We have witnessed explosive growth in last mile delivery in the past few years. This growth 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 the tremendous costs involved in these deliveries and know what to do about it.
As such, we wrote this article to answer some of the main questions people may have on topics such as:
- Why is last mile delivery important?
- Last mile delivery cost breakdown and why it is expensive;
- Last mile delivery problem and trends in different sectors; and
- Choosing a last mile delivery & logistics software.
Table of Contents
- What is Last Mile Delivery?
- Why Are Last Mile Deliveries so Important?
- What are the Costs Associated with Last Mile Logistics?
- How does Technology Support Last-mile Delivery Operations?
- 7 Major Last Mile Delivery Trends to Look Out for in 2021
- Real-World Examples that Solved the Last Mile Delivery Problem
- Tips on Choosing a Last Mile Delivery Technology
- The Challenges of Last-mile Delivery can be Tackled with Optimization
What is Last Mile Delivery?
“Last-mile delivery is the final step in the shipping process. It is when the consumers will receive their products. 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.”
Why Are Last Mile Deliveries so Important?
Last-mile delivery is the step that determines how fast you reach your consumer. The importance of last mile delivery is connected to revenue, consumer experience, and overall growth.
The Changing Face of Retail
Twenty years ago, brands like Sears were ubiquitous and dominant. Every home had its sales catalogue. The 90s and 2000s were the eras of big brick-and-mortar stores. 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.
Answering Consumer Expectations
The expectations are rising. Fast delivery or quick order fulfillment 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 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 this service.
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 logistics companies, and to survive; it’s crucial to meet customer expectations.
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, and delivery drivers.
For the purpose of scaling operations, businesses often rope in third-party logistics to satisfy their final mile delivery demands. It eventually helps them to grow faster and stay competitive.
Improved Customer Satisfaction
The products have already been compiled and are ready to leave from the 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 final 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.
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. These are future trends (covered below), and there is also significant investment in route optimization software and other cost-effective solutions to optimize the delivery process.
What are the Costs Associated with the Last Mile Logistics?
As Business Insider puts it, “And with the growing ubiquitousness of “free shipping,” 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 cost of final mile delivery is still proving to be expensive for a large number of consumers.
It gets worse, though. The average cost 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.
How Does Technology Support Last-mile Delivery Operations?
Here’s how technology can help and support last mile delivery planning:
Route Planning & Optimization Cuts Delivery Time
A poorly planned and optimized final delivery will never reach the final destination on time. The unplanned deliveries will have the driver going around the same locality without any proper direction.
But with a good route optimization solution and a strong last mile delivery algorithm, final mile deliveries can be done faster than usual. The delivery routes are optimized considering the traffic, road conditions, distance, and vehicle type. It helps in cutting down the time spent doing deliveries.
It can solve the last mile problem easily by improving the delivery experience and also making it more cost effective.
Cutting Labor Costs & Service Time
When delivery routes are planned in real-time, considering real-time factors in the final mile delivery, it can help businesses reduce the number of drivers required in a day to fulfill a certain number of deliveries.
Managers or dispatchers can auto-assign delivery routes to drivers based on location or availability. It can also help to limit the number of tasks handed over to the driver. Doing this can help cut down major last mile delivery 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 last mile package delivery that is sent out.
Proof of delivery helps in verifying that the delivery has been made successfully. Drivers can easily finish capturing proof of delivery and add it to their daily report of deliveries. It clears out any confusion or false claims.
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 also given notifications regarding their expected deliveries along with the contact details of the driver carrying their package, the lines of communication are clearly emphasized.
When you have clear lines for passing on a message through easy tools like a mobile app, tracking number, or in-app instant messaging, it can automatically improve the communication among the drivers, dispatchers, and the customer base.
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.
It allows the business to track the last-mile delivery supply chain. It can be really useful in the case of hiring third-party logistics. Businesses can demand reports and analytics to help them understand how the deliveries are being carried out. It can help monitor key metrics while filtering out data by drivers, date, or route.
7 Major Last Mile Delivery Trends to Look Out for in 2021
The world is changing very rapidly. And so is the last mile delivery model and its functions. Knowing and studying the trends will allow you to keep the advantage in your industry and make the adjustments to be a leader in your field.
Below are some of the critical trending topics:
The modern end-user wants to know precisely where their product is in every stage, in all the delivery points. 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. Finally, this last-mile technology allows for proof of delivery, another critical stage in the process.
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 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.
It does not require the companies to sell the products on their own. They invite sellers to be partners with them, selling and delivering their products to the customers through their own platform.
Quick Order Fulfillment
With increasing expectations for on-demand and same-day deliveries, there has been even more pressure on logistics and last mile customer experience.
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.
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. Other in-transit technology can predict the weather patterns to keep products safe, in particular perishable items.
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.
In this regard, a company that comes to mind is Uber, which is currently the gold standard for this type of business model. Many of these models use a “job post to job complete” flow, whereby the platform facilitates the delivery using inputs from users in all stages.
Self-driving Delivery Vehicles
As mentioned earlier, costs are very high when fulfilling orders to consumers for last-mile delivery. 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. These would allow not only cost savings but also around-the-clock delivery as the robot carrier needs no sleep.
By most estimates, there is still some time before solving all limitations of this technology, and regulation is adopted. The capacity of this tech makes it one of the best alternatives to the current delivery model. 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.
Gentle nudges, or suggestions, can be made at critical times to increase sales. This trend is already apparent and is likely to continue to grow.
Real-World Examples that Solved the Last Mile Delivery Problem
The last mile delivery problem has been tackled and solved by quite a few pioneers in various industries. These are some of the best examples of last-mile delivery in the real world.
Tips on Choosing a Last Mile Delivery Technology
- The tool must be able to accommodate multiple drivers and their schedules simultaneously.
- The technology must have a strong route optimization algorithm.
- Planning & optimization for route schedules 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 proof of delivery.
- The tool must provide daily reports and analytics for gathering useful insights.
Upper Crew works toward making your last-mile fulfillment tasks quicker and easier for your drivers and a delightful experience for your customers. Get in touch with us to book a free demo.
The paradox posed by the last mile delivery problem is the difference between the speed of delivery demanded by the customers and the resistance to paying a higher price for it.
As a retail store or online store, the best way to choose a last mile delivery process partner is to check if they are offering the following benefits:
- Improved delivery experience for customers as well as drivers
With the failure to set up efficient last-mile delivery to your customers, you will incur higher costs, lose out on many consumers, and eventually fail to expand the business and its operations.
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 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 comprises 53% of the total cost of shipping due to these inefficiencies.
Amazon’s last-mile delivery approach allows delivery services to become delivery partners. By doing this, Amazon’s last-mile services can share the businesses’ delivery load and speed up customer delivery times.
The Challenges of Last-mile Delivery can be Tackled with Optimization
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 route planning solution that can support your first mile and last mile delivery. Upper Crew is one such solution that will help you cut costs and deliver items more quickly. You can start by trying our 7-day free trial.
We hope this covers many of your questions relating to the challenges of last mile delivery! If you have any questions regarding last mile delivery optimization, please don’t hesitate to contact us or send us a message with your email address, and we’ll be sure to get back to you.