What do B2C giants like Amazon, Wayfair and Domino’s all have in common? They recognize the importance of last-mile logistics and dedicate time and resources to developing best-in-breed logistics networks that differentiate their service. Consumers are more likely to remember the experience of delivery than the process of ordering. The same is true in the construction industry.
Construction is one of the largest industries in the world, accounting for $11 trillion or 13% of global GDP. Over the past 25 years, the industry has lagged behind all others when it comes to productivity gains, largely due to the lack of investment in software and information technology.
As an industry, construction spends less than 1% of operating expense (OPEX) on technology, while manufacturing spends 14% and banking invests 10% in technology. This lack of investment manifests itself in rampant waste and low asset utilization, expensive assets sit idle, deliveries are rife with empty or “deadhead” routes, manual paper-based processes are time-intensive and prone to error. While last-mile is only one component of the journey for e-commerce giants, heavy construction logistics lives solely in last-mile delivery. The average dump truck route is between 20-30 miles, making heavy construction prime for disruption.
If construction takes a cue from the B2C world and places a greater focus on last-mile logistics, there will be significant efficiency gains, increased profit margins and higher customer acquisition/retention rates, while laying the foundation for artificial intelligence (AI)-assisted pricing and routing guidance.
Last-mile logistics creates efficiency and increases profit margins
Tech-minded consumer goods suppliers needed to build their logistics infrastructure from the ground up, whereas the construction industry already has the needed assets and infrastructure. However, what construction still lacks is the technology and visibility to more efficiently manage existing manual processes heavily reliant on pen and paper.
For the construction industry, transforming logistics requires a commitment to innovation. While many industry participants are currently inferring last-mile metrics by measuring velocity E.G. tons per hour, this limits their ability to get an understanding of overall business health and management of the last-mile.
Leveraging technology to broaden the scope of what can be measured can help logistics providers increase efficiency and generate ROI through:
- Visibility into deliveries en-route to allow contractors and pavers to schedule their crews more effectively and optimize labor costs.
- More visibility into scheduling and dispatching that will allow for increased utilization of fixed assets such as dump trucks.
- Matching orders and supply resources more efficiently, tracking progress against targets or budgets to deliver on time and on budget.
When you apply the thinking of, you look good when you delight your customer, to the B2B construction industry, suppliers look good, and then make their customers - the contractors - look good. When material is on time, jobsites and overall projects can run efficiently and true ROI can be achieved by contractors based on trucking performance.
Increasing customer acquisition and retention through last-mile logistics
Just like in consumer industries, strong branding will help suppliers’ products stand out and help maintain relationships and attract new customers. With superior last-mile logistics, suppliers can change the existing narrative and create a brand synonymous with elevated last-mile service.
Today, final-mile logistics in construction is fraught with miscommunication and missed opportunities. The broader societal expectations set by e-commerce providers are starting to take root in construction currently, but will be more essential in the coming years. Logistics providers that recognize this shift and adapt now will be better positioned to provide the service their existing customers expect and build a brand that will be the “go-to” for projects and bids.
Capabilities that will be critical include:
- Real-time views of material on the way to the jobsite, allowing contractors to effectively manage their crews and optimize labor and material costs.
- Enhanced communication tools that remove friction and ensure partners are working with the most up to date information.
- Digital tickets and load slips, ensuring compliance with increasing safety and compliance demands.
Laying the foundation for AI-assisted pricing and route guidance
For the majority of the construction industry, differentiated last-mile delivery has not been a possibility. In fact, many suppliers choose not to offer delivery as a value-added service to their customers. Why? Because it has been difficult to predict, monetize and maintain delivery. Limited data and a lack of visibility have led many to decide that delivery is too variable and intensive to make it a worthwhile investment.
With the introduction of technology, data is beginning to be aggregated so that it can be harnessed in a variety of ways to the supplier’s benefit. This includes data from within the plant or quarry, en route to the jobsite, activity at the jobsite and the return trip to the plant or quarry. With billions of rows of data, tech platforms are laying the foundation for AI to inform pricing and route guidance.
The benefits that can be extracted today help allow more nimble business decision-making, efficient delivery operations and better customer service, all of which help differentiate the suppliers’ brand, making them more memorable and sought after by customers. However, the future of the industry is unlocked with access to large data sets applying AI and machine learning benefits to last-mile delivery and the entire industry as a whole.
AI-assisted pricing and route guidance:
- Demand oriented pricing (auction house)
- Full-day pricing optimization (upwards and downwards scaling pricing depending on predicted work completed based on hauler performance, load availability and traffic)
- Route-based travel suggestions, avoiding traffic or jobsite congestion for truck entry
- Integration with overhead technologies like drones to validate clear paths for trucks on jobsites to make haulers and contractors move more quickly and safely
- Incentive-based pricing for hourly haulers (complex and performance-based pricing schemes, that reflect the target daily pay and compensate for high performance)
The expectation consumers have cannot be separated from the expectations in our professional lives. For the construction industry, placing a greater emphasis on customer satisfaction will be key to differentiating services in the coming years.
Without a strong shift in views toward technology and last-mile logistics, the construction industry may face hard times. Rising expectations, growing safety and compliance concerns, and narrowing margins may cause even some of the nation’s strongest companies to stumble.
The industry can no longer afford to operate within the status quo. Adopting the best practices of e-commerce leaders will allow construction suppliers to increase their profitability, match customer expectations and lay the foundation for future gains.