The explosive growth in last mile delivery in the past few years can be credited to the dramatic rise of same-day deliveries and the rise of e-commerce.
With the pandemic, this effect was pushed further and now we are witnessing a shift in the ways that logistics and our whole society operates.
This topic affects many organizations, from the public to the private, and the big and the small. We see this highlighted in many studies, notably this one, which speaks to eCommerce’s growth since 2017.
Many of these organizations need to be well aware of last mile delivery and the tremendous costs involved in these deliveries.
This guide will help you get started.
Table of Contents
- What is Last Mile Delivery?
- What are The Steps Involved in a Successful Last Mile Delivery?
- What is The Last Mile Problem?
- What are Costs Associated with Last Mile Delivery Logistics?
- Why Are Last Mile Deliveries so Important?
- Challenges and Opportunities of Last Mile Delivery
- Technology Solutions to Support Last-mile Delivery Operations
- 7 Major Last Mile Delivery Trends to Look Out for in 2022
- Real-World Examples that Solved the Last Mile Delivery Problem
- Tips on Choosing Between Last Mile Delivery Technologies
- Final Thoughts
What is Last Mile Delivery?
The final step in the shipping procedure when the consumers will receive their products is what last mile delivery refers to. If businesses are able to achieve on-time delivery in the last leg it can easily result in an improved delivery experience.
Last-mile delivery is one of the most crucial steps in the supply chain process. If performed well, it offers the delivery company a competitive advantage over others in the market.
What Are The Steps Involved in a Successful Last Mile Delivery?
Here are the 6 universal steps involved in the success of a last mile delivery:
1. Load Orders Into a Centralized System
Delivery companies follow different ways of input for all their order requests. It is important that these orders are lined up in a centralized system with ease.
When you have access to the right technology stack, you can upload or input hundreds of delivery points using an Excel sheet or CSV.
2. Schedule & Optimize Routes
Before you assign these delivery tasks to drivers, you must ensure they are in the optimal order.
When doing hundreds of deliveries throughout the day, you can’t spend hours in sitting in manually planning delivery schedules for your drivers.
Having a software that schedules and optimizes an entire route for drivers according to priority deliveries or vehicle capacity is the most scalable way of generating optimal delivery routes.
3. Load Parcel According To The Route Order
The best way of ensuring your delivery driver does not waste time looking for a package in the back of the truck is to arrange them according to the delivery route.
Start from the bottom of the list and start loading the truck.
Another thing that can be helpful is having the list of parcels and their location in the truck. This list will come in handy for your delivery personnel at the time of delivery.
4. Dispatch Routes To Drivers
You probably have a bunch of drivers who need to be out for delivery as soon as the routes are optimized and ready to go.
Instead of having it all manually set up for your drivers, just dispatch routes to their respective drivers. A last mile delivery solution can help you dispatch routes to drivers’ phone through email or SMS.
5. Improve Visibility Into The Last Mile Delivery Process
Last mile delivery without visibility is ineffective. Your customers need to be informed about the location and arrival time of their package.
Customers expect great level of visibility into the delivery process, right from the moment they order to the last-minute when their package is delivered to their house.
With real time driver tracking, ETAs, and customer notifications, the visibility into the delivery process can be improved.
6. Make Sure You Record Proof of Delivery
Verifiable records are important when you are delivering thousands of packages across the city. A verifiable record can be created by capturing proof of delivery.
Proof of delivery by way of customer signatures or images of the package delivered can improve accountability on your part and remove any false claims from customers.
What is the Last Mile Problem?
The biggest last mile delivery problem is the costs associated with the final leg of delivery.
Last mile costs have said to be as high as over 50% of the overall delivery costs.
Last mile delivery is one of the expensive parts of the delivery process. On top of that, it is also time-consuming.
What are the Costs Associated with the Last Mile Logistics?
As Business Insider puts it, “And with the growing ubiquitousness of “free shipping options,” customers are less willing to foot a delivery fee, forcing retailers and logistics partners to shoulder the cost. As such, it’s become the first place they’re looking to implement new technologies and drive process improvements.”
The graph below is taken from Statista and outlines this phenomenon quite convincingly. Their research estimates the average cost incurred to organizations is $10.10, whereas the average price to charge is $8.08; this leaves a deficit of $2.02 per delivery (ouch!)
Apparently, the last mile delivery or shipping costs are still proving to be expensive for a large number of consumers.
It gets worse, though. The average last mile shipping costs that consumers are willing to pay is a paltry $1.40 per delivery. These data points are why this is such a big topic and has the attention of fulfillment centers, shipping companies, and those in supply chains.
