June | 2018
In spite of multiple technological innovations in the supply chain space, Proof-of-Delivery (PoD) remains one of the most intractable problems even today. The impact of PoD delays and errors around is twofold – on the one hand, dissatisfied customers affect brand perceptions and downstream business, while on the other, a substantial lag in financial closures is especially worrisome if you are the receiving party.
The B2C delivery space has seen a spur of innovations ranging from order tracking services/apps, IoT-based device tracking to autonomous vehicles and drones for instant delivery. With the advent of Amazon and Uber, consumers expect shorter delivery windows. Thus, last-mile delivery has become a key differentiator and a critical part of consumer experience. While automation and innovation has solved parts of the problem, last mile logistics remains one of the most cost inefficient aspect of the supply chain journey. There is an increasing consumer demand for individualized orders at a specified place and time at a customized price point. Economies of scale becomes a challenge as order individualization increases and logistics costs shoot up to accommodate consumer delivery preferences. As a result, the share of last-mile delivery as a percentage of the total delivery cost has risen (as high as more than 50% in certain economies). 1
Today, the cost of global parcel delivery (excluding pickup, line-haul and sorting) is estimated to be €70 bn globally. The developed markets (US, China and Germany) account for 40% of this and are growing at 7-10% annually. The emerging markets on the other hand have clocked growth numbers>100%.1 Today’s consumers also demand real-time order visibility. They also show an increased interest and awareness in product sourcing information and authenticity. This has been seen across niche categories from luxury apparel and footwear to exotic food and beverages. According to a research, 56% of customers insist on receiving full visibility, while only 43% of logistics companies provide the service.
In Asian markets like Korea, startups are experimenting with last-mile delivery applications using blockchain by creating centralized delivery platforms and matching messengers to provide parcel delivery services with customers using AI and smart-contract based applications. Scaling these applications can enable significant savings through reduced delivery commissions (current industry average for commissions is >30%) by minimizing order-messenger mismatch.2 From a service evolution standpoint, the next step would be creating an instant hub-spoke model, reducing delivery times even further, and enabling point-to-point delivery through improved order-messenger mapping.
Cross-border trade counterfeits and payment disputes are major issues in the global B2B logistics space today. The global counterfeit market is estimated to be 1.2 trillion USD in value.3 Retailers and manufacturers are also plagued by long payment settlement cycles and disputes spanning across continents. According to estimates, $140 bn are tied up in payment disputes4 in the transportation industry and average invoice payment cycles could be as long as 26 days for organizations operating across multiple countries. Supply chains are still reliant on paper transactions with processing costs accounting for 20% of the total transportation costs. There is also a risk of losing paper-based records causing settlement disputes. For multinational shippers in emerging markets, 1-2% of revenue is currently lost due to the inability to invoice on lost or disputed shipment.5 In some emerging economies like India, the shadow credit period could be as long as 30 days due to delay between actual delivery and Proof of Delivery receipt. Multiple layers of subcontractors and brokers further delay this process and increase the risks due to unsynchronized records.
A platform approach to record keeping and payments by maintaining a distributed ledger can significantly reduce processing costs due to paper-less transactions. They also reduce the risk of disputes due to immutable record keeping. Creation of smart contracts integrated with IoT-enabled devices and blockchain networks can enable real-time status updates for shipments and a uniform view for all stakeholders. This in turn would reduce payment and settlement cycles.
Goods with special refrigeration and storage requirements can also be monitored throughout their delivery journey and payments/settlements can be triggered after checking product quality/authenticity through IoT-enabled sensors. Digital data collected from sensors can be fed into blockchain networks to validate goods receipt across the network. The blockchain-based applications of the future will be mobile-enabled, easy to use with and well connected with local players and logistic partners. The MNCs of the future could operate on a global private distributed ledger connected and enabled with multiple supplier side-chains with near-instant payment settlement cycles.
With all these technologies at our disposal, PoD need not be the nightmare it is today. With the right kind of service design followed by enabling technologies mentioned above (IoT, blockchain, analytics etc.), supply chains should focus on getting instantaneous PoD confirmations. Whether it is for a parcel delivery to a residence address or a full load truck delivery at a Distribution Center, these PoD updates should immediately cascade up the chain to facilitate the payments trail. Considering the severe impact confirmation delays can have on Customer Satisfaction/Net Promoter Score (apart from locking up working capital across the supply chain network), it is time organizations focus on getting their act right on the PoD front.
Gopi is the global head of Industry Domain & Consulting Services group for Wipro’s Consumer Business Unit which serves clients in a range of consumer-focused industries including Retail, CPG, New Age, Media & Entertainment, Travel, Transportation & Hospitality and Public Sector. Gopi is responsible for delivering better business outcomes and measurable impact for clients through Industry/Domain competency and Business Consulting offerings. He is part of the Consumer BU leadership team and also heads the BU pre-sales & solution definition organization.
Gopi has over two decades of industry experience as a practitioner and leader across various functions of Supply Chain, Retail and Logistics around implementation, program management and practice leadership. His industry exposure ranges from retail & distribution to semiconductor and consumer electronics to logistics & container terminals. He has spent several years in diverse geographies including US, Japan, Philippines and Malaysia on projects apart from managing global practices around various supply chain functions including planning, execution procurement and asset management.
Apart from enabling change with customers, Gopi is devoted to the cause of content-driven differentiation and influence-based leadership in the corporate workplace. He is an acknowledged thought leader with over two dozen publications to his credit, with retail, omnichannel/supply chain and business management being more frequent. Gopi holds a degree in Applied Electronics & Instrumentation Engineering from College of Engineering, Trivandrum (www.cet.ac.in) and an MBA in International Business/General Management from International Management Institute, Delhi (www.imi.edu).
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