HomeRegional NewsAfricaBreaking barriers in digitalisation of the last mile

Breaking barriers in digitalisation of the last mile

Digital solutions have become an integral part of the Last Mile Distributors (LMD) sector. They hold tremendous potential to increase efficiencies when operating at scale but face several barriers for which solutions are at hand.

The Digital Transformation to support Last Mile Distributors: overcoming barriers together report provides five areas of dialogue and action for digital service providers and other industry players to contribute to better digital solutions for last-mile distributors. The Energy Catalyst commissioned the report, which Energy 4 Impact and Global Distributors Collective co-authored.

Rebecca Symington, knowledge management programme manager of the Energy Catalyst Programme, says they were particularly interested in the topic. Though they work with companies that develop software design, they realise companies don’t always understand their target market. Therefore, the purpose was to help them get the knowledge and become more familiar with the market. It was a unique opportunity to get providers of technology and technology users together to create a dialogue between the industries. “It’s the same for the last mile distributors. They have their sources of frustration and lack of understanding of digital language,” said Symington.

The report explores how digital solutions helped many Last Mile Distributors quickly respond to COVID-19 related challenges such as restrictions on the movement of agents and assets. Throughout the pandemic, many LMDs even accelerated their digital transformation process, including the use of mobile money payments, remote sales agent or retailer training and setting up online stores or e-catalogues.

Symington thinks the actual acceleration lay in the newfound awareness of LMDs to the benefits of digital solutions. “Just like all of us have gone online a lot more, it’s the awareness of being able to reach clients and the general population without having to visit them.”

Regardless, she doesn’t think LMDs across Africa are about to replace in-person communication with digital formats. “You will always need that face-to-face time in the LMD space because of the nature of the market.”

According to the survey responses, this will help business processes such as stock management and payment collection, which can be a barrier. “If you streamline those aspects, it helps the LMD to scale because you’re reducing other aspects of highly intense personnel requirements.”

There are two competing realities at play as the LMD sector becomes more digitally savvy. More third party specialised digital solutions are coming online. The 28 surveyed LMDs collectively listed more than 40 different digital solutions adopted into their operations.

The other side of the coin is that LMDs still regard offline in-person activities as key to their business model. A large share of the LMD budget spend is on below-the-line marketing and cash payment collection.

While customer acquisition, payment collection, or remote field force management could benefit from digital solutions, many LMDs operate in markets that are not ready for complete digital transformation. Not all agents have smartphones or are digitally literate. Not all customers are comfortable paying for products with mobile money. And, offline activities can sometimes be critical to building relationships and trust when selling to a highly risk-averse customer base.

A Global Distributors Collective member survey gave LMDs a chance to review the digital solutions they currently use, and interestingly, affordability was not the most important consideration.

LMDs are willing to pay for the right solution, with respondents spending on average $25,000 per year on their whole set of digital solutions. Their top three needs for digital solutions are user-friendliness, customisability, and interoperability.

Some digital service providers (DSPs) differentiate from competitors by excelling in particular aspects, such as excellent user experience design. But, despite efforts by DSPs, it did appear that not all LMDs’ needs can be met, and certain barriers still need to be overcome. The report outlines five areas of action, unpacked below, to overcome digitalisation barriers for last-mile distributors.

  1. Industry visibility and digital jargon
    Even when LMDs and DSPs find each other, there is still a lot lost in translation as LMDs often struggle to understand and compare the technical terminology used by the DSP. At the same time, DSPs claim the LMDs struggle to define what they are looking for. Symington says this is one of the most important aspects of business in the LMD sector they would like to address. “To break it down for both parties to see where the misunderstandings will be. There are all sorts of recommendations that are quite practical. It breaks it down to an affordable as well as practical way.”

Solutions to explore:

• Create marketplaces or repositories where LMDs can find accurate, up-to-date overviews of available digital solutions. The GDC is developing an online catalogue with peer-reviewed digital solutions for LMDs. The purpose is to describe and categorise DSP solutions based on the LMD business functions they support. It would also help to create a standardised terminology for the sector.

• Specialist software brokers. An example mentioned in the report is Enable Digital, an independent consultancy supporting LMDs or their investors who pay the consultancy bill to assess and fulfil digital technology needs through technology audits and software comparisons.

