Same-Day Delivery: Logistics’ New Battleground?

The only time I would ever think about same-day delivery is around the holidays, but I find the idea compelling. Is this salvation for the supply chain?

Same-day delivery is available in specific US cities. Couriers employed by the delivery company pick up inventory from a local warehouse or retail store, and deliver it to customers. The advantage of this model over Kozmo, which shut its doors in 2001, is that the delivery company doesn’t own inventory. It’s how Amazon.com used to be before it started building warehouses. The delivery companies profit from the delivery fee, which ranges from $2 to $10. Some merchants require minimum orders; others don’t.

In the electronics supply chain, many businesses are hubbed together in certain regions (Silicon Valley) and industrial parks (Research Triangle). The most obvious application for same-day delivery would be a manufacturing line that’s idling for lack of a few parts. Same-day delivery could save this company millions of dollars worth of downtime.

The same would be true for engineering. Most designers can get component shipments overnight, but what if you forgot one part, or something is defective? Instead of shelving that design for awhile, you could have your part in an hour.

Purchasing managers could also benefit from same-day shipment. Let’s face it: BOMs are big and confusing. Buyers could save themselves a lot of grief if an incorrect part or omission reaches the factory at the same time as a scheduled delivery.

There is, of course, a problem. Same-day only works if the inventory you want is within a day’s drive of a warehouse, retail store, or component factory. Most manufacturing –- whether it’s components or finished goods -– is scattered around the world. The part you need probably isn’t being manufactured next door.

Distribution warehousing could solve part of the problem: Most distributors have huge regional facilities in all parts of the world. Geographically, same-day shipment is possible in Europe. In China, that could be a problem.

Most of the businesses providing same-day delivery are small, local, startup companies that focus on a city or region. Couriers use their own cars or bikes, and are reimbursed for mileage. It seems to me, however, that this trend won’t go unnoticed by the big carriers for long. In fact, UPS, FedEx and DHL are well-equipped operationally for same-day services -- they already own fleets of trucks and planes. UPS even partners with tech companies on the warehousing component parts.

Better yet, maybe the flailing US Postal Service can leapfrog the carriers and provide same-day service in the US. It might be the Post Office’s last hope.

The sticking point, as always, will be cost. I can’t see this system working in the electronics industry without minimum orders. Paying $2 for same-day delivery of a $2 component isn’t cost-effective. There’s also the possibility that same-day services might receive inventory that’s been consigned for another customer. Inventory tracking is already a nightmare, but any company -- say, a distributor -- that cracks the price/inventory/tracking code could have a big opportunity in same-day.

What do you think?