How Parcel Lockers Will Transform Last Mile Delivery

How Parcel Lockers Will Transform Last Mile Delivery
This study explores customer value in relation to parcel lockers, a self-service tool that reshapes the delivery and returns experience in the context of e-commerce last mile delivery. Parcel lockers offer a response to retail and last mile delivery challenges provoked by the rapid growth of e-commerce worldwide. Retailers, logistics service providers, communities, and other stakeholders now face issues due to increased volumes of goods sold online. The introduction of parcel lockers to service algorithms is intended to address these issues by involving consumers in the service process. However, the existing research fails to provide knowledge about the customer’s view on this new technological solution. This study followed a focus group design and built on grounded theory to provide insights into customer value in relation to parcel lockers. These insights can contribute to both research and practice.

We consider the problem of designing a outdoor parcel locker network as a solution to the Logistics Last Mile Problem: Choosing the optimal number, locations, and sizes of parcel locekers facilities. The objective is to maximize the total profit, consisting of the revenue from customers who use the service, minus the facilities’ fixed and operational setup costs, the discounts in the delivery costs for customers who need to travel in order to collect their parcels, and the loss of potential customers who are not willing to travel for service. The problem is expressed as a 0–1 integer linear program. We show that it is equivalent to the well-known Uncapacitated Facility Location Problem. We then solve the modified problem, and apply it to an industrial-sized network.

Parcel delivery lockers are fast becoming a familiar sight in malls, stores and train stations as the boom in online shopping leads retailers and logistics providers to look for new ways to deliver orders as quickly and efficiently as possible.

Global sports retailer Decathlon is rolling out indoor parcel locker in its 1,500 stores as part of its click-to-collect service, while Amazon has had lockers in supermarkets, post offices and transport hubs across Europe for the last few years.

Online shoppers select the lockers as a delivery option during checkout, then receive a QR or SMS code that will open the locker once the parcel is delivered.

“Parcel lockers are becoming popular because of the convenience,” says Tessa English, Director, Industrial and Logistics, at JLL. “Consumers have more control over when they pick up their shopping, rather than having to wait for deliveries or risk parcels being left in the wrong place.”

As online shopping continues to rise across Europe, shoppers are increasingly expecting fast, flexible delivery. DHL has a network of 340,000 lockers in Germany, accessible by 90 percent of the population, while many retailers, such as ASOS in the UK, also allow customers to return orders via a locker.

“This gives customers greater flexibility over their shopping, especially as lockers located in transport hubs often offer public access 24/7,” says English.

For retailers, parcel lockers are also a means to tackle the challenges – and costs - of last mile deliveries from warehouses to homes and offices. Trying to deliver packages to customers who aren’t home can cause delays on delivery routes, while getting orders to individual addresses often means putting vehicles on the roads before they’re full, raising costs and contributing to city centre congestion and air pollution.

“Delivering to parcel lockers means a van could drop off dozens of orders at each delivery point, rather than just one,” says English. “This reduces vehicle movements and the number of vehicles required, which offers retailers and operators better route and cost efficiencies.”

The right location
Parcel lockers tend to be placed in areas with high footfall, such as supermarkets and train stations, although varying consumer habits in different countries – or even different areas of the country – have a big impact on location decisions.

“A good location depends on retailer customer profiles – how frequently customers order and where they live. This is where big data can provide insight into the most effective locations,” says English.

“What’s key is that customers can pick up the parcel along their usual journey, without a detour. As soon as the convenience factor is lost, electronic locker become a less effective investment and potentially also a less sustainable solution.”