Last-mile delivery: What is it and how can you be the best at it?
Global shipping volume is expected to reach 200 billion parcels by 2025, with both eCommerce and global trade continuing on an upward growth trajectory. Facilitating the delivery of this ever-increasing volume of packages will not be easy, but it is achievable: Success or failure will largely depend on how businesses manage the final stage of the delivery journey - the so-called last-mile.
What is last-mile delivery?
Last-mile delivery is usually defined as the movement of goods from a transportation hub to the final delivery destination. Typically, this final destination is an individual’s home but B2B deliveries also occur.
Although any package will have gone through various stages within the supply chain, the last-mile is often considered the most important (and challenging) step of the journey. What’s more, given how essential supply chain management is to so many industries, businesses must get last-mile delivery right. Retail, manufacturing, pharmaceuticals, and many other sectors all depend on the last-mile to ensure their products are delivered in good time and are of the required quality.
What are the main challenges?
Although the importance of last-mile delivery cannot be disputed, many businesses continue to struggle in this area. The challenges surrounding last-mile delivery are numerous and not easily solved. Here are a few of the main ones:
1. Route optimization
Many last-mile delivery challenges actually stem from the fact that it is very different from other parts of the supply chain. While component parts generally have to make a single journey, say, from raw material producers to a manufacturer, last-mile deliveries concern multiple destinations, varying timeframes, and the possibility of missed shipments. All this introduces complexities into the last-mile delivery process that make it difficult for businesses to plan the most efficient, optimal route for their delivery journeys.
2. Hard to reach places
Last-mile delivery in city centers and high-density areas still presents challenges, of course, but these are likely to be magnified significantly when delivering to more isolated locations. Communication technology may be less well-developed and location systems are less frequently updated. Plus, the cost of the last-mile can be significantly higher per package because of the greater distances involved.
One of the major difficulties around last-mile delivery is its unpredictability. Unusually high levels of congestion can increase delivery times or human error earlier on in the supply chain could lead to mislabelled goods. And after all that, the customer may simply not be at home! A lack of visibility into the delivery process often exacerbates this problem and means that neither businesses nor customers receive real-time information regarding a package’s location.
4. Time pressure
Customers have higher expectations regarding their deliveries than ever before and, at the same time, competition between third-party delivery firms and eCommerce brands is ramping up. The rise of the ‘on-demand economy’ means that customers want restaurant-quality meals, books, groceries, and a variety of other goods delivered according to a lightning-fast timeframe. When these timeframes are not adhered to, businesses may find customers seeking out alternative suppliers and the reputational damage involved can be difficult to recover from.
Reed more about delivery speed in the artikel: how to make your delivery times faster
What are the major costs involved with last-mile delivery?
All of the above challenges add up to a single, bigger problem for business: the cost of last-mile delivery. Estimates indicate that last-mile delivery is the single biggest expense within an organization’s supply chain, contributing more than 40% of the total cost. Here are some of the major contributors to this expense:
Labor: The salaries paid to delivery drivers contribute significantly to the overall cost of last-mile delivery. Although the use of freelancers by some third-party logistics firms has been successful in driving this cost down, it remains difficult to reduce this further.
Packaging equipment: Packages must receive adequate protection while in transit to ensure that they reach the consumer in the desired condition. This adds up to an extra expense, both in terms of the actual materials used for packaging and increased weight. Depending on the goods being shipped, businesses may also require refrigeration and other types of specialized packaging.
Fuel: Although last-mile deliveries are getting shorter on average, the distance involved still generally sits between six and nine miles. Collectively, across the hundreds and thousands of deliveries undertaken each day, this can add up to a sizeable fuel bill. The rise of electric vehicles is changing this. This also contributes to lowering the carbon footprint.
Software: Most organizations involved in last-mile delivery have invested in some form of technology to help them manage their deliveries. Of course, this should lead to lower costs in the long term but still represents an investment that needs to be evaluated.
Inefficiencies: Every delivery that takes longer than expected, each package that gets returned, and every dispatch error contributes to an unexpected last-mile delivery cost.
Reed more about saving costs and achieve last-mile delivery at the same time in this article: Save costs & achieve last-mile delivery
How technology is revolutionizing the last-mile
Although the challenges surrounding last-mile delivery are many, technology is stepping up and rapidly changing this final stage of a product’s journey. Data analytics, product tracking, and consumer apps are among the solutions being pioneered by many logistics companies. These smart technologies are providing businesses with enhanced visibility into the last-mile, ensuring consumers receive products faster, more reliably, and at a lower cost.
Reed more about the future challenges around last-mile in this article: Last-mile delivery trends
How Local Eyes fits into the last-mile
At Local Eyes, we offer a location platform that leverages a range of data sources, including carrier data, GPS, and IoT sensors, to cut inefficiencies from your last-mile journey. Data holds the key to meeting the many challenges of the last-mile, whether they involve route optimization, faster fulfillment, or lowering costs.
As new innovations continue to be developed, the future of last-mile delivery will surely involve plenty of twists and turns. However, our high precision, real-time mapping and location software means that you won’t be unprepared for whatever comes next.