The overnight delivery is a new concept of delivery that started with the online grocery shop, Market Kurly. If an order is completed by 11 p.m. or before midnight, the order will be delivered to the front of the customer’s house by 7 a.m. of the next day. As such, for its convenience, the number of users using overnight delivery services has been soaring in recent years. There are, however, a number of serious issues that accompany the convenience of this service. Through this article, The Sungkyun Times (SKT) will take a look at the growth trend of the overnight delivery market, the associated problems, and possible solutions to resolve them.
The Status Quo of the Overnight Delivery
How the Overnight Delivery System Works
Overnight delivery services are at the forefront of the logistics war. They must find, pack, and deliver ordered goods by the next morning in an extremely short period of time. The key to the dramatic success of the overnight delivery is big data analysis and Artificial Intelligence (AI) utilization. Big data analysis fundamentally changed the existing system from preparing goods after getting an order to preparing the goods before taking an order based on the data of millions of past orders. Also, a “random store” which is the way placing logistics randomly has been adopted as the overnight delivery companies’ warehouse management system. Although the system is referred to as “random”, it actually manages the logistics in the most efficient manner through exhaustive AI calculations.
A Growing Size of the Overnight Delivery Market
According to statistics released by the Rural Development Administration (RDA), the market size of the overnight delivery service was 10 billion won in 2015, surpassed 400 billion won last year,
and is expected to reach 800 billion won this year. With the rapid increase in the market size, conglomerate-runstores like Coupang, Lotte Homeshopping, and E-Mart have also entered the market, starting big competition.
Problems Caused by the Overnight Delivery Service
The Excessive Use of Disposable Products
A major side effect of the expansion of overnight deliveries is the excessive use of disposable products. The main products of overnight delivery are perishables, such as frozen foods and foods/beverages (36%). To maintain freshness, retailers are using disposable packing products such as Styrofoam, cold-reserving foil packs, airbags, and plastic packaging. For example, Market Kurly uses a large amount of packaging
materials as it operates a “full-cold chain system” that seeks to keep food in optimal conditions throughout the delivery.
Excruciating Labor of Night Workers
The late night labor of the night workers of the overnight delivery service who have to finish packing and shipping logistics during the night time is also becoming a social problem. Night-time delivery staffs do not earn a fixed monthly income. Instead, they are paid per delivered shipment based on the amount of orders allocated each day which is extremely unstable. In addition, according to a news report by YTN News, many night-time delivery staffs who work from 3 a.m. to 7 a.m. suffer from health problems such as sleep disorders, digestive system disorders, and menstrual irregularity. The International Agency for Research of Cancer (IARC) even defined night labor as a second-class carcinogen.
Frequent Sell-outs and Delays Due to a Lack of Infrastructure
The frequency of out of stock products and delays in delivery are problems from the customer’s point of view. Due to the nature of overnight deliveries, the delivery companies prepare products based on the analysis of past orders. Therefore, if the analytical prediction is wrong, there would be a gap between the number of prepared goods of the company under their prediction and the actual number of ordered goods from the customers’ demand. As Market Kurly aims to dispose of less than 1% of their fresh food orders, popular goods are frequently sold out, much to consumers’ dismay. Moreover, due to a lack of infrastructure such as the lack of deliverers, trucks, and a logistics network, the delivery time can sometimes exceed 7 a.m., which directly violates the strong point of the overnight delivery.
Possible Solutions to Resolve Associated Issues
Using Eco-Friendly Packaging Materials
Simplifying packaging involves sacrificing the freshness of food, so it is recommended that the retailers seek alternative solutions such as reusing packaging materials or introducing an eco-friendly packaging system. For example, Lotte Homeshopping uses reusable ice packs and cold boxes in place of disposables.
Improving Working Conditions for Night Workers
A fixed monthly income could ensure a stable income for night-time deliverers. Market Kurly has adopted monthly fixed transportation benefits based on the ratio of night allowance paid to overnight deliverers. Furthermore, in order to promote the deliverer’s well-being, both the delivery market and customers should empathize with the harsh working conditions of late-night deliverers and create a “NO DELIVERY DAY” once or twice a year.
Increasing Efficiency Using AI
A more sophisticated and less error-prone statistical program is a possible solution to the shortage of logistics and delivery delays. Currently, Amazon is using the “Amazon Machine Learning” system which recommends a product to customers and this system has a high probability to link the recommendation to the actual purchase. It will highly increase the accuracy of the prediction of the amount of consumers’ demand for each product, therefore, reducing the disposal rate. When these kinds of AI systems are adopted by Korean overnight delivery companies, it will enhance the efficiency of delivery systems.
There are both positives and negatives to the new overnight delivery systems. That is why overnight delivery companies should continue to monitor the social problems and inconveniences raised earlier and consider ways to reduce them. Only when the social problems caused by overnight deliveries are alleviated and consumers’ complaints are reduced will overnight delivery services become a part of consumer culture in our society.