The Economics of Sidecar’s Local Delivery System

Sidecar

Will logistics and delivery provide a key strategic advantage in local commerce? That’s the hope of players like Google, Amazon, Uber, Sidecar and Postmates. As we have previously noted, each hopes to get a leg up on the economics of local commerce and time-to-customer by cutting out the middleman: USPS, Fedex and UPS.

Sidecar, in particular, has suggested there are a revised set of delivery economics. A new blog post by CTO and co-founder Jahan Khanna says these economics have been changed by three factors: always on consumers and businesses; agile software that pinpoints ideal routes and matches and combines orders for delivery personnel; and “multi mode delivery networks,” consisting of walkers, bikers and autos – each utilized to complementa each other, traffic patterns, parking etc.

“When everyone is connected to the Internet all the time, people can work together in shockingly more efficient ways than was previously possible,” notes Khanna. “The ability to intelligently decide which mode works best at which time, and path-find between multiple modes, is a powerful cornerstone of the Sidecar network.”

Khanna notes that Sidecar has broken each of its local markets into quarter mile grids. The task is to predict how many orders are going will come into each grid – a process that is updated every 15 minutes. Additionally, Sidecar’s data group figures out where there are parking and traffic logjams. “The routing algorithm is the heartbeat of our on-demand infrastructure,” he says.

“Every car, bike courier and walker on the Sidecar network is not on one ride, or one delivery per se,” says Khanna. “Rather, they are assigned to an ordered set of multiple waypoints each with individual deadlines. They might be picking up two orders at the first location, dropping one off at the next, picking two more up at the third, and so on and so forth. The goal of the system is to maximize driver efficiency and minimize confusion due to reassignments, all while targeting a 95% on-time percentage.”

Khanna also says that all this works for $6.90 deliveries — even with San Francisco’s especially high labor costs. In San Francisco, walkers need to make $16 an hour, drivers need to make $22 an hour, and bikers need to make $19 an hour. At peak times, cars can handle six deliveries an hour; while a bike can handle four.

“Our technology enables us to work together more efficiently than was previously even imaginable,” Khanna sums up. It certainly beats FedEx’s $17 charge for same day delivery — which is still not capable of getting a hot pizza to a customer’s door. What it means for Uber’s attempt to make $3 deliveries is less certain.

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