The Complete Guide to Out-of-home Delivery
Out-of-home (OOH) delivery has been gaining popularity over the last couple of years — and there are a good number of reasons for it.
What out-of-home delivery does is bring an added layer of convenience to last-mile delivery, improving customer experience, increasing the success rate of first-time delivery, and cutting down costs and delays in deliveries, all the while allowing last-mile carriers to optimize their business operations.
OOH allows last-mile carriers, posts, parcel locker manufacturers, and e-commerces businesses to be strategic about where they position their lockers and pickup and dropoff locations (PUDOs).
As a result, all these businesses get a financially more viable way to innovate their business, despite the new emerging regulations on sustainability and electrification. And they get to keep meeting their customers’ expectations.
However, there are many moving parts to factor in regarding OOH delivery. Manual work, lack of healthy data to drive the decision-making, and looming competition can all make last-mile carriers and postal operators more reluctant to settle on a new location and new network expansion. And even then, a new PUDO or location might simply not live up to the potential, which is a costly mistake to correct.
With this collection of resources on out-of-home delivery, we lead you through all the parts of your OOH delivery journey, whether you’re just starting to build your OOH delivery network or are already heavily investing and scaling your last-mile delivery efforts. Read on for a deep dive into the topic and get the know-how so you can set up, manage, and scale your OOH delivery network.
Table of Contents
- What is last-mile delivery?
- Challenges in last-mile delivery
- Future of last-mile delivery
- What is out-of-home delivery?
- How out-of-home delivery works
- Benefits of out-of-home delivery
- Out-of-home delivery vs home delivery
- Out-of-home delivery for last-mile carriers
- Out-of-home delivery for postal operators
- Out-of-home delivery for parcel locker manufacturers
- Out—of-home delivery for e-commerce companies
- Logistics analytics and OOH delivery
- Key metrics and KPIs in OOH delivery
- How to build the OOH delivery network
- How to manage the OOH delivery network
- How to scale the OOH delivery network
- Regulatory challenges and parcel locker networks
What is last-mile delivery?
Last-mile delivery is the final step of the delivery process. Think of it as the moment when your parcel or product goes from a warehouse or retail center, to its final destination — most often your doorstep.
This part of the delivery comes with many challenges and is often the most expensive one, as there is a lot of unpredictability around delivering to individual recipients in different locations.
Challenges in last-mile delivery
Some of the key challenges in last-mile delivery include the high costs of having to tend to multiple individual locations in order to deliver parcels. This includes costs of fuel, labor, maintaining your fleet, navigating past heavy traffic areas, solving limited parking, hardly accessible locations, and increasingly stringent environmental regulations.
The future of last-mile delivery
The last-mile delivery has been changing over the recent years, as more businesses are embracing OOH delivery, looking for ways to make their business greener, and meeting the regulatory requirements.
In our survey with industry experts on trends that will emerge or continue to shape last-mile delivery in the years to come, we’ve uncovered the four shifts below.
- Climate-neutral goals continue to impact the last mile. As the EU aims to be climate-neutral by 2050, countries and local governments impose stricter regulations on delivery vehicles and larger last-mile carriers to create more space for mobility without emissions. The experts we spoke to believe these practices will intensify in the new year as more local regulations emerge, ultimately transforming last-mile delivery.
- Dynamic routing based on the recipient’s behavior patterns and preferences. There are a lot of fluctuations throughout the delivery day: last-minute jobs, cancellations, redirections, etc. On top of that, traffic and weather conditions can be unpredictable. Dynamic routing can help with these unforeseen changes. Still, experts believe something missing in the equation could take deliveries to the next level: the recipient’s behavior patterns and preferences. If they are typically not home in the morning or favor deliveries at a later hour, the deliveries would be scheduled at the preferred time and near the end of the route to ensure successful first-time delivery.
- Autonomous mobile parcel lockers. Industry experts envision a future where parcel lockers can move on their own, traveling from location to location while notifying consignees of available times for collecting parcels. Some state that they need to be fully autonomous, helping cut the costs of loading the lockers. The success of out-of-home delivery relies heavily on the recipient’s willingness to participate actively in the last mile. However, most of them only accept short walking distances to collect parcels. Autonomous-driving parcel lockers could be a good answer to the limited willingness to walk.
- Out-of-home delivery is getting popular, with the need to become more sustainable. Companies continue to struggle with labor shortages, high turnover among drivers, and integrating subcontractors with the operation. By consolidating shipments from many individual locations, scattered across the city, to a single, or several addresses, allowed by PUDOs and parcel lockers, would take a good chunk of the load off of them. However, industry experts are worried about the sustainability of parcel locker network infrastructure. They predict that parcel delivery companies will focus more on strategic expansions for greater and faster infrastructure utilization.
What is out-of-home delivery?
