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30 ISE Magazine | www.iise.org/ISEmagazine Tackling the difficult last mile The term first-time hit rate (FTHR) represents the per- centage of first delivery attempts that are successful. Obvi- ously, higher first-time hit rates increase customer satisfaction. FTHR can be improved by offering time windows, which refer to the length of the time period inside of which a product must be delivered to the consumer. McKinsey and Co. re- ported that approximately 5 percent of consumers are willing to pay a premium for guaranteed home delivery within a two- hour time window, and they are generally willing to pay more for reliable service. However, studies by Kenneth Karel Boyer and others have shown that shorter window length increases delivery miles per customer, increasing the supply chain's en- vironmental impact and delivery costs. The average cost of a delivery that was limited to a time window was 42 percent higher than a delivery made during a nondefined time period, according to "The reception box impact on home delivery efficiency in the e-grocery business" in the 2001 ter atio al Jour al of Physical Distributio & Logistics Ma ageme t. Installing secure boxes in houses or buildings can significantly improve urban logistics. This can eliminate the "not at home" problem and bring first-time hit rates close to 100 percent, authors Vesa Kämäräinen, Juha Saranen and Jan Holmström wrote. Collection points or lockers are other options to increase FTHR. These consist of a network of storage locations where the customer can pick up their purchases. The network can include spaces in post offices, gas stations, train stations and other storage points. Collection points can eliminate failed deliveries and make delivery routes more effective, reducing transportation costs. On the other hand, new costs come on- line when collection points are opened, including the price to lease the space. Return rates must also be accounted for when calculating the total cost of the last-mile delivery process, especially if the returns are picked up from the customer location. In this case, additional transportation and logistics costs include material handling. Managing customer returns is important in improv- ing last-mile logistics. The vehicles and technologies the delivery company choos- es may have a significant influence on last-mile costs. The fac- tors driving the cost variation include gas consumption, in- surance, loading space, methods to process and transport the packages and security systems. Modern information and communication technologies can make a significant difference in the last-mile delivery process. Routing tools based on new technologies and software can enable real-time management of deliveries, cutting costs. Ac- cording to the company Logistics Trends, routing software can reduce fuel costs by 5 percent to 10 percent while im- proving productivity by up to 50 percent via dispatcher and route planning functions, along with improved visibility and customer service. Cost model and simulation It is very difficult to calculate and report exact costs for last- mile deliveries. Companies do not want to disclose their cost structure. In addition, allocating transportation costs and over- head costs becomes quite challenging. To overcome this limitation and still gain insights into the costs of last-mile logistics and assess potential trade-offs, a cost model has been developed by Roel Gevaers, Eddy Van de Voorde and Thierry Vanelslander. Their 2014 article "Cost modeling and simulation of last-mile characteristics in an in- novative B2C supply chain environment with implications on urban areas and cities" in Procedia – Social a d Behavioral Scie c- es, developed a model to evaluate delivery strategies across dif- ferent geographical areas, with time and distance-related costs being the main factors in the model. This model estimates the average "last-mile" cost per unit delivered. Although this model was initially developed and imple- mented for the Benelux region (Belgium, Netherlands and Luxembourg), Illinois Institute of Technology graduate stu- Getting back from whence it came: Same-day returns As same-day delivery dominates discussion about the future of online sales, a British newspaper is reporting that three retailers might roll out same-day returns for this Christmas shopping season. Online fashion retailer Asos, Nike and Nespresso are considering the service, according to The Telegraph. Asos and Argos already have launched same-day delivery options. And in the United States, CVS is aiming to offer same-day delivery in select cities (Miami, Boston, Philadelphia, Washington, D.C., and San Francisco) next year, USA Today reported. Same-day returns make sense, David Sanez, chief operating officer at retail logistics company Stuart, told The Telegraph. "Consumers will benefit from greater convenience, a better shopping experience and time back in their day," Sanez said. "At a tap of an app, consumers can book a return at a time and place which suits them, even within the hour. No longer will we have to schedule [time] in our busy lives to visit a post office or a pickup point. "For retailers, same day returns mean a faster turnaround, reducing the number of items that will end up out of season by the time they're redistributed. This means retailers are more likely to have the items we want, in our size, available to buy when we want it."