The reason why food delivery logistics is so hard

June 26, 2024
JJ Velaz
The reason why food delivery logistics is so hard

This is why food delivery logistics is so hard. You have 2 crazy demand peaks.

Lunch peak is 2-2.5x the orders you do at 3pm.

Dinner peak is 3x the orders you do at 7pm.

This means you need a lot of riders in just a few hours. But it’s really hard to have someone working those few specific hours. First, because regulations don’t allow for it in some countries. Second, because people don’t want to work only 1 hour.

You can make it work if you deliver with flexible freelancers. It makes it way easier to adapt to the demand curve. But it’s really hard to do it profitably if you have fixed shifts of 4+ hours. If employment laws are rigid, it is very hard to make money in food delivery.

In the image below you can see what happens when you work with 4 hour shifts at your lunch peak. You’re good to cover the base but at some point those red areas appear. Those red areas = riders without jobs. You are paying riders but they are not delivering. That’s expensive. You are paying someone but you are not making any revenue out of it.

If you keep adding 4 hour blocks to deliver the 12pm orders then you’ll provide a good experience to your customers but you’ll have a lot of idle riders before and after the peak. So providing that good delivery experience is very expensive. What most companies in not flexible countries do is to leave it exactly as I show in the image below. What this will mean is that those 12pm orders will be delivered in 45-60’. Experience will be worse, but else the cost will be too high to make the economics work.

The ideal scenario is to have such a liquid supply that you can adapt perfectly to the demand curve. For that you need riders doing 30-60’ shifts even. In some countries in Asia we accomplished that when I was leading logistics at foodpanda.

By matching supply (riders) with demand (orders) you can ensure that each rider does on average 3 orders per hour. You minimize idle time so you make the most of the $ you invest in delivering.

Doing delivery efficiently is very hard. Companies like foodpanda, Grab and others have the tools for it. They have invested millions in logistics technology. But if you are a medium business chances are that building your own tech stack will take a lot of time and money. That’s why we are building those tools at Kosmo. So you don’t have to forecast, plan and manage your own fleet. You can just outsource it easily and ensure there is always a rider to deliver your order and make your customer happy.

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