, 4PL services provide a high degree of know-how in the area of process excellence and have a well-developed IT structure as well as modern transport management systems. In the past, the use of 4PL services has brought with it several advantages: affected companies have been able to reduce their personnel costs, save transport costs with the help of efficient route planning, and achieve a considerable increase in customer satisfaction thanks to intelligent real-time monitoring solutions that guarantee a high degree of transparency for both the supplier and the customer.
Logistics plays a special role in the chemical industry. Due to the changed procurement behavior, such as a just-in-time procurement policy, the demands placed on chemical suppliers are constantly increasing. In the future, chemical logistics will be subject to far-reaching changes. In a previous blog post, we already reported on future trends in the logistics industry, which could also be of significance for chemical logistics companies.