I encountered this business problem when my friend worked as the COO for a last-mile-delivery company. Here’s a link: https://painpoint.substack.com/p/a-costly-problem-among-delivery-companies, and here’s the full story if you prefer to read it here on Reddit! 🙂

About last-mile delivery 🚚

When you order something online for home delivery, someone must ensure that the package arrives at your door. The company that sold you the product ships the package in a container to your country, where it ends up at the hub of a last-mile delivery provider, who, in turn, delivers the package to your door.

The final step that causes the problem 📦

When the delivery man delivers your item to your home, they use their phone to photograph the package outside your door. The purpose is to prove that the delivery was successful and is required for last-mile delivery in most countries. This proof-of-work protects the last-mile delivery company against liabilities if the package disappears.

Here’s what goes wrong 🛑

To prove that the package was delivered at the correct location, the photo must contain some essential information, most importantly, the bar code. Unfortunately, delivering packages is stressful, and the courier runs a tight schedule. In their hurry, they often take photographs that don’t meet the requirements, making them invalid.

When a customer complains 😱

The real issues start when customers complain they never received their package and the last-mile delivery company can’t show a valid image. If that happens, they must often pay the entire price for the lost item. Considering these companies make pennies on each delivery, that’s a devastating cost.

What does this problem cost? 💸

A contact of mine worked as the COO for a last-mile delivery company with operations in the United Kingdom and France. The revenue for one delivery ranged from $2-4 but their margin was a stomach churning 5-10%. Since the average value of the content was around $300-400 they needed between 750 (best case) and 4,000 (worst case) successful deliveries for every failed delivery. While he couldn’t tell me how many deliveries they needed to repay he confirmed it was significant.

Brainstorming a solution 🧠

It’s easy to start thinking about advanced applications using image analysis to ensure a photo is perfect before the courier can continue his or her route. However, according to my contact, that’s the wrong approach because no last-mile delivery company wants to slow down their couriers by adding roadblocks in the process.

What do they actually need? ✅

Instead, a better approach is to analyze the photos afterward to detect employees who frequently take bad pictures and correct their behavior. That way, they can keep the delivery process efficient and reduce problems over time. Here’s what the image analysis must detect:

The bar code or address is readable The entire package is visible in the image There is no person in the image (for GDPR purposes)

Technical requirements 🤖

Most last-mile delivery companies use a platform where they track all their deliveries and where the photos are uploaded. The image analysis module should be lightweight and easily integrated into existing systems. You can also add an additional layer to extract and visualize the needed information.

Important about pricing 💰

When considering pricing, most people outside the industry feel it’s reasonable to charge per analyzed image. However, no last-mile delivery company would entertain costs directly impacting their margin per delivery. Instead, you need to charge a fixed price that doesn’t scale linearly with the number of packages.

Additional competitive advantages 🔥

Perhaps you think the delivery companies should solve the problem themselves since it’s easy with a technology such as machine learning. That’s reasonable, but there are some ways to add additional value. For example, when a delivery company signs a new customer, their packages look different and fool the current algorithm. If your algorithm analyzes images from multiple companies, you can build a robust algorithm that handles any package, saving delivery companies precious time.

Final thoughts 🤔

I’m not sure how other delivery companies handle this problem. My company did a short push to create this product, but ultimately decided to focus on other ideas. The question is how much more value can you bring as an external partner compared to a quick and dirty in-house solution. Perhaps there are other related ideas that you can tackle at the same time to create an AI toolset for delivery companies.