Top 5 Strategies on How to Reduce Last-mile Delivery Costs

Have you ever wondered why that favorite customer of yours no longer visits the store or places orders online?

Why does that tiny shop next to you earn more profit than yours, although all you see is a delivery truck loading and leaving?  

In the digital era that we are living in today, everything is available online with the benefit of same-day delivery. 

Products get ordered, packed, and delivered every other hour. 

So, all you need to do is upgrade your delivery process. It means increasing delivery efficiency and expanding your supply chain and profit margins.

In this process, effective delivery plays an important. Businesses cannot flourish without having good delivery services, especially last-mile deliveries.

Unaware of last-mile delivery and its costs?

Read further to update your strategies on how to reduce last-mile delivery costs.

What Are Last-mile Delivery Costs?

According to the current scenario, last-mile delivery costs are a considerable last amount that the business invests in moving the goods from the distribution centers to the provided customer’s address.

The final phase of the whole delivery process is to transport the package from the warehouse to the customer’s address.

Why Is Last-Mile Delivery So Important?

Many factors matter here, making it the most crucial step of the delivery process. 

The factors making last-mile delivery a critical step are:

  • It acts as an interface between the brand and the customer.
  • It builds a brand’s loyalty.
  • Optimizing it can ensure a healthy profit margin and a better customer experience.

Therefore, faster delivery service, meeting customer expectations and ensuring high-profit margins become necessary to survive in today’s urban market.

When talking about profits, you need to ensure an efficient delivery system with reduced per-mile delivery costs.

But the last mile shipping can cost you about 53% of the total shipment cost. 

“Free shipping” stays on customers’ minds, and they tend to find another seller if they have to pay the shipping charges. 

So by neglecting the optimization of last-mile delivery costs, you might not only face a spike in mile costs but will also end up losing customers.

Was There a Spike in Your Last-Mile Delivery Cost Recently?

If yes, then you need to understand why.

The primary motive behind making changes in mile delivery demand by any company is usually customer-oriented. When last-mile delivery demand became common among shoppers, the companies came up with ideas to pamper their customers.

The last-mile delivery process is not that efficient, but the customers were ready to pay extra bucks for the same-day delivery. 

So the companies took this chance to go for the last-mile delivery. 

Not every company out their failed deliveries, but the ones that stepped in without considering the possible spike shortly drowned!
Understanding the reasons behind the increase in last-mile delivery is a critical aspect.

List of reasons leading to a spike in last-mile delivery costs:

  • Same day delivery
  • Free shipping
  • Supply chain costs
  • Failed delivery

Same Day Delivery

Same Day Delivery
  • Let us consider an order you received in the morning demanding some home essentials. This order demands delivery on the same day. What should one consider?
  • Supply chain, labor charges, delivery vehicles availability, delivery drivers—everything needs to be taken care of under the last-mile delivery operations.
  • This will cost you a high percentage of your profit margins and a lot of time and energy. Too.

Free Shipping

  • One of the critical factors to enhance customer experience is to provide the best alternatives according to the changing market trends.
  • But sometimes, these trends never always prove efficient for the business.
  • Such a factor is free shipping. A customer demands it, unaware of the shipping costs and last-mile delivery problem.
  • If the shipping costs, the consumer tends to switch brands for the one that provides higher benefits.
  • So both ways, it’s the company facing loss.

Supply Chain Costs

  • If we look at the overall delivery costs, a package starts costing the company right when ordered and packed from the factory and shipped to the nearest distribution hub of the provided address.
  • That’s just half the job done. Further, it involves distribution and labor charges, fuel consumption, etc. How can one expect a profit when all these processes cost the profits.

Failed Delivery

  • “Your package is out for delivery.” seems to be the best notification on a customer’s end. But what if this joy turns out otherwise.
  • Several factors can delay the final mile delivery leading to a bad consumer experience. The reasons may include constant traffic delays, unavailability of the receiver, and out-of-route miles.
  • A package to be delivered near the distribution hub is more accessible than the one at a longer distance covering some extra deliveries.
  • Hence, an increase in the last mile delivery costs. Suppose the package cannot reach the consumer on time due to certain unavailability factors, which leads to failed deliveries, which further adds to the increase in last-mile delivery costs.

How is a business supposed to flourish in such a situation?

Well, there is a way out. You cannot avoid last-mile delivery costs, but you can take specific measures to reduce last-mile delivery costs. 

E-commerce is increasing, causing a change in trends and a shift in customers’ interests and demands.

With the mile delivery market size, a business needs to keep up the pace to stay up with the market trends. 

If you want to make the delivery logistics become your leading edge instead of the bottleneck, give a read to the strategies mentioned below.

Five Strategies on How to Reduce Last-Mile Delivery Costs

Five Strategies on How to Reduce Last-Mile Delivery Costs

The five strategies mentioned below are carefully designed in order of execution to simplify your delivery processes and improve your ability to handle more advanced logistics. 

Let’s explore more

1. Listing and Loading

No matter what amount of packages are to be delivered, listing the packages and then loading them for delivery is a must.

This typical process can save you on last-mile delivery by reducing last-mile costs.

