Delivery as a Service (DaaS): Understanding, Importance, and Challenges

Fast-paced modern markets demand efficient business operations. For companies competing in the on-demand economy, quick and reliable deliveries are now a prerequisite. 

In fact, 80% of customers demand same-day shipping, with 61% expecting delivery within three hours.

The mantra is clear: swift deliveries make customers satisfied. 

However, ensuring speedy transportation and logistics with high customer satisfaction poses challenges. One of the biggest challenges is building a sophisticated delivery infrastructure that requires significant investment and eats into slim profit margins.

So, how do you keep up with the demand for speed without compromising the integrity of your business?

This is where Delivery as a Service (DaaS) comes in as an optimal solution.

DaaS allows companies to outsource delivery logistics to professional delivery service providers, which spares them the hassle of managing supply chain complexities.

So, let’s examine the key facets of DaaS and determine whether outsourcing transportation makes sense for your business.

What is Delivery as a Service (DaaS)?

“Delivery as a Service” (DaaS) refers to a logistics business model where a third-party provider offers delivery services to other businesses or individuals. This can involve the delivery of goods, packages, or even services.

DaaS is often used in the context of e-commerce retailers, food delivery businesses, and other industries where timely and efficient delivery is crucial.

The DaaS provider handles the operational complexities of managing delivery fleets, warehouses, and drivers to streamline the shipping process and make timely deliveries.

They utilize network capacity, technological infrastructure, and logistics expertise, so you don’t have to build these delivery capabilities in-house.

Delivery tasks that can be offloaded to the DaaS provider include:

• First and last-mile transportation
• Picking up shipments from warehouses
• Efficiently planning routes and modes of transport
• Managing a network of delivery vehicles/drivers
• Live tracking and status updates
• Proof of delivery documentation
• Scalability to handle order surges
• Round-the-clock customer support

This enables you to offer faster and more flexible delivery options like same-day delivery by leveraging the provider’s infrastructure. Customers also benefit from real-time visibility and a reliable experience.

The goal is to provide a convenient and reliable delivery solution for businesses that may not have the resources or expertise to handle delivery logistics on their own.

Delivery as a Service (DaaS) Process Overview

Understanding the intricacies of how Delivery as a Service (DaaS) operates is key to unlocking its potential for businesses. 

Let’s explore the step-by-step process that provides the ultimate customer convenience.

1. Initial assessment of needs

The process begins with the DaaS provider fully grasping your specific delivery requirements through consultation. 

This lays the groundwork for a customized solution. What expectations need to be met?

2. Order integration

Next, the company’s order management system is integrated with the DaaS provider’s advanced technology platform through APIs. 

This allows new delivery orders to effortlessly flow from the business to the delivery provider, initiating the delivery process.

3. Instant transmission of delivery requests

As a customer order comes in, those shipment details are directly transmitted to the delivery service provider as a delivery request. 

This streamlined transmission ensures that the delivery chain is activated promptly, minimizing delays.

4. Smart allocation of logistics resources

Here’s where the magic happens. Leveraging sophisticated algorithms and machine learning, the service-oriented delivery provider intelligently allocates delivery requests to optimize logistics resources. 

This includes dynamically assigning warehouses, local delivery routes, and available fleets based on delivery location, traffic, and real-time demand.

5. Swift shipment pickup and transportation

With everything allocated, the delivery fleet swings into action! 

From warehouses or store locations, orders are picked up and transported using the fastest mapped route to the destination. Determining the most efficient route, scheduling, and dispatch are handled seamlessly through advanced route optimization software.

6. Real-time delivery monitoring

As the orders are on their way, the emphasis is on providing complete visibility. Upper’s real-time driver fleet tracking system dashboards provide live updates on the current location and estimated time of arrival (ETA), ensuring transparency throughout the journey.

7. Proof of delivery

Upon successful delivery, proof of delivery is captured through e-signatures or photos, and the delivery status is updated instantly. This ensures accountability and transparency, making it more than just a delivery—it’s about delivering with precision using proof of delivery software.

