Comparing Alternative Home Delivery Models for e-Grocery Business

Abstract

Recently, last mile logistics has been identified as one of the most important factors in developing consumer direct business concepts. Research and experience have revealed that the goods reception mode is one of the key factors when developing cost-efficient home delivery operations. This dissertation identifies, models, and analyses existing and emerging e-grocery home delivery operation models. The cost levels of various home delivery models offering attended and unattended reception are compared, and their feasibility evaluated using real point-of-sale data and a vehicle routing tool. The cost level of home delivery service is also compared to the current costs of a household customer visiting a supermarket using his/her own car. In addition, the environmental effects of the different home delivery models are analysed. According to the results, home delivery transportation costs using the shared reception box concept are 55-66% lower than those of the current standard home delivery model with attended reception and 2-hour delivery time windows. This cost reduction alone justifies the two-to-five-year payback period of the investment required, even if there is only a fairly small number of deliveries per day. Compared similarly, using customer-specific reception boxes in home delivery operations leads to a cost reduction of 44-53%. Because of the high investments involved in customer-specific reception boxes, the payback period, based on the cost savings, is 6-13 years. This requires customer involvement in investment. These results show that the most cost-efficient e-grocery home delivery model is based on unattended reception, which enables the optimal routing and scheduling of delivery vehicles. It would also be the best solution when considering the environmental aspects. Usage of e-grocery home delivery services offers a notable potential for traffic reduction when compared to the situation in which customers visit the shop using their own cars. In the selected test area, the reduction would be between 54 and 93 per cent, depending on the home delivery model used. However, the total traffic reduction and reduction of traffic emissions depends greatly on the e-grocery market share in the future.