On-demand businesses have been on the rise and proliferating an increasing number of previously traditionally served industries. We have seen many domains becoming on-demand, especially in industries like food, transportation and home services in key markets. On-demand businesses are driving growth in many of these industries. For example, the online food business is estimated to have grown at 25% CAGR over 2015-18 and predicted to continue robust growth of approx. 15% between 2018-20 compared to -6.9% and -7.6% respectively for the offline business (Source: McKinsey & Company). A Zomato blog post announced that they processed around 2 million orders in the month of March 2017 alone. This trend towards instant consumption is a harbinger of things to come as more and more consumers seek more and more products and services on-demand.
Disruption of Industry and Operating Models
As industries get disrupted by this on-demand trend, old businesses are struggling to adapt while new businesses are embracing new opportunities it brings. To build an on-demand business means careful creation of business strategy & vision, business model & planning and operating model & execution. Strategy imperatives are discussed in the first instalment of this series (Breaking down same-hour to same-day deliveries: Should I door-deliver/service?) and business planning imperatives are discussed in the second instalment (Last Mile Delivery: 3rd Party or Insource?). In this instalment, we will discuss operating model and execution imperatives.
On demand and hyperlocal businesses most often require a major overhaul of traditional fulfilment processes. There needs to be continual and real-time order/ job process and delivery planning to cope with short completion cycles. If unit economics of on-demand fulfilment needs to make sense, then execution needs to be optimized. To deliver a delightful customer experience, execution needs to be flawless.
These challenges imply that operating model and execution needs to be planned meticulously down to the second, especially when volumes are large and unpredictable. Manual planning and execution may not be feasible given constant flow of high volumes of order/ job data (e.g. hundreds of orders each spread in location, time, load, resource, etc.) that needs to be analysed to ensure accurate and optimal execution. Relying on traditional manual methods may result in broken processes and poor experience.
On-demand Fulfilment Challenges
On-demand delivery planning encompasses the following processes:
1. Order/ Job Management:
Primarily consists of managing order/ job priority. Based on business type this can mean different things:
- For a local grocery store with a steady inventory for few items and procure-only-on-demand items (sourced from a nearby distributor); order priority would be based on time
- For a home service business with priority membership; job priority would also need to factor in customer membership
- For restaurants with fixed delivery time guarantee; prep time , distance, time-to-reach would be the major factors influencing order priority
These prioritization considerations can often be automated with technology tools so as to ease the pressure on managers and allow their attention to focus on more important operational matters.
2. Ops Planning:
Each order/ job needs to have its life-cycle planned right from the point the order is received, processed, ready, to being in-transit, reached, fulfilled and completed. Along with the order/ job priority a host of other factors need to be considered most important of which are:
- Location: Geographical point of fulfilment where the product/ service should be physically delivered
- Time: ETA should be within the promised time window and order/ job fulfilment needs to complete within promised service time
- Resource constraints: Human, material, tools, vehicles and other resource availability
Manual planning cannot take into account all these factors and produce an acceptably efficient planning. It often gets reduced to simple first-come-first-serve approach, when volumes are high to geography-binning or batch-processed planning. All these methods are sub-optimal and often result in poor experience. Advanced technology tools can help address these challenges (more on this later in this article)
3. Ops Orchestration:
Orders/ jobs need to be hand-held through their life-cycle. Negligence in handling may lead to hanging orders or bad service experience. It is not uncommon to receive angry customer calls about missed orders. Orchestrating orders involves following functions:
- Monitoring orders/ jobs health
- Assigning orders/ jobs to suitable field-agent
- Dispatching ready orders/ jobs
- Supervising field-force
- Managing customer communication
When these functions are not orchestrated in precise manner there are cost overruns (e.g. higher number of trips, excess distance/ time coverage), productivity issues (e.g. under-utilization of agents and resources) and revenue leakages (e.g. from late/ poor delivery experience). Several field-force management tools can help overcome some of these challenges and standardize processes.
4. Order/ Job Performance:
An important part of running good delivery operations is ensuring that process performance is correctly evaluated and there is continuous improvement. Several aspects of ops performance need to be tracked and monitored. Major indicators to be tracked are as follows:
- Order/ Job performance
- Service delivery timeliness
- Field Agent performance
- Customer experience
- Store/ Hub performance
Tracking key data parameters and enabling objective measurement of these performance indicators are crucial in gauging overall operations health. Using these indicators are also key in developing continuous improvement programs. Appropriate tools can be employed to capture data and provide right analytics.
Holistic and Integrated Technology Tools
Several piece-wise technology solutions address different challenges discussed above. However, very few solutions like LOOP address these issues holistically and in an end-to-end integrated manner.
Key functions performed by such technology tools are as follows:
Field-ops design and orchestration:
- Scheduled and Real-time optimized planning
- Real-time automation of key activities like planning, monitoring, assignment, dispatch, customer communication, etc.
- Live tracking of mobile units/ field-agent
- Mobile asset and resource management
- Task management
- Real-time alerts
- Gamification of field-force performance
- Skill assessment and training of field-force
- Performance and product/ service Information access for field-force
Customer experience management:
- Live tracking of order/ job status and service delivery
- Pro-active customer engagement
- Configured and real-time communication and feedback
- Live visibility with easy-to-use dashboards
- Predictive planning
- Pipeline management
- Data capture and presentation
- Key performance indicators tracking dashboard
- Insight generation for continuous improvement
We will discuss in greater detail how businesses can drive value through use of these cutting edge tools and technologies in our next instalment to this article.
As can be seen, running optimal operations for moderate to large volumes of on-demand business, if done manually, can be operationally limiting and economically unviable. If unit-cost economics must make sense, then it becomes necessary to use the right technology tools. Manual planning will also not be able cope with dynamic changes (e.g. sudden inflow of orders, unforeseen delays, order cancellations, order modifications) that are inherent to on-demand operations.
Consumption behaviour and trends clearly indicate that on-demand delivery model is here to stay and will only continue to grow and disrupt new industries as well. Businesses must assess operating model and execution challenges and explore/ adopt holistic technology solutions that can help them upgrade ops management and execution processes. Having right operating model enabled with right technology tools will ensure higher and faster success rate of your on-demand business transformation/ start-up.