Out-of-home delivery refers to delivering a parcel to a machine or location other than the recipient’s home. Unlike in the traditional “to your doorstep” delivery, the recipient plays an active role and travels to collect their parcel from the OOH point within a specific time frame.
As OOH delivery became more popular, it became evident that it’s also an effective way for people to make returns and send parcels to other recipients.
This means that parcel delivery companies can consolidate shipments (previously divided between smaller vehicles and millions of addresses) and reduce the costs of failed first-time deliveries.
How out-of-home delivery works
With out-of-home delivery, parcels are delivered to a location outside of the recipient's home address. This approach offers alternative, secure locations for recipients to pick up their parcels at their convenience, giving them more flexibility and security.
The primary forms of OOH delivery include parcel lockers and Pick-Up/Drop-Off (PUDO) points:
- Parcel lockers are secure, automated lockers in accessible public places, such as shopping centers, transport hubs, and residential complexes. They allow recipients to collect their parcels using a unique code or electronic key, often at any time of the day or night, providing a flexible option for people with busy schedules.
- PUDO points involve established retail or convenience stores that act as parcel collection and return points. These locations are part of a wider network, offering a human touch to the collection process and often additional services, such as late opening hours, parking, and assistance with heavy or bulky items.
Benefits of out-of-home delivery
OOH delivery impacts every part of the delivery chain. It allows last-mile carriers to reduce operational costs, improve customer experience, keep pace with the changing regulations, curb their environmental footprint, and innovate.
Improve operational efficiency
With substantially more items per stop, nearly 100% first-attempt delivery, and ease of access, OOH delivery can be up to five times more efficient than home delivery. For the same reasons, parcel lockers and PUDOs are an efficient solution to cut last-mile delivery costs.
Plus, OOH helps manage parking, one of the biggest challenges for couriers.
Trim delivery costs
From the perspective of logistics companies, the cost is a leading factor when delivering.
Making a single-item e-commerce delivery is a costly proposition. Low-volume deliveries will always be operationally expensive, and logistics companies spend billions annually improving infrastructure and doing R&D to reduce these costs.
As multiple deliveries can be completed at a single location at the same time, OOH, through parcel lockers shows up as an efficient way to reduce last-mile delivery costs and gain a competitive advantage.
Convenience for the customer
OOH provides a more customer-centric approach. Parcel lockers and PUDOs offer a longer storage period, allowing recipients to pick up their parcels at a convenient time and place.
Parcel shops and lockers with a drop box and label printer make sending parcels and returns cheaper and easier.
Curb negative environmental impact
It’s important to note that a reduction in CO2 emissions is possible if recipients travel on foot or by bike to collect the parcel. Combining the pick-up with a trip they are taking also helps lower carbon emissions. This is why it’s essential to have OOH points close to recipients or along their commute path.
Out-of-home delivery vs home delivery: the impact on business
According to an experiment by the Centre for London and the Behavioural Insights Team, telling customers about the benefits of OOH delivery during the checkout process can prompt them to select out-of-home delivery.
The participants were split into four groups. The control group was shown an online checkout without any interventions. Another group had the OOH option pre-selected during the checkout and moved to the left-hand side.
The last two groups were shown messages with environmental or convenience benefits.
Nudges significantly outperformed the control group. The environmental nudge was the best performer, with participants choosing OOH delivery 71% of the time. The convenience nudge was the second most effective method, leading to choosing OOH delivery for 62% of checkouts.
Another approach is making OOH deliveries cheaper than home deliveries. As OOH deliveries are more cost-effective and environmentally friendly, this is possible for parcel delivery companies and e-commerce businesses and can help them on their sustainability journey.
Since delivery cost is one of the most important factors for online shoppers, providing a more affordable option could encourage them to take an active role in the last mile.
Out-of-home delivery for last-mile carriers
OOH delivery aids last-mile carriers on several fronts.
By consolidating deliveries to fewer designated locations, last-mile carriers cut delivery costs.
Instead of making stops by multiple homes, the OOH network helps reduce the number of stops that the delivery fleet must make, in turn cutting fuel and labor costs.
Then there is the issue of missed deliveries. With parcel lockers available around the clock, the risk of failed first-attempt deliveries drops. With OOH points, recipients get to collect their parcels at a convenient time.
As a result, the costs linked to re-delivery are also curbed, while the flexibility of collecting parcels when suitable boosts customer satisfaction and loyalty.
And it’s not just about doing it better.
With an OOH network in place, one trip enables multiple parcel deliveries. This makes it possible to handle large volumes of parcels, which is crucial during peak times, and which is also an overture to scalability.
With OOH, last-mile carriers get to handle larger volumes of packages without a proportional increase in delivery resources.
As for the environmental side, OOH allows carriers to lower carbon emissions, and as a result, cut their footprint. By promoting consolidated delivers, last-mile carriers future-proof their business models, staying in line with global sustainability trends.