The 5 major costs associated with final mile logistics or total shipping costs:
- Fuel Costs: Fuel costs come up to 10-25% of the overall last mile delivery expenses.
- Labor Costs: Labor accounts for 50-60% of total last mile expenditure.
- Delivery Management Software Costs: The costs of delivery management software is often quite high. But these are affordable because they help you reduce other costs.
- Costs of Failed Deliveries: Failed deliveries can largely affect the bottom line of the final mile logistics.
- Other Miscellaneous Costs: Other costs include vehicle maintenance, idling, and rescheduling.
Why Are Last Mile Deliveries So Important?
Last mile delivery is all about rapid order fulfillment or how fast you reach your consumer. The importance of last mile delivery is connected to revenue, consumer experience, and overall growth.
1. The Changing Face of Retail
Twenty years ago, brands like Sears were ubiquitous and dominant. Every home had its sales catalogue. These companies were dominant players because they offered convenience: get everything that you need in one store!
Nowadays, access and convenience have changed dramatically, and the trend is tilted heavily towards online orders and home delivery.
This trend equates to a compounding complexity for last mile delivery process flow and the last-mile logistics sector as a whole.
2. Answering Consumer Expectations
The expectations are rising. Faster delivery or rapid order fulfillment process is considered critical to 99% of consumers in the United States. Many customers feel frustrated with the lack of transparency, professionalism, and accuracy when having items delivered.
These statistics point to a tremendous opportunity to build brand loyalty & offering a delightful customer experience when executing the delivery properly.
The data is pretty clear in this respect: 74 percent of consumers are more likely to buy from you again if you offer a same-day delivery service. Additionally, about 25% of consumers are ready to pay a premium for such last mile services.
So retailers are looking for ways to keep up with the consumer demands of quick order fulfillment.
The threat of Amazon Prime gaining market share looms large over all third-party logistics providers, and to survive; it’s crucial to meet customer expectations.
3. Operational Scalability
Last mile delivery is important for boosting the operational scalability of the business, especially during the holidays or weekends when the orders pile up.
The operational scalability can be handled well with the increase in technological tools, autonomous vehicles, delivery drivers, and overall efficient resource allocation.
For the purpose of scaling operations, businesses often rope in third party logistics providers to satisfy their final mile delivery demands. It eventually helps them to grow faster and stay competitive.
4. Improved Customer Satisfaction
The products have already been compiled and are ready to leave from the warehouse or distribution center. But without last-mile delivery, the shift of products from the transportation hub to the customer’s personal residence will not be possible.
If these products are not delivered, the customer expectations will not be met. Failure in reaching the delivery destination or reaching late will result in a poor customer experience.
With the right last-mile delivery service the drop-offs can be achieved and customer satisfaction can improve as well.
5. Adapting to the Technological Change
New technologies are transforming the industry, and the transformation of the last mile is spurring new technologies. There are enormous increases in venture capital investments in supply chain management and logistics start-ups.
Several technologies are being explored, including artificial intelligence, automation, delivery robots, robot drones, self-driving cars.
There is also significant investment in route optimization software and other cost-effective solutions to optimize the delivery process.
Challenges & Opportunities of Last Mile Delivery
Here are some of popular challenges and opportunities of last mile delivery.
Common Challenges of Last Mile Delivery
1. Lack of Visibility
Visibility is key to developing credibility. Your buyers want more visibility into the location of their product and the expected delivery time. The lack of it will affect the customer experience and the brand following.
2. High Delivery Costs
The costs of last-mile delivery experience are constantly on the rise and they are often more expensive than other parts of the delivery process.
Longer routes, driver salaries, fuel costs, and repeated delivery attempts impact the delivery costs.
3. Unpredictable Events
The last-mile delivery process is filled with uncertainties. Traffic congestion, weather conditions, vehicle breakdowns, customer unavailability, are just some last-mile problems. But accurate plans and clear communication can help reduce uncertainties and eventually minimize failed deliveries.
4. Inefficient Route Planning
Route planning is time-consuming when done manually. Inefficient route planning is often a leading reason for late deliveries. To handle this situation better, logistics companies must use route planning and optimization software to improve efficiency.
Opportunities of Last Mile Delivery
1. Sophisticated Technology for Tracking
Location Intelligence is used to improve visibility into the third party logistics delivery process. It can track the movement of packages and inform the users of the exact delivery status.
This can really help eCommerce companies tackle several last-mile delivery challenges.
2. Faster Fulfilment
Amazon is the first in the eCommerce industry for delivering products within one or two days. Most eCommerce businesses have tried it but are not able to match Amazon’s speed.
Fast delivery is the need of the hour and businesses need to offer it in order to stay in the game.
