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Should you crowdsource last-mile delivery?
Many retailers experience shifts in demand, so crowdsourcing delivery workers might help address fluctuation. Learn other benefits and challenges of crowdsourcing the last mile.
Crowdsourcing last-mile delivery might benefit companies in various ways, including cost savings and flexibility. However, drawbacks to the system exist as well.
Crowdsourcing last-mile delivery refers to companies using independent contractors to move packages to their final destinations. It's not an entirely new concept. For example, companies have used bike couriers in urban areas for decades.
Now, however, companies can crowdsource last-mile delivery through platforms that connect organizations with workers who are willing to transport packages on the last legs of their treks, said Alan Amling, an assistant professor of practice at the University of Tennessee, Knoxville, Haslam College of Business' Global Supply Chain Institute.
Here's a look at the top benefits and challenges of this practice.
3 benefits of crowdsourcing last-mile delivery
Companies might see some increase in speed of delivery times if they opt for crowdsourcing. Learn other benefits.
1. Flexibility
Many retailers experience shifts in product demand, so crowdsourcing delivery workers can help address that fluctuation.
The flexibility involved is a major benefit of crowdsourcing delivery, said Nick McKeehan, managing director at Protiviti, a global consulting firm located in Menlo Park, Calif.
2. Lower capital investments
Crowdsourcing last-mile delivery can also help organizations save money.
"These are not your employees," McKeehan said. "You don't have to hire them, and you don't have to buy the assets -- trucks and trailers."
However, crowdsourcing could become the more expensive option for some companies.
A tipping point could occur in terms of delivery volume or distance where crowdsourcing becomes more expensive than conventional shipping options or handling deliveries with a company fleet, said Alison Ponder, managing director at FTI Consulting, a business consulting firm located in Washington, D.C. Companies must regularly evaluate their shipping patterns and costs to ensure they're not overspending by crowdsourcing.
3. Potentially faster delivery times
Packages that are delivered via a crowdsourcing delivery model skip the central sorting that occurs with conventional delivery services, such as the U.S. Postal Service.
That typically results in packages getting into the hands of customers more quickly, Ponder said. Companies typically use crowdsourcing delivery for transporting products that are already close to their final destinations.
3 challenges of crowdsourcing last-mile delivery
Crowdsourcing last-mile delivery also comes with potential problems.
1. Quality of services
Companies that crowdsource delivery give up some ability to manage the workers delivering products. This means organizations have less power to respond if a delivery worker is, for example, rude to a customer.
"When workers are your employees, you train them and there's an expectation of performance levels," McKeehan said. "When they're a third party, you're rolling the dice to some extent."
In addition, if a company hires a delivery employee, then company workers have interviewed the delivery employee and determined that they feel comfortable with the delivery worker interacting with customers and accessing customers' property.
For crowdsourcing, companies are fully relying on crowdsourcing vendors to set worker standards and vet gig workers to make sure they meet those standards, Ponder said.
2. Compliance with labor laws
Along with a lack of control over worker behavior, crowdsourcing delivery work is also legally more complicated than hiring employees.
Remaining aware of and following the employment laws, such as compensation and tax regulations, that apply to gig workers can be challenging, Ponder said. The laws that apply to gig workers aren't always clear and are at times in flux.
3. Uncertainty about gig worker availability
While companies schedule internal delivery workers for certain times, gig workers' schedules are more unclear.
Companies might not be able to hire the number of gig workers they need within a required timeframe, said Milena Janjevic, a research scientist at the MIT Center for Transportation & Logistics. Customer experience could then worsen because of delivery unpredictability. Potential lack of delivery workers and customer experience decline both add risk to a company's logistics strategy.
Mary K. Pratt is an award-winning freelance journalist with a focus on covering enterprise IT and cybersecurity management.