Out-of-home delivery for postal operators
OOH allows postal operators to position themselves in the changing market, using proprietary infrastructure and resources, while modernizing their operations to cater to the demands of the consumers.
For starters, OOH delivery would enable posts to offer flexibility to parcel recipients. This way, posts would be appealing to a large group of people with unpredictable schedules who can’t be at home during traditional delivery hours.
Then, OOH delivery would allow posts to eliminate multiple delivery attempts, saving on fuel and labor, optimize route efficiency, and cut the carbon footprint.
Posts already have an extensive network of postal offices and facilities, which can serve as ideal locations for deploying OOH delivery networks. Leveraging this existing infrastructure allows postal services to minimize additional investment costs while expanding their service offerings and start implementing new solutions right away.
The OOH delivery potentially opens up possibilities for postal service providers from different countries to collaborate across borders and become competitive in the e-commerce landscape. For example, if postal operators from two neighboring countries opened parcel locker networks to each other, e-commerce businesses could use postal services to ship orders, which would increase the volume of packages and make postal service providers more competitive.
Out-of-home delivery for parcel locker manufacturers
As e-commerce companies and last-mile carriers embrace OOH delivery, locker manufacturers are looking at an expanding market.
And more strategic partnerships, diversified revenue streams, product innovation, sustainability, and a treasure trove of proprietary data and analytics are the prime prizes.
Parcel lockers have transitioned from traditional “brick and mortar” locations for parcel drop-off to a data-driven keyhole through which network operators can gauge dwell times, most popular locations and pickup times, demand, and capacity at all times, as well as a variety of other performance metrics.
By adding a layer of OOH network analytics, locker manufacturers can offer added value to network operators and retailers, providing them with insights into usage patterns, delivery volumes, and customer performance — off the shelf. This helps create new business models around analytics.
Plus, it allows locker manufacturers to strategically and intentionally offer customizable locker solutions, depending on their client needs.
Out—of-home delivery for e-commerce companies
Customers do want the convenience of getting their parcels right on their doorstep — but OOH delivery should not be overlooked. By tapping into the potential of OOH networks, e-commerces get to improve the bottom line — and woo the customer.
Thanks to the 24/7 accessibility of parcel lockers, e-commerce businesses get to go beyond the traditional delivery windows. Instead, by setting up well-thought-out delivery points, these companies equip their customers with more efficiency, as customers easily pick up their parcels at any time.
And while there is something to be said for the unbeatable ease of home deliveries, with OOH, e-commerces allow customers to choose the most convenient locker location and time for pickup.
At the same time, some parcel lockers support parcel returns, which simplifies the process for the customer and incentivizes them to repeat business.
Finally, lockers help fend off the “porch pirates”, who, according to a 2019 New York Time analysis, are responsible for a whopping 1.7 million packages that go missing every day in the US. Lockers provide a secure alternative to receive parcels, reducing the risk of damage and theft.
Logistics analytics and OOH delivery
Last-mile delivery, and logistics as a whole, are responsible for delivering millions of packages every day. Each package has its origin, destination, content, size, weight, and location tracked.
Understandably, this results in a lot of data accumulation over time.
The good news?
Thanks to last-mile delivery and OOH analytics, you get more profound insights from these large data sets and then make last-mile delivery more efficient.
Analytics brings operational and cost efficiency. They work together to help logistics professionals improve planning and operations, all while staying as cost-efficient and sustainable as possible without sacrificing quality.
Key metrics and KPIs in OOH delivery
There are many metrics and KPIs in OOH delivery you can track, depending on how mature your delivery network is at the moment.
Understanding the OOH network’s performance can be challenging if you monitor only the number of shipments related to a PUDO point or parcel locker without other data to provide more context. Due to their characteristics, some metrics may be more important for parcel lockers than PUDOs.
Some metrics you should be tracking include:
- Utilization rate: Utilization rate is the ratio of the number of parcels delivered to the locker and the total capacity of the parcel locker. For a single day, it can be calculated by the previous formula. For multiple days, looking at the median could be more beneficial. A high utilization rate can indicate the success of the parcel locker positioning and lower the cost per delivered parcel.
- Uncollected parcels: Knowing the percentage of parcels that the recipients do not collect after being delivered to OOH points is important. A high percentage of uncollected parcels negatively affects the business. It decreases the utilization rate and increases costs associated with re-delivery. It can also indicate other issues, such as limited access hours or poorly chosen locations.
- Parcel dwell time: Parcel dwell time refers to the time a parcel spends in a locker or PUDO point before collection. For parcel lockers, shorter dwell times indicate they can be filled more often, which increases the utilization rate. You can gain deeper insights by analyzing how the dwell times are related to the location. For example, are they shorter in urban areas or along the commute path?
