In 2020, after the COVID-19 pandemic and subsequent self-isolation began, the number of online purchases in all retail segments increased sharply. The pharma industry was in for truly explosive growth. According to Admitad, in the first quarter of 2020, the number of online sales of drugs, medical supplies, and related services increased by 46% compared to the previous year's results.

The company's turnover grew by 96% in 2020, and it successfully adapted to the new operating conditions. However, as a result of intensive scaling, the company had to face a new challenge: as the volume of orders grew, the load on logistics increased significantly. At the same time, the company's delivery model began to develop quickly.

Problem

At the end of 2020, the company's employees processed and delivered at least 20-40 thousand orders per day throughout the largest delivery region. As the sales volume increased, it became more difficult and time-consuming to plan the delivery manually, and the couriers’ working time was used less effectively. That could lead to an increase in time spent and transportation costs.

Let's analyze why.

1. 1. Exclusive role of a logistician.

   In addition to pickup points in drugstores, the company's logistics model involves large warehouses—hubs, whose areas vary from 4,300 to 10,800 square feet. Every day, several dozen logisticians were planning deliveries from hubs in the ERP-system.

   There were bottlenecks in their operation scheme:

   • Logisticians could only serve hubs in their residential cities, as it was only in those zones that they were well acquainted with the details of transport logistics.
   • Only a logistician could perform the routing. Other employees did not have the appropriate skills or access to the ERP-system.

   During the working day, the logistician needs to plan routes for several waves of delivery. Each of them is tied to the delivery interval chosen by the customers. The wave duration varies from 3 hours or more, depending on the city.

   To be sure couriers are able to deliver orders on time, the logistician must do these steps an hour before each interval begins:

   1. Do the routing and make a delivery plan

   2. Instruct warehouse staff

   3. Make sure that orders are collected and issued to couriers

   4. Solve problems with orders that arise while planning and transfer them to the contact center to communicate with the customers

   If the logistician spends too much time on routing, the couriers may not have enough time to receive orders before the interval starts. At that point, it turned out that route planning in a particular city was the exclusive responsibility of a particular logistician. All processes on the last mile depend on that person, and no one could replace them or share their tasks.

   Until 2020, logisticians successfully tackled manual delivery scheduling for each wave. However, when the volume of orders increased to 300-500 orders per wave, routing became more and more time consuming and less effective. By the end of 2020, routing could take up to half an hour for a wave. This situation created risks for fulfilling the SLA. This was concerning, as the high level of service is an important competitive advantage of the company: the couriers deliver at least 95% of orders on time.

2. Non-optimal utilization of couriers.

   The sharp increase in the sales volume led to the need for a large number of couriers. It was fairly difficult to find and train them in a short timeline, and moreover—if couriers are not satisfied by the number of orders and the payment, then they will leave.

   In order to solve the staff turnover problem, the company implemented the principle of social justice. All couriers had to receive the same amount of money for 2 weeks, as it is the standard salary payment period. This principle had to be considered when distributing orders so that all couriers would receive approximately the same amount of work.

   Since only the logistician was involved in route planning and distribution of orders, it depended specifically on the logistician how much money the couriers received in piecework payment.

   Considering that logisticians were forced to work in conditions of high workload and severe time constraints, the human factor could intervene in the distribution of orders between couriers. For example, a logistician could randomly assign more orders to one courier than the other. The lack of transparency threatened the principle of social justice.

   Also, the company had a staff of couriers on an hourly basis, for which different tariffs could apply. During the working day, if each of the couriers received fewer orders than they could fulfill, this would lead to downtime and increased costs. Logisticians had neither the time nor the opportunity to manually analyze and optimize the cost of couriers' salaries—and this was compounded since the number of couriers was constantly growing.

3. Various types of goods.

   Among other things, it is worth noting that the wide variety of goods became an additional factor in the complexity of planning delivery.

   Drugs and medical supplies are goods that differ not only in consumer properties but also in the transportation method. Within the same order, there may be items that can be transported in the usual way alongside items that must be refrigerated. The latter include heat-labile drugs—for example, enzyme dragees and solutions for injections.

   All these features (and many more) must be kept in mind while route planning in order to optimally distribute the current orders between couriers.

   The company's catalog contains more than 50,000 items, each of which has a certain set of significant characteristics. In the aggregate, this is a huge amount of data that is physically impossible for an ordinary person to navigate efficiently.