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Trade fair transport logistic

Food logistics reimagined

Lieferdienst Lebensmittel Foto: Miriam Doerr & Martin Frommherz

The forum “King Customer and the Last Mile: new directions in food logistics” at the trade fair transport logistic reveals a paradigm shift.

10.05.2017 Carsten Nallinger

Until now, the delivery of food to end customers hasn’t played an important role. The food magazine’s forum “King Customer and the Last Mile: new directions in food logistics” at the trade fair transport logistic showed that change is happening. Probably not only because online mail-order company Amazon launched its service Amazon Fresh in Berlin. Analysts Björn Weber and Lisa Byfield-Green of LZ Retaillytics, a subsidiary of the food magazine, has carefully examined the trading world in this context. There have been several attempts in the past to deliver fresh produce to people’s homes. So far, however, all failed. The Lidl-Express Service, for example, never fully took effect. Food chain REWE, on the other hand, introduced a nationwide network of cash-and-carry markets and delivery services.

Now, the American cooperation is taking on the challenge. Not without cause: “Germany is Amazon’s most important market outside of the US,” Lisa Byfield-Green reported. Which is why the advance with Amazon Fresh isn’t very surprising, even if it starts out as a test in Berlin first.

The motto is “think big”

The capital’s Amazon Prime customers will have fresh produce delivered to them from Alt-Tegel for 9.99 euros per month in addition to the Prime-fee and starting at a minimum order value of 40 euros. Approximately 120 million euros turnover is expected by 2021 with foods in Germany, the analyst reports. Although this business model isn’t new to the mail-order company: Amazon has only recently started trading foods via Amazon Prime Now in Berlin and soon in Munich. But the motto is “think big”. In 30 US-cities and now 15 in Europe, eleven of them in Great Britain, the service is already existing. “This is Amazon’s model for the future,” Byfield-Green explains.
She’s convinced that Amazon Fresh will soon launch in Munich Dingolfing. There is more to come: Hamburg, Hanover, Stuttgart, Frankfurt/Main, Cologne, Dusseldorf, Leipzig, Dresden. Partner in deliveries is KEP-service provider Deutsche Post DHL. Still, Björn Weber  wonders: “Is all of this possible in a profitable way?” He doubts that with an in-house fleet, as REWE is trying to work with at the moment. Regarding the partnership between Amazon and DHL, however, he sees the course set for success. “14 percent of all parcel shipments in Germany are sent via Amazon today. At this volume, it literally won’t make a difference if you add a head of lettuce on top,” he said. It’s different for REWE’s delivery man, who drags around water bottles for 19 cents.

Route planning tool growing into success model

Dr. Michael Lierow, partner at consulting firm Oliver Wyman, sees potential suppliers of food deliveries under the temporal gun. “Running too far ahead potentially burns money. However, running behind isn’t an option,” he portrayed the companies’ dilemma. Therefore, Oliver Wyman examined a standard DHL tour with a special route planning tool. It tried to answer the question whether it’s possible to position stops for fresh goods in a way that fits, and where the rest can be filled with other parcels. In his view, it turned out to be a successful model. “It affects the stationary retail trade in a way nobody could have guessed until now,” Lierow said. He’s speaking of structural change as a result. Jobs would consequently arise in the fulfillment part, which in turn fall away in the retail sector. When considering potential Amazon Fresh challengers, Lierow comes to a clear conclusion: “From our point of view, the last mile can only work in cooperation with one of the large remaining service providers DPD and Hermes.”
“Fast and flexible delivery solutions for food shipments,” Micheal Knaupe, Director Customer Experience & Communications of DPD Germany, has promised as well. Although this business segment has still been quite new to DPD. “Only three years ago we wouldn’t have had anything to show for it,” Knaupe reports. The company has meanwhile gone through a new digital setup. The KEP service provider sees tremendous growth potential in this area: 28 percent of all online shoppers have ordered food before. So far, though, only five percent do it regularly. That’s about to change, and not only because of Amazon Fresh’s new service.

Options for change possible until just before delivery

“It’s about speed and it’s about digitization,” Knaupe named the factors for success. No matter whether Same Day or Next Day – fresh produce must get to its destination quickly. Which is why a traditional DPD product from the B2B-segment is experiencing a kind of renaissance: the guaranteed next-day delivery at a specific time. “That’s the Benchmark, that’s where we’re headed.” It’s the reason why DPD also got involved in startup tiramizoo. But DPD has been going through a digital setup in general. This means that five options for change are possible for up to five minutes before delivery – e.g. that the parcel shall be delivered to the neighbors if required. Or authorizing for delivery of parcels in the garage. Furthermore, the customer receives maximum transparency.
He receives proactive push-messages with information on the whereabouts of his shipment, including unexpected delays – e.g. due to traffic jams. In the course of digitization of deliveries, DPD additionally has integrated a number of features in the smartphone app, which users are familiar with from other areas. The delivery service, for instance, can be rated, or a tip can be given via Paypal. “It’s in the nature of things that not everything goes smoothly with such a vast number of shipments. This feedback enables daily improvement,” Knaupe reported. And with approximately 1.5 million shipments in Germany, this optimism seems entirely justified – even regarding new services like food deliveries.

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