- Time before delivery: Time before delivery refers to the time it takes for a courier to pick up a package and make it available for collection. While you can’t necessarily control how quickly recipients collect the parcel, you can influence what happens before it reaches a PUDO point or locker. The metric shows if parcels are delivered promptly and efficiently, which can improve operational efficiency and customer satisfaction.
- Delivery and collection by day of the week: The distribution of deliveries to parcel lockers by days of the week can be helpful input for organizing work and scheduling deliveries. The distribution of collections from lockers or PUDOs by days of the week can provide valuable insights into recipient preferences. For example, do they prefer to collect parcels during workdays or weekends?
- Delivery and collection by hour: Combining the hourly distribution of delivery and collection times with the capacity of parcel lockers makes it easier to spot idle periods.
- Returns: Tracking the number of returns through parcel lockers and PUDOs can be more beneficial for e-commerce companies. A deeper analysis of returns provides insights into customer behavior and the efficiency of the OOH network. Companies can identify patterns and trends in the items being returned and the reasons behind them. This information can be used to improve the overall customer experience and reduce the number of returns in the future.
How to build the OOH delivery network
As companies set out to build their network, their efforts tend to focus on finding the location — one that has a high potential to attract numerous customers — before the competition does.
At the same time, companies need to evaluate the prospect of partnerships with a variety of location providers, while keeping the network infrastructure costs at bay. This is further exacerbated by already limited locations, and often manual and tedious location scouting process, which only fuels the indecisiveness around which locations to pick.
There is a lot of groundwork to do in this stage — and it can make or break the long-term viability of your network. Given the importance of this preparatory work, you should consider numerous factors, including:
- existing parcel lockers and PUDOs
- historical shipment volumes, including information like returns and unsuccessful shipments
- stops
- points of interest
- areas within walking/driving distance
- population data
- competition.
How to manage the OOH delivery network
Once the network is up and running, companies shift focus to ramping up its utilization and optimizing the process, from delivery to OOH points to speeding up parcel collection.
The right analytics lets the company:
- monitor and improve the network performance — doubling down on OOH delivery analytics allows companies to have real-time insights into how their network is performing. And, in addition to looking at the network as a whole, companies can zoom into a part of the network (e.g. a city or delivery area) or a specific OOH point for deeper analysis when needed. This way, the company stays on top of parameters to improve so that their locations are utilized to their full potential.
- get notified about critical shipments — the larger the network, the more difficult it gets to manage it and keep tabs on all the information. With an analytics solution, companies get to cut the time spent on identifying the issues. Instead of wading through endless reports, companies can get notified about critical shipments (e.g. the X shipments that have been dwelling for the past Y days).
- see how you stack against the competition — understand the position of your OOH points compared to other networks in the same region. Identify weak spots and easily make strategic decisions.
- simulate changes to the network — whether it’s adding or removing a location, or simply setting it up somewhere else, the analytics allows you to tackle the issue, without the extra costs involved. In case of location issues, it might make sense to relocate a locker, as you could still achieve the same or better density. In other cases, removing a delivery point is the most sound business decision, especially if that delivery point is consistently poorly performing. Then again, as you look for greater capacity and availability, you might need to add a locker or combine a PUDO with a locker nearby. In practice, all this would be a costly exercise. Meanwhile, a good OOH analytics solution lets you model your network and immediately see how all these changes reflect both on the network and your bottom line.
- create routes for parcel lockers and PUDOs — optimizing routes is a critical task, both for home and OOH delivery. Instead of manually tracking and working out the performance of each route, OOH analytics allows last-mile carriers to analyze completed routes, pinpoint bottlenecks and deviations from the planned route, and track delivery progress in real time, ensuring the quality of route performance.
How to scale the OOH delivery network
At this point, the company already has a network in place and is, hopefully, optimizing it continuously. It now moves to expand the network.
A particular set of challenges arises then, as the company needs to get hold of data on new markets, put in place a centralized reporting system across locations, and ensure smooth collaboration between countries.
This is easier said than done though. First off, the model that last-mile carriers have on their own turf might not work on another. A post has a strong advantage in its own home country, as it boasts existing infrastructure, that has stood there long before the OOH network.
Moving to a different country would mean building a network from the ground up, sans the infrastructure and resources.
Something similar goes for partnerships. You might have a stellar cooperation with a location provider in one country but that partner might not be present in the country where you’re planning to expand the business, or they have already welcomed a different last-mile carrier into the fold.
Regulatory challenges and parcel locker networks
Incorporating parcel lockers into existing urban infrastructures and logistical networks is challenging. The regulatory landscape frequently changes and varies greatly by location, impacting where and how parcel locker networks operate.
Logistics companies and postal operators must understand and adhere to these regulations, not just because of compliance. They have to make smart investments in their network, ensuring lockers are accessible to customers and viable for long-term operation.
