Gulf’s ecommerce businesses have a fuel cost issue that needs speedy solutions

Only in rare instances should these businesses pass on full costs to customers

Last updated: July 23, 2022 | 12:34

Soham Chokshi, Special to Gulf News

4 MIN READ

There are ways to mitigate the steadily rising cost of delivery. Start optimizing routes and adapt.

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It seems that 73 per cent of consumers across the region shop more online now than in the pre-pandemic. The UAE logistics industry is projected to generate more than $30 billion by 2025 and ecommerce in the region is growing at more than 53 per cent.

However, the fuel hikes in the Middle East are creating ripples across segments. The fuel prices have risen multiple times, gradually impacting the price of commodities and services such as cabs. The logistics services have not remained untouched.

Prices are expected to rise, with consumers and businesses starting to feel the effects. This poses significant challenges for logistics and delivery businesses to fulfil orders without customers absorbing the additional charges. How will the Middle Eastern logistics industry meet this without threatening customer loyalty?

This leaves businesses with four options:

Absorb the cost by themselves and hurt their bottom-line.

Share the additional cost burden with customers by charging them more and risk loyalty. Stats show how free and faster shipping are vital towards customer retention.

Try to find common grounds by changing delivery SLAs (Service Level Agreement) and consolidating orders. This will impact delivery speed, but is a good way to drive sustainable operations. However, some essential delivery segments like food and medicines may require instant shipping. This may be challenging to deal with.

Invest in smart technologies that help businesses build agile and resilient logistics operations to overcome such unforeseen situations. They automate and optimize logistics operations to improve profitability, ensure SLA adherence, and boost customer experience.

Here’s how technology can optimize cost and fuel-consumption

Optimizing delivery routes

Heavy traffic increases fuel consumption and puts more wear and tear on vehicles leading to higher replacements and maintenance costs. However, automated route planning, unlike manual planning, takes real-time traffic, distance, delivery location, and other data into consideration while planning the journey.

Leveraging an AI-powered route optimization can help businesses to reduce the distance travelled, eliminate empty miles, decrease trip volumes, prevent vehicle idling, and smartly combine forward and reverse logistics. Geocoding converts addresses into exact coordinates and eliminates the problem of poor-quality addresses, leading delivery agents to the exact location every time.

Increase resource capacity

Automation also allows you to lay out your routes in advance to plan and assign your most cost-effective resources.

Increase driver productivity: En-route order clubbing ensures 14 per cent more orders per driver.

Vehicle capacity optimization: Increase vehicle utilization by 31 per cent. Optimum load also ensures better performance and low wear and tear.

Drive consistently: Aggressive driving may be able to save you some time on the delivery duration, however, it can cost a lot of fuel. Moreover, this could also increase the risk of accidents. Employing fuel-efficient driving techniques and driving slower is known to improve fuel consumption. Research shows that fuel consumption is 28 per cent higher at 100kph than 80kph due to air resistance.

Prevent multiple attempts

Order visibility: Enable customers to track orders through predictive and real-time updates on the delivery status. Trigger tracking links to customers on WhatsApp, email, and SMS for them to know when their order will be delivered.

Personalized delivery: Allowing customers to change their delivery timings and location as per their convenience. Failed deliveries require another attempt to deliver, hence increasing fuel costs. Asking customers to set a delivery timeline to receive their orders, can help reduce instances of failed deliveries.

Stacking strategies: Implementing a stacking strategy ensures that when you arrive at the delivery point, the unloaded items are easily accessible. This helps speed up the drop-off process. Eventually, this allows you to make more deliveries.

Ensuring you’re using the right tools for your logistical needs goes a long way in enabling effective spending. It is also crucial to work with technology partners with a proven track record who understand the challenges specific to your industry and your business.

The right logistics provider will have efficient operations that keep costs down without sacrificing the service. With these kinds of partners, you can expect a smoother, cost-effective, and fuel-effective operation with no unforeseen surprises.

Safeguarding customers from fuel price hikes will be key to tapping into the growing eeommerce market in the Middle East, as well as building a loyal customer base. For businesses in the MENA region, optimizing logistics costs is one of the most effective ways to do this.

Soham Chokshi

The writer is CEO of Shipsy.

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