When you order your food from a local restaurant, the restaurant is usually within a few miles from your house. That delivery is hyperlocal.
If you have ordered food or grocery online, you would have definitely come across a hyperlocal delivery process. If you are looking to set up one for your own business, you should understand some key principles that are important to run this efficiently. In this episode, we'll go through the fundamentals of Hyperlocal delivery.
Hyperlocal delivery is sometimes known as last-mile logistics or last-mile delivery. It's simply the delivery process that has the delivery location closer to the pickup location. There is no standard criteria for the distance but it is typically within the same city.
When you order your food from a local restaurant, the restaurant is usually within a few miles from your house. That delivery is hyperlocal. So is your local grocery delivery or the local pharmacy that delivers your medicine.
Let's take an example. Let's say you are a local restaurant and want to deliver food to your customers. What does it take you to do that? The food is ordered and paid for. The extra service you provide is delivery and you want to minimize the cost of delivering the food.
The biggest cost factor in hyperlocal is the people (there are other smaller ones like platform cost, overheads). Let's call them runners. Now, in order to deliver an order, the runner needs to physically move from the pickup location to the customer's location and carry the order. So the time to pickup, travel and deliver are non-negotiable.
The delivery companies need to pay a fixed monthly charge to the runners. Meaning, they incur the cost whether the runner delivers 1 order or 20 orders in a day. So the objective of the operations manager here would be to use the runner to deliver maximum number of orders.
So, the key question when you run a hyperlocal operations is this: How many orders can a runner deliver in a given hour?
The more you deliver, the lesser the cost you incur per delivery and your overall profit margin increases (or reduce the cost for customer which should increase revenue).
Now, all the new business models in this industry stem from the question above. Keeping the question in mind, there are the following variables that can be influenced to reduce the overall time.
Pickup Time - Time taken for the runner to pickup the order from source
Travel Time (or windshield time) - Amount of time spent in travelling
Delivery Time - Time taken to deliver the order after arriving at the destination.
Quantity - No of orders delivered in parallel
Idle Time - The time spent by the runner in between deliveries
So, the equation becomes something like this.
Now, you can change these variables in different ways to reduce the overall cost per delivery. Reducing pickup time, travel time, delivery time and/or salary of the runner and increasing the no of quantity carried together reduce the cost.
Some well known strategies are
Reducing Pickup Time
Reducing Travel Time
Reducing Delivery Time
When multiple orders have pickup and delivery locations that are closer, the items can be batched together to be carried by the same person. This reduces the separate travel time needed.
This is notoriously difficult to achieve in on-demand but getting this at scale would be a significant improvement.
Batching is mostly used in e-commerce or other scheduled deliveries.
Reducing Idle Time
This is one of the most fundamental ways to improve your efficiency. Few strategies are
Scheduled Deliveries - These are typically deliveries that have a predefined delivery timing which is allocated at least a day or two before. This enables these companies to plan their route and pickup multiple items together. So, the runner picks all the items together, travels along the most efficient route to deliver all the items. A good example of this is amazon.com. Most e-commerce companies deliver this way for their last mile.
On-Demand Delivery (Fast Delivery) - This is the typical hyperlocal delivery where the product once ordered is delivered within 30-60 mins. They do this by limiting the travel distance to 5-8 miles max. So, the amount of time spent in travelling goes down compared to e-commerce where the runner travels across the city. Some examples are Dominos, DoorDash, Postmates etc
This model will only work if the runners always have orders to deliver. Means, within a 5-8 mile distance, there should be enough orders coming in. So, these companies focus a lot on optimizing the correct number of runners in each hour and within in area. That part is known as capacity planning.
Ultra-fast delivery - A lot of new players are changing the game by delivering within 10-20 mins. This is very similar to on-demand except that the delivery distance is typically 1-2 miles. So the travel distance really goes down. Examples are Gorillas, Flink.
These companies also focus a lot more on reducing the pickup and delivery times by typically managing their own store with inventory storage optimized for fast packaging and delivery.
We will see each of these models in a lot of detail in a later post. Hopefully this gave you a good understanding of how the Hyperlocal Delivery operations is setup.
All of these models need a strong technology platform to run efficiently because the margin of error is so low. At Zorp, we provide the technology infrastructure for businesses that want to run their Hyperlocal delivery. Check us out.
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