The rapid increase of e-commerce and hyperlocal delivery platforms has given a boom to the low-margin last-mile delivery segment. Businesses, big or small, are venturing into this booming segment, which is now becoming a necessity offering for the consumers. However, aggregating enough volumes to break even is a struggle for the newcomers. To address this challenge, logistics companies are now looking to cut costs, increase efficiency and expand business sources by leveraging smart technological models.
Traditionally, a single order was delivered from point A to point B, after which the fleet would return empty-handed. This method substantially brings down the delivery capacity-which can be easily avoided by using the Milk-Run model.
What is Milk Run Model ?
Also known as cyclic goods taking, Milk Run is a multi-pick, multi-drop, or round-trip system that facilitates distribution or collections.
To elaborate further, it is a method of goods and product collection in which the user dispatches one truck at a specified period, to visit various suppliers – following a predefined route – to collect products and parts and deliver them to the destination. In a Milk-Run shipment that uses a warehouse, goods from several suppliers are collected in the warehouse first, then picked up at the stores with the help of distributors.
The business model which was initially introduced by the automobile manufacturing enterprises has been soon adopted by the third-party logistics companies which aim to provide on-time delivery service to their clients. Milk-run model is currently being utilized by both B2B and B2C companies which are trespassing into each other’s territories to either obtain higher margins or make full use of their delivery fleets.
Experts believe that the Milk Run model, equipped with tech-like route optimization, is helping delivery boys deliver on an average 15-20 packages per two hours, thus, dramatically bringing down labor costs and ringing in higher revenues. Logistics companies streamlining their operations, with better route planning, ensure better utilization of resources like delivery vehicles, labor, etc and thus saves cost.
By implementing the Milk Run method, companies have improved their supply chain process in the following way:
- Cost-efficient route for the procurement of the material
- Decreases the number of turns
- Decreases the inventory at the warehouse
- Decreases the total lead time
- Decreases the WIP time.
- Improvement in the warehouse management and fast delivery of goods and products
- Decreases distance traveled by the trucks and also decreases the number of trucks’ Rapid Time to Value
Working within refrained time windows and with real-time orders, the modern logistics industry is making benign development by leveraging the Milk-Run scheme.
In this competitive and fierce industry, the enterprises need to ace two main factors i.e. time and cost, and an optimized tech-enabled mil-run business model can help logistics players achieve just that.
Logistics enterprises can improve the vehicle’s load factors, make full use of vehicles’ space and deliver the full loaded goods to the designated place, and avoid the waste of time at the same time save the cost of transportation.
Furthermore, saving an extra round trip and utilizing the empty run also reduces the correspondingly high resource consumption and CO2 footprint.