3. Real-time Inventory Visibility & Deployment
Retailers are working on advanced algorithms for automating processes and offering inventory management in real-time.
This is done to cut down the delivery time and maximize the number of deliveries. With visible inventory, retailers can make changes across all channels whenever they want.
4. Environmental Strategy
eCommerce companies are a significant contributor to carbon emissions around the world. Their customers are becoming more environmental friendly and they would like their brands to do the same.
It presents a perfect opportunity for eCommerce brands to be more aware of the issues and come up with innovative solutions to tackle the challenge.
Technology Solutions to Support Last Mile Delivery Operations
Here’s how technology can help and support final mile delivery experience:
- Route Planning & Optimization Cuts Delivery Time
With a good route optimization solution and a strong last mile delivery algorithm, final mile deliveries can be done faster than usual. It helps in cutting down the time spent doing deliveries and solves the problem easily by improving the delivery experience and also making it more cost effective.
- Cutting Costs & Service Time
Routes optimized in real-time can help businesses reduce the number of drivers required in a day to fulfill a certain number of deliveries. Doing this can help cut down major costs like labor and fuel without affecting any last mile profitability.
- Offers Digital Proof of Delivery
In an industry that constantly demands transparency and accountability, it is imperative to have a feature like proof of delivery. A proof of delivery by way of signature capture, photo capture, or notes from drivers can help businesses be accountable for each package delivered to the customer’s doorstep.
- Improves Communication
Using a tool that allows the dispatchers and drivers to communicate easily helps in the smoother flow of the delivery process. When the customers are given notifications regarding their expected deliveries along with the contact details of the driver carrying their package, the lines of communication are clearly emphasized.
- Reporting Boosts Accountability
Daily reporting of deliveries can help in identifying weaknesses. It can also create opportunities for improvements. With reporting, the dispatchers or managers can know why a certain stop was not covered, or why a particular delivery took longer than expected.
7 Major Last Mile Delivery Trends to Look Out for in 2022
Below are some of the critical trending topics:
1. Improved Traceability
The modern end-user wants to know precisely where their product is in every stage, in the entire delivery process. This phenomenon is called traceability.
Thanks to smartphone technology, we are blessed to have the possibility of step-by-step tracking information for users. Drivers can accomplish this using bar codes, scanners, and other devices.
2. In-house Delivery Service
E-commerce giants like Amazon are preferring to start their own in-home delivery service. Any company offering in-house delivery services that employs its own delivery vehicles and drivers for carrying shipments from distribution centers to customers.
By doing this, e-commerce companies are able to:
- Expand on their services;
- Generate improved customer experience;
- Control costs; and
- Opt to deliver around the clock or even on weekends.
3. Quick Order Fulfillment or Same Day Delivery
Retail stores and online stores are required to turn in orders much more quickly than they are already capable of, only due to quick order fulfillment demands and same-day deliveries.
These kinds of expectations often pose a challenge in planning and organizing. It requires a business to expand its reach and magnify doorstep deliveries in all parts of the country. Amazon has been quite successful when it comes to quick order fulfillment, thanks to its fulfillment centers everywhere.
4. Smart Technology Sensors
The increased consumer demand for the real-time tracking information of their order at every step. They want to know the shipment process from the last-mile distribution centers, the transit, and updates to the delivery destination.
The last mile delivery technology we have today has made this distinctly possible. Nowadays, sensors can also be added to packages to detect the humidity or temperature levels of the inventory.
5. Crowdsourcing and Gig Economy
Another big trend is the rise of supply chain management and logistics start-ups, particularly in the “gig economy” or “crowdsourcing” space.
Venture-backed capital in San Francisco, and other cities, are lining up to invest massively in this sector.
Interestingly, venture capitalists are not backing assets but rather technology and information-based startups to build these transportation networks.
6. Self-driving Delivery Vehicles
One area where there is a lot of interest is to reduce labor costs by having fleets of autonomous last-mile delivery vehicles.
Vehicles include trucks, cars, drones, and any delivery robot that can deliver a parcel to a recipient. Robotic delivery is the next big thing.
However, one thing to note is that large corporations such as Tesla and Amazon are investing large sums of money into these capabilities. Amazon, in particular, has invested $530 million in its self-driving car company called “Aurora.”
The final trend to be aware of is upselling. The importance of upselling is paramount. Oberlo notes the following:
The probability of selling to existing customers is 60-70%, while the probability of selling to a new prospect is 5-20%.
More and more delivery service companies are studying psychology and the user journey points to leverage extra online sales. This job is dramatically more comfortable with mobile and smart technology, data analytics, and predictive intelligence technology.
