For original equipment manufacturers (OEMs) and the independent aftermarket (IAM), this is both a blessing and a curse. On the one hand, their returns on digital investments and e-commerce platforms are starting to pay off. But on the other hand, their logistics are stretched thin between evolving customer expectations and new business models.
The digitalization of the aftermarket industry has experienced an unprecedented wave of growth over the past two years. OEMs and IAM suppliers have realized the importance of deploying an e-commerce strategy for their spare parts business. This has created a unique opportunity for them to review their business models, value propositions, and service portfolios, all of which enabled them to expand their offerings, generate new revenue streams, and increase profits. But this paradigm shift comes with its own set of challenges, one of which is last-mile delivery.
E-commerce businesses find themselves forced to invest more resources into enhancing the customer experience (CX) and ensuring that spare parts and services are delivered on time and on par with customer expectations.
E-commerce—a major challenge in aftermarket logistics
B2B shoppers are still B2C shoppers outside business hours. They are familiar with the convenience and near-instant gratification of the Amazon-like buying experience. And many have come to expect it as a business too. But the B2B sector is not prepared to deliver on these expectations. Due to differences in the target audience, buyer intent, customer lifecycle, decision-making process, and order fulfillment and shipping, B2B service providers can’t be held to the same standards as B2C suppliers.
Through their e-commerce platforms, OEMs and spare parts providers are already elevating the customer experience with enriched product information and an easier ordering process. And with the initial stages of the buying journey being optimized from research to procurement, vulnerabilities in the supply chain are starting to emerge. Additionally, the influx of larger and more frequent orders coming in each day slows down the last-mile delivery process.
The cost of last-mile delivery
Before it reaches the customer, merchandise goes through a lengthy process of traveling overseas in shipping containers and making a stop in a distribution center, warehouse, or storage facility. And last-mile delivery is the final step in the journey, from the distributor to the customer.
This entire process costs the OEM or spare parts provider a lot of resources. Last-mile delivery alone can amount to 53% of a product’s shipping costs, and up to 41% of the total supply chain costs. Considering that the customer’s willingness to pay for shipping is extremely low, OEMs and spare parts providers are often expected to cover the costs themselves. Furthermore, traffic delays, human error, and long distances only add to an already expensive delivery process.
The spare parts industry is forecasted to grow by 3% every year until 2030 due to rapidly evolving technologies, the need for sustainability and a circular economy, and the acceleration of equipment turnover. And with greater demand for spare parts come greater shipping responsibilities.
Shipping is a major part of the customer lifecycle and it accounts for customer retention, satisfaction, and loyalty. So how can last-mile delivery be optimized to enhance the customer experience while also maximizing the benefits of digitalization and minimizing the steep costs of the final stage in the logistics process?
Artificial intelligence for logistics relief
In the event of a component failure, there’s no time to waste for either the customer or the supplier. As such, an efficiently planned supply chain is essential. At the present, the aftermarket supply chain is overwhelmed by too much going on at once: digitalization, rapidly changing technology, market volatility, and lack of resilience in times of crisis.
To stay ahead of the game, OEMs and spare parts providers need a solution for increasing parts availability while also reducing costs. And one such solution is artificial intelligence (AI). AI either as SaaS or in-house, can help parts suppliers fine-tune their forecasting accuracy and calculate probabilities for different demand outcomes, thus maximizing availability, decreasing warehousing costs, and reducing delivery times.
AI combines the massive volumes of data OEMs and spare parts providers generate every day with sophisticated algorithms to help them increase efficiency, especially in the warehousing stage of the shipping journey. By collecting and analyzing information and inventory data, AI transforms warehousing processes to make demand predictions, modify orders, and re-route products in transit.
With AI harnessing the power of supply chain data, spare parts providers can stay ahead of warranty and recall issues and improve aftermarket inventory deployments to ensure that the most demanded parts are available for their customers exactly when they need them, thus optimizing inventory and pricing in the process too.
Reassuring the customer in the post-purchase phase
OEMs and spare parts providers depend on their dealers and distributors. However, outsourcing the shipping process to them and giving control of last-mile delivery to a third party doesn’t always have a positive impact. Even if a business provides excellent CX until the checkout process, a third-party shipping partner can ruin that experience for the customer. But total visibility into the shipping process and real-time tracking can significantly diminish that risk.
Regardless of business size or industry, there are no exceptions in customer demands for last-mile tracking. So, what can OEMs and spare parts suppliers do to improve transparency and reassure their customers that their much-needed components are on the way?
- Real-time tracking: Last-mile delivery without updates on the status of the order and its location can turn an otherwise positive customer experience on its head. The customer wants to trace their investment and requires notifications regarding the pick-up, transit, and date of the delivery. And they need access to this information on-demand via their preferred channel.
- Delivery preferences: Since the pandemic started, customers prefer as little human interaction as possible, especially in a work or business environment. They demand the option for contactless services if possible, and where technicians are required on-site, they need a reliable way of communication to set up access to the site with safety norms in mind. A self-service interface that facilitates these options would be most helpful not only for the customer but also for the technician.
- Proof of delivery (POD): E-signatures, geotagging, photos, and notes are all provisions of last-mile delivery software solutions that prevent failed deliveries. Last-mile delivery software not only reassures the customer that their investment is on its way but also improves the driver experience by reducing paperwork in complex delivery situations.
These solutions help streamline last-mile delivery in a digital-first world where e-commerce is both a source of profit and risk for OEMs and spare parts providers. Without real-time tracking, personalized delivery options, and proof of delivery, the whole effort of creating an e-commerce platform that elevates the customer experience can fall short of its designed goal.
Suppliers of aftermarket services should look at last-mile delivery as an intrinsic part of the customer journey and ensure that their customers receive the same consistent elevated experience that they do in each stage of the buying journey.