Final link in the chain costs the most

final link

The final link in the e-commerce supply chain can account for more than 50% of the total logistics spend. That is the key finding from the ‘Last Link, Quantifying the Cost’ report published by property consultancy Cushman & Wakefield. In its research, the commercial real estate specialist used a new tool created in conjunction with P3 Urban Logistics. The tool enables developers, investors and occupiers to quantify the total costs for the final link in the supply chain for any property.

As consumers have embraced e-commerce, their expectations about delivery service and speed have also increased. Last-link efficiency therefore has a critical impact on delivery time and cost by reducing the drive time between the urban depot and the first delivery point (the so-called ‘STEM distance’).

The Cushman & Wakefield report concludes that the high last-link costs are due to various delivery inefficiencies, such as lack of delivery guarantee, sub-optimal delivery routes and the failure to integrate return pickups in congested urban areas.

Reducing the STEM distance

Analysis of four top European cities – London, Paris, Madrid and Milan – revealed that reducing the STEM distance is guaranteed to result in lower total last-link costs. Despite significantly higher rents, urban depots have consistently lower total last-link costs when compared with distribution warehouses which are usually located outside towns or cities.

Urban depots, which are often located inside or on the edge of a city’s periphery, reduce drivers’ time and therefore wages, save fuel costs and optimize the use of delivery vehicles – whether vans or bicycles. Reducing the STEM distance by just 20 minutes can result in an average annual saving of €2 million, and as much as €4 million a year in Paris.

Point of contact with consumers

“Our new tool demonstrates that it’s hugely important to optimize the last link in the supply chain from a cost-efficiency perspective. But this final part of the chain is also the point of contact with consumers, and that can enable companies to really set themselves apart,” says Menno van Boxtel, Head of Industrial & Logistics at Cushman & Wakefield.

According to Van Boxtel, companies can definitely earn back the higher rents for urban depots thanks to the huge savings they make in the last link of the supply chain. “Besides that, closeness to consumers is becoming increasingly important in order to gain a competitive edge, as is attracting suitable employees.”

New tool

The new Cushman & Wakefield tool helps investors and occupiers to make key decisions about further supply chain efficiency improvements relating to things like portfolio management and restructuring, choice of location and delivery route optimization. In the longer term, the consultant expects sustainable solutions and technology – such as autonomous vehicles and the use of drones – to become extremely important in future supply chain improvements.