8. Additional services integration

The basic process that we discussed above is as follows. But DaaS goes beyond the basics. DaaS providers also offer additional services like warehousing, inventory management, picking and packing orders, and labeling for shipment. This comprehensive approach caters to businesses looking for end-to-end solutions.

Growing Importance of DaaS

Market Trends

Today’s consumers have little patience – they expect on-demand delivery convenience. This means delivery timelines have drastically shortened, with 8% of US online customers citing shipping speed as an essential consideration in buying from an e-commerce store again.

Same-day shipping is now common rather than a luxury. According to a recent market study by Technavio, the US market for same-day delivery alone is forecast to reach USD 9.82 billion from 2020 to 2025.

Technological Advancements

DaaS allows retailers to keep pace by providing them with the delivery infrastructure they need.

The last mile of the delivery process remains the biggest bottleneck for timely fulfillment. Businesses find managing in-house vehicles, delivery drivers, and logistics extremely capital-intensive. DaaS introduces flexibility to the entire fulfillment process. It’s affordable, with on-demand access.

So whether it’s changing customer expectations or the need for agility, multiple factors make DaaS a lucrative business proposition.

The time is now to evaluate whether outsourcing logistics capabilities can accelerate your ecommerce growth story.

8 Key Benefits of Using Delivery as a Service

Fulfilling customer orders swiftly and reliably is now an expectation rather than an exception. 

Delivery as a Service (DaaS) provides businesses with the infrastructure and capabilities not just to meet but exceed these rising expectations and service level demands. 

So, let’s explore the key benefits that make DaaS an indispensable solution for businesses seeking streamlined and effective delivery logistics:

1. On-demand delivery convenience

Managing the sudden rise of orders is challenging without excess buffers or additional resources. 

But you don’t have to worry about that!

DaaS offers on-demand convenience. 

Based on your live order volumes, additional delivery capacity gets seamlessly activated via the DaaS provider’s virtual fleet technology. 

This on-demand delivery scalability means you pay only for the exact capacity consumed. It converts fixed transportation costs into variable expenditures aligned with revenue.

2. Customizable delivery solutions

Every business has unique delivery requirements. DaaS providers understand this diversity and offer customizable shipping options.

Whether you need same-day, next-day, weekend, or specific time-slot deliveries, DaaS adapts to your business’s needs.

3. Strategic competitive advantage

In the competitive landscape, providing reliable and expedited delivery service can give you an edge over your competitors. 

Using DaaS, you can showcase delivery excellence by fulfilling next-day delivery or even same-day shipping at competitive pricing. This increases perceived brand value, conversions, and retention. 

Instead of large upfront investments, DaaS offers to pay for measurable transport output, making it financially sustainable too.

4. Seamless market penetration

Every business dreams of increasing its geographic footprint and revenue pools. 

However, expanding into new markets often poses logistical challenges. It includes setting up transportation infrastructure, such as warehousing and fleets across locations, which is a capital-intensive exercise. 

DaaS simplifies this process by providing access to virtual fleets. Whether you are a local business testing the waters or a national brand aiming for a broader reach, DaaS facilitates easier market penetration.

5. Reduced operating costs

Maintaining dedicated delivery personnel, vehicles, or warehouses binds significant working capital. 

DaaS turns these fixed or semi-fixed expenses into complete variable costs aligned with actual shipping volumes each month. 

You just have to pay for the logistics services you use, reducing overall operating costs and improving your bottom line.

6. Advanced tracking capabilities

Customer anxiety over delayed parcel delivery can make or break brand loyalty. 

DaaS enables real-time monitoring of order journeys through advanced telemetry, sensors, and responsive systems. 

From order fulfillment services to last-mile delivery, you can gain refined control over your delivery supply chain.

7. Improved customer service

Despite monitoring each process, occasional mishaps are inevitable. Shipping delays can be a concern, but responsive and knowledgeable customer support can turn the tide.

