The Forrester Wave™: Order Management Systems, Q2 2023

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Last-Mile Sustainability: Why flexible order sourcing is essential

And how an order management
system can help you achieve your carbon emissions goals

Glass globe on a conceptual green forrest background
Low-carbon delivery can reduce not just your Greenhouse Gas Emissions (GHG), but costs as well.

By Nicola Kinsella

Jan 12, 2024

As ecommerce grows, so will last-mile deliveries. And Statista projects that global retail e-commerce will continue to grow at 11.16% from 2023 to 2027. While not all online sales result in delivery (there are pickup orders too), most do. Which presents a serious emission challenge. Why?

Last-mile accounts for up to half of total delivery carbon emissions

Because globally, as reported in the Revealing the Secret Emissions of E-Commerce research report by the Clean Mobility Collective (CMC) and Stand.earth Research Group, the last-mile accounts for up to half of total delivery carbon emissions. That’s a lot.

Average CO2 emissions per parcel

It also estimated the average CO2 emissions per parcel globally is 190-215 gCO2. To keep it simple, let’s call it 200 gC02 per parcel. What does that mean in more relatable terms?

A diagram showing that it would take 3,373 tree seedlings grown for 10 years to offset last mile delivery of 1,000,000 parcels

If you ship 1,000,000 packages a year you’d generate 200,000 kgC02 (~450,000 lbsC02) per year in last mile delivery emissions. And if you wanted to offset those emissions, you’d need to grow 3,373 tree seedlings for 10 years. While carbon offsets are an important part of any net zero strategy, what’s the better alternative?

Find ways to reduce your Greenhouse Gas Emissions (GHG). But not just because it’s good for the planet. There are other upsides as well.

Customers have become increasingly conscious about their choices. They want to reduce their own carbon footprint. And associate with brands who offer them more sustainable options. Real options. With data behind them. What’s more, lowering the carbon impact of delivery can also provide a financial upside for your business.

Low-carbon delivery can reduce costs

The bottom-line impact of emissions reductions initiatives can lead to real cost savings now. In fact, one Fluent Order Management customer was able to optimize their sourcing logic to reduce the average delivery distance of each order. The result? They saved over $133k in monthly transportation costs. While every business is different, there are many levers you can use to impact the last mile.

Ways to reduce last mile carbon emissions

A diagram showing three ways to reduce carbon emissions

It can start with simply increasing inventory visibility and fine-tuning your sourcing logic. To promise against future inventory if it means you can ship from a location closer to your customer. And expanding your carrier network. Whatever approach you take, there are many opportunities to cut emissions. And costs too. Let’s take a closer look.

  1. Reduce split shipments – Every time a single order has multiple shipments, your costs go up. Not just the delivery cost and carbon impact of the overall delivery, but packaging and labor costs too. The good thing is, there are several strategies you can use to lower your split shipment rate. Three approaches to consider include:
    1. Increase inventory visibility – If you don’t have an accurate view of all your inventory, you can’t optimize order sourcing. Some customers have reduced split shipments simply by making improvements in this area. How? By increasing the visibility and accuracy of their inventory availability data, they’ve managed to reduce the average distance over which orders are delivered. The result? Lower delivery costs, and lower emissions.
    2. Optimize sourcing logic – Once you have an accurate view of inventory, you can fine-tune your sourcing logic to reduce the average delivery distance of every order even further. But it’s important to consider how you measure distance. Both for your calculations, and for reporting purposes. For example, you may want to calculate and capture the Great-Circle Distance (GCD) of an order (great-circle distance or orthodromic distance is the shortest distance between two points on the surface of a sphere, measured along the surface of the sphere). Or it may be more practical to use the Shortest Feasible Distance (SFD) of an order (the shortest practical route between two places that factors in real operating conditions such as, road type and traffic.)
    3. Consolidate orders via existing trunk routes – Say a customer orders two items, but one is in a Distribution Center (DC), the other in a Store. Or they’re in two different stores. What can you do? One option is to use existing replenishment routes for order consolidation rather than using a parcel carrier to ship from DC to Store to do a store-to-store transfer. That way you’ll save on transfer costs, emissions, and on the cost of delivery to the customer. (For additional ideas, see: 10 Ways to Optimize Split Shipments)
  2. Promise against future inventory – Say a customer doesn’t need an item in a hurry. And you know a replenishment order is on the way to a location that’s closer to their delivery address. What are your options? Rather than shipping immediately from a more distant location, with a flexible order management system, you can instead promise against the future inventory. That way, the item will ship from a closer location which will reduce both emissions and the cost of delivery.
  3. Offer low-carbon delivery options – This may mean seeking out new last-mile delivery partners think delivery via bicycle or public transport. Or renegotiating contracts with (or switching) your current carriers, many of whom will now offer delivery via electric vehicles. With flexible order orchestration logic, you can create or update workflows to manage any differences in how those orders need to be processed.

But to implement these strategies, you need the right tools.

How a flexible order management system will help achieve your goals

A highly flexible order management system, like Fluent Order Management, is key to achieving these goals. Why? Because it provides you with core capabilities that are essential if you want to reduce order split, fine-tune your sourcing logic, promise against future stock availability, and roll out new delivery options quickly. Specifically it provides the following:

  • Enterprise inventory hub – The Fluent Big Inventory module consumes inventory data from all your back end systems, at scale, and applies intelligent processing. So you have an accurate unified view of all available stock. Including future/inbound inventory. Which is essential if you want to optimize sourcing.
  • Extensible data model – There are lots of data points that can contribute to low-carbon deliveries. These may include the availability of carriers at each fulfillment location. What’s more, there are many more data points, like delivery distance of an order (stored as GCD or SFD, or both), that can be important inputs to your overall GHG emissions reporting.
  • Flexible sourcing logic – The sourcing rules can be configured and extended to use any data point or attribute. So you can fine-tune the logic to reduce the average delivery distance of every order and maximize profitability. This includes promising against future inventory.
  • Flexible order workflows – Workflows that can be configured and extended quickly and easily mean you can roll out new, low-carbon delivery options faster. This might include different fulfillment options for different regions. Or testing in one region before rolling out to the next.

A flexible order management system, like Fluent Order Management, lets you extend the data model, so you can track the order attributes, like GCD and/or SFD, to support both your sourcing logic and other reporting requirements.

Fluent Order Management’s flexible order orchestration logic lets you do just that, manage the staging, transfer, and consolidation of items for an order.

The future doesn’t have to be neutral

While carbon neutrality may be the goal long term, achieving it can also have a financial upside. There are real cost savings in delivery costs and packaging. And the brand value of being able to cite quantifiable emissions reductions as well should not be underestimated. In the age of ‘greenwashing’, solid data can help build a brand’s reputation for authenticity and trustworthiness.

But to realize this sort of result you need four key things. Great inventory visibility, an extensible data model, the ability to fine-tune your sourcing strategy, and flexible rules and workflows for order orchestration. Luckily, a modern, flexible order management system provides all this and more.

To learn how Fluent Order Management can help you optimize sourcing, reduce split shipments, lower delivery costs, and achieve your sustainability goals, contact us today.

 

 

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