• Matchmaking events run in conjunction with established events where LMDs and DSPs can meet.

  1. Digital readiness at the last mile
    If a C-level executive does not commit to IT, the DSP finds it difficult to onboard a new LMD. Since most digital solutions are not plug-and-play, LMDs and DSPs must work together to create the solution. Limitations around digital literacy apply even more to the customer base of the LMD. Barriers include limited smartphone penetration and mobile internet access, as well as a distrust of digital solutions.

Solutions to explore:

• IT skills training for LMD leadership and staff.

• Streamline the onboarding process for LMDs by nominating and training experienced ‘digital champions’ at the management level who can then train other management personnel and agents.

• Leverage trusted relationships between agents and customers to introduce digital solutions such as mobile wallets among customers.

  1. How to help LMDs finance digital solutions
    Digital transformation can be a significant expense. To maximise the value of each IT investment, LMDs must choose solutions suitable for them, which maximise the functionalities on offer. DSPs must optimise their pricing model and cater to LMDs with different sizes and needs to address the affordability gap.

Solutions to explore:

• Increase LMD awareness of the realistic costs of digitalisation and make sure DSPs are transparent about budgetary requirements.

• Improve the affordability of digital solutions through fair pricing models and discounts – some DSPs are exploring methods like introducing a cheaper entry-level solution with fewer functionalities that work for small or early-stage LMDs.

• Encourage investors and donors to support developing and tailoring digital solutions for LMDs.

Symington pointed out Energy Catalyst also works on creating these kinds of partnerships. “It’s an ideal solution from a donor point of view. More and more public sector donors are going to the private sector to bring in development solutions. There is scope for this market-based solution to be expanded, and it is something we try to do both in the Energy Catalyst system and more generally within Energy 4 Impact.”

  1. Interoperability of digital solutions
    Ideally, LMDs would choose all-in-one solutions with automated workflows and data combined on dashboards that help managers make daily decisions. However, the reality is that LMDs may use up to seven different, often non-connected digital solutions as the industry remains largely fragmented.

At the same time, many DSPs choose to specialise in just one or several functionalities, and they introduce an application program interface so other DSPs can connect with these. Though interoperability through an application programming interface provides opportunities, the DSPs can then face challenges such as agreeing on terms of integration, who will do and pay for what, and the resources required to maintain integrated solutions. Integrating mobile money providers, in particular, can take a long time.

Solutions to explore:

• Make accessible application program interfaces (APIs) and data integration endpoints available.

• Service bundling by DSPs with complementary offerings to create a win-win situation for cost-sharing marketing and customer onboarding.

• Introduce more open-source solutions and content.

5. How to streamline the connection with mobile operators and local regulators when DSPs enter new countries with LMDs
Digital solutions can be easy to replicate across countries because of their cloud-based nature. DSPs also tend to develop solutions that apply to all the LMDs’ product categories. But, engaging with local telecommunications companies (telcos) and mobile money providers is made difficult by the long and bureaucratic processes required for integrating services, low telcos responsiveness, and limited DSPs’ negotiating power.

“Even if you look at it across developed economies, replicability does require adaptation. That is where the finance in grant or cash flow provision would be helpful. It’s just to cover the additional cost that makes the adaptation for that particular market so difficult. Very rarely can you take an idea and plant it in another place. It doesn’t mean the idea isn’t valid. A general concept will always need local agreements,” explained Symington.

Solutions to explore:

• Work through aggregators who act as intermediaries in the integration process with telcos.

• Facilitate dialogue between DSPs and the mobile industry.

• Increase LMD awareness of telco requirements. ESI

About the organisations

Energy Catalyst is a UK programme co-funding from the Foreign, Commonwealth and Development Office, Global Challenges Research Fund, the Department of Business, Energy and Industrial Strategy and the Engineering and Physical Sciences Research Council. www.energycatalyst.ukri.org

Global Distributors Networks is a collective of Last Mile Distributors around the world. GDC has 200+ members in over 50 countries, who have reached over 35 million people with life-changing products such as solar lights, clean cookstoves and water filters. www.globaldistributorscollective.org

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