DaaS providers’ dedicated customer service bridges communication gaps and provides insurance against a damaged reputation. 

They take ownership of issues and provide frequent, customized updates through delays and post-resolution. 

Rather than improbable perfect operations, responsive issue management wins long-term loyalty.

8. Integration-friendly Platforms

Seamless integration is crucial for operational efficiency. 

DaaS allows connecting inventory dashboards, order systems, fulfillment apps, mapping software, etc., with logistics APIs for holistic data exchange. 

This simplifies the process of embedding the delivery services into existing business workflows.

Through this, transportation capacity planning happens in parallel as orders get logged.

Use Cases of Delivery as a Service Model in Different Industries

Industry	Key Benefits of DaaS	Unique Challenges
Foods & Beverages	Enhanced customer experience, optimized logistics, and strict adherence to food safety	Food safety regulations, perishable goods, last-mile delivery
Medical & Pharma	Ensured timely delivery, compliance with regulations, secure and reliable delivery	Temperature control, regulatory compliance, security and privacy
Online Retail/eCommerce	Faster delivery times, reduced operational costs, improved customer satisfaction	Peak season demand, return and reverse logistics, last-mile delivery challenges

1. Foods & beverages

Meal delivery companies have transformed the conventional dining industry by offering customers more convenient and customizable meal shipping options. 

They can collaborate with DaaS providers to fulfill on-demand and scheduled orders based on customers’ dietary preferences.

2. Medical & Pharma

This industry taps into the potential of the DaaS model to ensure the timely delivery of critical medical supplies, equipment, lab samples, and medicines. 

DaaS service providers ensure compliance with transportation specifications, including temperature, humidity level, and air pressure, while executing medical deliveries. 

3. Online retail or eCommerce

Online retailers use the DaaS model to fulfill customers’ orders quickly and efficiently. They collaborate with DaaS providers to handle high-volume shipments, returns, or replacements while minimizing operating costs. 

It helps them offer quick delivery options to customers, boost their engagement, and increase repeat sales and revenue. 

Examples Of Delivery as a Service Companies

Below are examples of delivery services for a few companies to help you learn how this business model works and how they have mastered it. 

1. Postmates

Founded in 2011 and headquartered in San Francisco, California, Postmates is an urban logistics service offering on-demand goods delivery from local grocery stores or restaurants. It offers a website and mobile app for online customers to order products. 

They use many couriers on bikes, scooters, vans, or trucks to make deliveries. Local restaurants or grocery stores can partner with Postmates to leverage its vast logistics network and streamline its on-demand delivery process.

2. Amazon

Founded in 1994 by Jeff Bezos, Amazon is one of the most popular eCommerce giants. It delivers many products, including books, apparel, electronics, scientific supplies, jewelry, garden items, and toys. 

They collaborate with third-party shipping partners to expand their operations and offer delivery services, such as warehousing and inventory management, transportation, and last-mile delivery to clients.

3. FedEx

Founded in 1995, Federal Express Corporation (FedEx) is one of the leading global logistics companies, making roughly 14.5 million deliveries daily. 

It leverages a worldwide network of fleet drivers, warehouses, and fulfillment centers to provide a plethora of services, including:

• Last-mile delivery 
• eCommerce fulfillment
• Cold chain logistics 
• Warehouse and inventory management  
• HAZMAT transportation

4. Instacart

Headquartered in San Francisco, Instacart is a popular name in the grocery delivery industry across the United States. They provide both a website and mobile app, allowing customers to select from on-demand and scheduled delivery options.

They partner with over 1400 local and national grocery retailers, including prominent ones such as Albertsons, ALDI, Costco, CVS, Kroger, Loblaw, Publix, Sam’s Club, Sprouts, and Wegmans.

4 Challenges in Using Delivery as a Service (DaaS)

While Delivery as a Service (DaaS) brings a myriad of benefits to businesses, it’s essential to acknowledge the challenges associated with this model. 

