Last-Mile Delivery: The Final Frontier of Logistics

delivery

Online shopping has caused a seismic shift in buying habits and behaviours of customers. These changes have also caused a change in the customer’s expectations, too: expecting fast and cheap delivery – ideally, free delivery.

In a competitive marketplace, companies must remain, well, competitive. To move the needle and innovate, companies must find wiggle room somewhere in their offerings to appeal to potential customers. The latitude companies will often adapt first and foremost is that of cheap/free delivery. Logistically, more reliable delivery at a cheaper price puts increased emphasis on a company’s last-mile delivery process.

What is Last-Mile Delivery?

Perhaps the most important step of the delivery process, the “last-mile” is the transportation of parcels and packages from the distribution centre to the ultimate delivery destination – in the hands of the customer.

Sometimes referred to as “last-mile logistics”, businesses aim to ensure that this step of the logistics process is as quick, reliable and efficient as possible: some businesses, such as Amazon, rely on last-mile delivery as a competitive indicator, through their Amazon Prime service.

Optimisation on last-mile delivery is crucial, however; being the most expensive and time-intensive aspect of the logistics process, meaning that, without significant optimisation, last-mile delivery can quickly eat into profits through increased overheads.

Though last-mile delivery optimisation may provide many deterrents for businesses – particularly for small businesses – speedy, cost-effective delivery is a key indicator of customer satisfaction within an eCommerce marketplace where near-instant delivery fulfilment has become the standard and the expectation.

Last-Mile Delivery: A Five-Step Process

Last-mile delivery can be divided into five simple steps.

1. Customer Order Enters the Centralised Digital System

Orders/requests will be monitored by the order sender and end receiver – both likely to track the progress of the logistics process through the tracking number.

2. Products Arrive at Transportation Centre, Awaiting Delivery to the Customer

Businesses should focus on this stage, as this is where the last-mile delivery stage fundamentally begins.

3. Each Order is Allocated to Delivery Staff Based on Optimal Routes

Parcels and packages are strategically plotted based on optimal routes across recipient addresses: done to optimise delivery and save costs.

4. Packages Will be Scanned Before Being Placed Onto Vehicles

This stage of the process updates the status of the order, allowing both the sender and the recipient to utilise real-time tracking, which reduces the loss of packages.

5. Package Reaches The End Recipient: Proof of Delivery is Obtained

With the package arriving at its final destination, the delivery driver will update the tracking information to reflect the delivery verification and confirm the delivery status.

What is the Last-Mile Delivery Problem?

Simply put, the last-mile delivery problem is the undeniable fact that the last-mile of the delivery journey is often the more expensive stage of the logistics process: typically accounting for more than half of the entirety of shipping costs.

The interplay here is that customers are beginning to expect fast and free delivery, but, for the company, the last-mile of the delivery process is often the most expensive and time-consuming.

The Costs of Last-Mile Delivery

Averaging at 41% of total shipping costs, the price of last-mile delivery is considerable. Through the ubiquitousness of “free delivery”, customers have become conditioned to avoid paying for delivery where possible, meaning the retailers and delivery partners are having to bear the brunt of markable expenses.

As a result, last-mile delivery has become one of the first areas of the logistics process for the implementation of industry innovations in processes and technologies.

Why is Last-Mile Delivery So Expensive?

Delivery and logistics are generally expensive and challenging, with last-mile delivery providing additional complexity to the daily delivery of packages. Factors that may contribute to the overall cost of delivery include:

  • Failed deliveries: deliveries that fail at the first attempt, requiring reattempts, add significant costs
  • Urban deliveries add significant downtime: traffic, stoppages, densely packed deliveries, complex stress can all contribute to significant costs and productivity deceleration
  • Returns and refunds: on average, a staggering 20% of eCommerce orders are returned, adding significantly to the overall cost and complexity of order fulfilment.
  • More miles on complex routes: more delivery stops can rack up the complexity of the route and increase road miles, particularly if the plotted route is suboptimal in practice, requiring ad-hoc routes that may increase out-of-miles consumption

Businesses That Are Typically Affected by the Last-Mile Delivery Problem

Businesses that deliver tangible products directly to customers are commonly most adversely affected by the last-mile delivery problem, including:

  • Couriers and delivery partners
  • eCommerce businesses
  • Department stores
  • Direct-to-consumer retail
  • Florists
  • Food delivery services
  • Insurance companies
  • Pharmacists that offer delivery services
  • Restaurants offering delivery
  • Supermarket delivery services

Five Ways Technology Can Assist in Last-Mile Delivery

Customers are key, and a surefire way to increase customer satisfaction is via fast, reliable delivery: the caveat being that last-mile delivery, as established, is the most challenging aspect of the order fulfilment journey.