Real-World Examples that Solved the Last Mile Delivery Problem
1. Meal Delivery Service: Essential Meal Delivery
Essential Meal Delivery is based out of Canada. Its drivers make hundreds of deliveries within a strict 3-hour delivery window, due to the perishable nature of the fresh meal kits.
With a manual planning and optimization system, Essential Meal Delivery not only found it difficult to optimize delivery routes, but they also failed to take into consideration the service time, delivery time windows, and priority orders.
On top of that, informing their customers about the deliveries also had to be done manually by the drivers. That means only more time being wasted on the road.
With Upper Route Planner, Essential Meal Delivery streamlined its planning and optimization process, delivered within the time frame, improved customer communication, and saved up to 1 hour per driver, per day.
2. Furniture Delivery: Parkwood Products Ltd
Parkwood Products Ltd is a family-owned and operated furniture business in New Zealand. They relied on their delivery drivers to manually plan the routes. This didn’t give them any control over their own delivery process.
The planning and route optimization was taken over by Upper Route Planner. They received accurate delivery time estimates and their drivers had a way to record electronic delivery proof for each product delivered.
3. Asset Management: Station31 Partners
An asset management company in the United States, Station31 Partners, was spending almost 20 hours in manually planning and optimizing their routes. They found it difficult to fit in last-minute requests or changes to the plan. Also, the pictures of the property had to be taken separately and then submitted to the office.
Station31 Partners are not in the business of food delivery or furniture delivery.
Even though Station31 Partners didn’t deliver any products, they still realised the need for a last mile delivery solution. They were very creative in the use and integration of Upper Route Planner into their process.
- Station31 Partners saved 18-20 hours of manual planning tim each week.
- They planned efficient routes for 15-17 drivers within an hour each day.
- Upper Route Planner also made it possible for them to plan for a few weeks in advance.
- They used proof of delivery to capture pictures of the property and have them sent directly to the office, without transferring the pictures manually to the office computer.
Tips on Choosing Between Last Mile Delivery Technology
- The last mile delivery solution must be able to accommodate multiple drivers and their schedules simultaneously.
- The technology must have a strong route optimization algorithm.
- Planning & optimization for delivery scheduling must be simple.
- Last-mile delivery systems must consider all the factors (driver shift times, number of drivers, & priorities), evaluate them, and create optimized delivery times.
- A route planning & optimization tool should save you enough time and money with each optimized route.
- It must offer ways to capture electronic delivery proof.
- The tool must provide daily reports and analytics for gathering useful insights.
The paradox posed by the last mile delivery problem is the difference between the delivery speed demanded by the customers and the resistance to paying a higher price for it.
The last mile delivery costs comprise over 40% of the entire supply chain process. The reason it is so costly is because it is the most crucial stage of the delivery process.
As a retail store or online store, the best way to choose a last mile delivery process partner or supply chain partners is to check if they are offering the following benefits:
- Improved delivery experience for customers as well as drivers
With the failure to implement last mile delivery efficiency for your customers, you will incur higher costs, lose out on many consumers, and eventually fail to expand the business and its operations.
Which industries have to deal with last mile logistics?
The industries that deal with last mile delivery logistics are:
- Direct-to-consumer retail companies
- Flower shops
- Food & drinks delivery service
- Alcohol & Breweries
Last mile delivery is the process of moving goods from the warehouse to the final delivery destination. These are services that include all the last mile carriers involved in delivering goods and services within that previous mile (from Amazon, UPS, FedEx, USPS mail delivery, to startups, smaller couriers, logistics companies, and carriers).
The entire shipping process costs add up for delivery organizations when you think of everything that goes into these deliveries: people, vehicles, and management.
Many urban areas are not much better because of traffic congestion and other infrastructure issues. These inefficiencies have risen dramatically with the growth of e-commerce and the rise in-home delivery. Last mile logistics comprises 53% of the total cost of shipping due to these inefficiencies.
Amazon’s last mile logistics approach allows delivery services to become delivery partners. By doing this, Amazon’s last mile services can share the businesses’ delivery load and expedite delivery times.
The technologies that are proving helpful to last mile logistics are tools like route planning and optimization software, real-time tracking abilities, capturing proof of delivery, drones, self-driving vehicles, and delivery robotos.
In conclusion, the importance of optimizing your last mile delivery is undeniable. Please note the rising trends we discussed and determine how they can best fit your overall shipping process.
Make sure you try out a suitable route planning solution that can support your last mile delivery. Upper Route Planner is one such solution that will help you cut costs and deliver items more quickly.
If you have any questions regarding last mile delivery optimization or how to integrate Upper Route Planner into the process, please don’t hesitate to contact us or send us a message with your email address, and we’ll be sure to help you out.