Let’s explore the cons of DaaS, shedding light on the potential drawbacks you may encounter:

1. Additional costs add up

While Delivery as a Service (DaaS) offers the potential for reduced operational costs, it’s crucial to recognize that you may incur additional expenses when opting for this model.

The convenience of outsourcing delivery logistics comes with a price tag, and as delivery fees accumulate, businesses need to assess the financial implications carefully.

To strike a balance, you should conduct a thorough cost-benefit analysis. You should weigh the extra costs against the bottom line achieved through streamlined business processes, optimized last-mile delivery, and the ability to focus on core business activities.

2. Loss of direct control

Outsourcing delivery to a third-party provider means relinquishing a degree of control. 

This means less direct oversight and hands-on control over the last-mile transportation process, fleet operations, and delivery professionals.

The delivery experiences, which are crucial touchpoints with customers, are now in the hands of an external entity. 

3. Operational hurdles

Third-party deliveries introduce an element of risk, including the potential for late deliveries or damaged goods. 

These mistakes can adversely affect customer satisfaction, tarnish the business’s reputation, and lead to order cancellations.

4. Dependence on the DaaS provider

The operational efficiency of businesses utilizing DaaS is intricately tied to the delivery performance of the service provider. 

Any hiccups or issues faced by the DaaS provider can quickly translate into operational challenges for you if you rely completely on their delivery services.

Choosing Between DaaS and In-House Delivery: Which One is Right for You?

Navigating the decision between Delivery as a Service (DaaS) and in-house delivery management is like choosing the right tool for the job. 

Let’s break it down to help you make an informed decision based on your unique delivery needs:

1. Ideal scenarios for using DaaS

• DaaS is beneficial for emerging small businesses that lack the financial resources to develop an intricate delivery infrastructure.
• DaaS provides the benefit of fast delivery scaling without the hassle of owning assets for businesses that want to enter new markets.
• DaaS provides a flexible capacity model, making it apt for businesses experiencing significant demand fluctuations and catering to a broad customer demographic.
• DaaS is advantageous for businesses dealing with products that pose transportation challenges, such as oversized items or those requiring specialized handling.

2. Scenarios favoring in-house delivery management

• In-house delivery management is a personalized solution for businesses aiming to foster direct relationships with local customers.
• In cases requiring hyper-local logistics with strict Service Level Agreements (SLAs), in-house delivery shines.
• In cases where upfront budget constraints are a primary concern, managing deliveries in-house can be a financially prudent choice.
• In-house management ensures continuity and efficiency for businesses that already have streamlined internal transportation processes.

Choosing the Ideal Delivery Approach for Your Business

Delivery-as-a-service (DaaS) suits businesses that emphasize flexibility, optimization, and focus on core competencies. Established companies can leverage it to test and enter new markets and expand their customer base without significant investment in deploying fleets and drivers..   

Small businesses may find in-house delivery management using route planning and route scheduling software more suitable. Such software provides advanced features like route optimization, real-time tracking, and customer communications. 

It helps avoid the risk of dependence on third-party service providers, loss of control, and execution gaps while enabling them to manage deliveries more efficiently and affordably, similar to how Trader Joe’s delivery optimizes its logistics to maintain quality service.

Streamline Your Delivery Operations with Upper

Delivery as a service contributes to widening your customer base while offering convenience and flexibility in shipping options to your customers. However, this advantage could sometimes be offset by the heavy costs of outsourcing your delivery process. 

This is even more concerning if you are a small business owner with a tight budget and limited scalability capabilities. Upper’s route planning software can come in handy here. It can help manage your deliveries in-house by handling all the delivery processes, such as optimizing routes, scheduling deliveries, tracking drivers, and obtaining proof of delivery. This way, you can take full control of your deliveries while avoiding delivery outsourcing costs to maximize your profit margins.

Are you ready to manage deliveries yourself? Try Upper today!