Consider these pointers to understand a wiser aspect:

  • First of all, do the listing carefully. Arrange the packages in the order of delivery routes. Start listing from the nearest delivery points and arrange the list to the farthest.
  • Then fill up the list with the exact house numbers and names and even the location by the road (left or right) to ensure the delivery is made at the correct address without consuming a lot of time.
  • Once you are done with the proper listing, prepare for the loading process.
  • Start loading from the package to be delivered to the last location and fill up with the nearest ones at easy access.
  • This pattern will save your delivery personnel a lot of time, and chances of confusion will reduce as everything is organized.

2. A Transportation Hub

Vehicle hub can be presented as a silent problem hub because any problem can occur unexpectedly. 

Consider an early morning delivery with same-day shipping, and you realize that there are no delivery drivers.

Moreover, you’ll require more tasks completed in case of multiple deliveries.

Further technical issues in transportation before or during delivery can incur extra charges. 

So to avoid these last-mile delivery problems, you need to make sure the following:

  • The transportation is fully serviced. Take a general vehicle maintenance inspection to avoid incurring additional costs.
  • To avoid last-mile delivery problems, the package loading and arrangement must be made one night before the delivery day.
  • Assign delivery to the delivery person and keep one in backup to cover unavailability.

 3. Route Optimization 

Route optimization is a necessary step that the management of delivery points must take to meet last-mile delivery logistics. 

The selection of efficient delivery routes can be made using any last-mile delivery software or route optimization software. 

Efficient delivery can be ensured when the delivery routes must be preplanned, ensuring the most cost-effective route in fuel costs, delivery points, average multiple deliveries, and operational costs.

When optimizing a route, consider the following:

  • The shortest route possible in case of last-mile deliveries.
  • Any strikes or road blockage that might result in last-mile route change.
  • The hours of delivery in terms of traffic movement.
  • Opt for real-time data available regarding traffic congestion and optimize delivery routes accordingly to avoid extra distance covered.
  • Make use of the most cost-efficient route in case of repeat deliveries.

4. Real-Time Data

If we reflect on all the optimization done and strategies planned, it’s all for a few main things, i.e., to enhance customer experience and to meet shifting consumer demands. 

A consumer is enthralled by the text “out for delivery”; it becomes the responsibility of delivery personnel to make sure the package reaches out to the consumer in the same period as assumed. 

It’s not just the delivery fleet at work, the consumer has to reschedule the day’s tasks to receive the package. 

So the mile delivery challenge is to deliver the package safely and in time to ensure customer satisfaction while maintaining delivery efficiency.

To make this work, you can provide your customers with last-mile real-time tracking/delivery time windows of their order to ensure the slightest chance of failed deliveries and the package deliveries arrive at the required location.

5. Flexible Delivery Options

When it comes to managing costs, the decision-making shall be split into both parts. 

Every consumer holds different needs and thus orders differently. 

Some want it delivered in the same period, while others can wait for the delivery as per the usual delivery standards.

Providing flexible delivery options to your customers will help you understand their requirements better, thus making the work intensity on your part a little less stressed.

You can provide options to your customers, such as: 

  • For same-day delivery, provide options explain the routes where last-mile delivery (in the given period) is possible and the extra cost to pay, ensuring that it doesn’t affect your profit margins.
  • You can even ask for a suitable delivery day date and time to make sure there are the most minor failed deliveries.
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Ultimate Last-Mile Delivery Costs Saver

The rapidly growing e-commerce is a headache for many logistic companies.

It affects their profit percentages and intervenes with their time and functioning.

But to maintain that efficient total supply chain costs without worrying much about:

  • Labor costs
  • Increased shipping costs

You need to follow an organized system.


FAQs

Last-mile delivery, as the name indicates, is the final stage of the whole process, where the package dispatches from the warehouse to the customer.

Last-mile delivery is essential because it is the ultimate interface between a brand and a customer and is vital to maintaining brand image and loyalty.

To reduce delivery costs, one needs to optimize the route for efficient and multiple deliveries in less time and fuel consumption without compromising the customer’s satisfaction.

Latest technologies/software have made final mile delivery an easy process. But lack of knowledge about these leads to an unoptimized delivery system.

This causes failure in deliveries due to the last mile last-mile, hence incurring extra charges making it an essential.

Last-mile delivery can be improved by centralizing all logistics and taking control of optimization and arrangements before the delivery day.

One cannot consider delivering packages last mile as a profitable venture. This is because it is the most expensive part of the delivery chain. But if optimized properly, it can save some profits.

Upper Route Planner Can Help You Optimize Your Business

Upper Route Planner is the leading route planning and optimizing software. It is an all-in-one delivery management software that can meet business requirements regarding route planning, quick dispatch, and much more. 

Upper Route Planner is not just a cost-effective investment that a business can make. It is also known to boost operational efficiency and productivity.

To learn more about the software, its’ features, and benefits, to take your business to the next level. 

Author Bio
Rakesh Patel
Rakesh Patel

Rakesh Patel is the founder and CEO of Upper Route Planner. A subject matter expert in building simple solutions for day-to-day problems, Rakesh has been involved in technology for 30+ years. Looking to help delivery businesses eliminate on-field delivery challenges, Rakesh started Upper Route Planner with the ultimate goal of simplistic operations in mind.

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