Fleet management platforms are hugely beneficial when you start to implement last-mile delivery optimisation changes. Such platforms can introduce various tools and advantages to your last-mile delivery strategy.

1. Automated, Real-Time, GPS-Based Route Planning: Cutting Delivery Times

Delivery routes will always provide challenges – traffic, detours, vehicle breakdowns, amongst others – so, real-time optimisation can alleviate many emergent difficulties.

Consider, too, that some routes will be scheduled that are multiple miles long but with only sporadic deliveries – such as in countryside areas. Modern software-based solutions can optimise delivery routes using analysis and algorithms which consider factors including vehicle capacity, traffic and expected delivery times to provide delivery drivers with real-time updates and alterations.

2. Save on Service Time and Automate Labour Tasks via Auto-Dispatch

Software-based route planning saves a considerable amount of time in comparison to manual strategy as routes are analysed and adapted in real-time, meaning management can focus their labour on other tasks and potentially decrease the number of drivers required.

3. Proof of Delivery

Technology can now update delivery statuses in real-time, via a digital signature or a photo of the package being delivered – expediting the internal delivery confirmation process, as well as updating the tracking for customers who may be away from their homes at the time of delivery.

4. Analytics and Reporting to Increase Accountability

Effective analytics and reporting can highlight process bottlenecks and internal shortcomings before such things snowball and become larger problems – allowing management to seek ways to implement improvements.

Statistics and reporting also allow businesses to clearly signpost milestones by setting targets and tracking the progress against KPIs.

5. Improve the Overall Customer Experience

Making transparent improvements to your process ensures more accountability is demonstrated to your customers and increases your overall communication with them. Implementing real-time tracking, customer surveys, chat support, driver contact and SMS notifications can put the customer’s mind at ease during the last-mile delivery process.

Seven Trends That Will Influence Last-Mile Delivery

Technology and industry innovations will continue to add efficiency to the challenge of last-mile mile delivery.

1. Smart Technologies

The length and breadth of the types of products available to purchase online expand every day, the one constant is that these products must then be delivered. As a result, fulfilment centres have adapted and renovated their warehouses to accommodate the variety of goods to be delivered, including refrigeration units, hydraulics lifts and the like.

2. Microwarehousing

As opposed to conducting business from one large, centralised warehouse, companies are now emulating the Amazon model of cutting delivery times by purchasing warehousing space that is dotted around varying locations to cut delivery times.

3. Automation, Drones and Robotics

Soon enough, labour-intensive tasks will be taken up by mechanical technology solutions, similar to the manufacturing industry.

4. Carrying Upselling

Using consumer behavioural data, companies have been able to incorporate delivery driver upselling of similar/complementary products right at the point of delivery.

5. Expedited Order Fulfillment

Customers have now been conditioned to expect rapid delivery and this is a trend that will continue to influence the need for innovation in the last-mile delivery process.

6. In-House Delivery

Companies are seeking to cut out the middle-man and employ their own fleet of delivery drivers and vehicles, meaning they save long-term costs and have more control over the last-mile delivery stage of order fulfilment.

7. Tracking Improvements

Last-mile delivery is frustrating for the customer and the retailer, particularly when packages go undelivered or get lost. Many software solutions now provide real-time tracking of packages to monitor precisely where packages are and the distance from the final destination.

In Closing

Last-mile delivery should not be trivialised by any eCommerce retailer that aims to maintain marketplace sustainability; an open-minded approach to order fulfilment and the internal process should be taken into account so as to increase the probability of customer satisfaction.

If last-mile delivery and the overall pressures related to storage and order fulfilment are creating additional complexity to the day-to-day running of your business, consider partnering with Breakwells logistical and delivery support.

Contact us today.

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