Last Mile Deliveries take place within the last or final mile of the supply chain. These are deliveries direct to consumers, whether it’s two miles or 20 miles, it’s all Last Mile.
Last Mile Delivery has gained notoriety in recent years. In 2020, in the U.S. alone, more than $9 billion of venture capital was poured into startups focused on Last Mile Delivery.
Crunchbase currently lists more than 400 organizations trying to address the issues that come with leaving a package on consumers’ doorstep.
The reason? Total e-commerce sales for 2021 were estimated at $870.8 billion, according to the U.S. Department of Commerce – an increase of 14.2% from 2020 and a 45% increase from 2019. And yet, e-commerce sales in 2021 accounted for only 13.2% of total sales.
The last mile logistics pie is growing rapidly. But it poses one of the more challenging logistics puzzles to solve.
Why is Last Mile Delivery So Challenging?
Last Mile Delivery is hard to get right. Home deliveries are labour and fuel-intensive and they’re difficult to predict. But this final stage in the delivery process significantly impacts customer satisfaction and customer loyalty.
Challenges of Last Mile Delivery:
- Predictability and Flexibility
- Customer Satisfaction
Last Mile Delivery Can Cost… a Lot
As the number of final mile deliveries grows, shippers’ expenses will balloon. According to Capgemini, the last mile accounts for 41% of the total supply chain costs.
Scaling your fleet of drivers and equipment – not to mention skyrocketing gas prices – create high fixed costs that can erode profitability. Route and labour optimisation become paramount for a cost-effective Last Mile Delivery Strategy.
What’s more, with e-commerce comes a greater risk of shipment returns. As CNBC reported, retail returns jumped to an average of 16.6% in 2021 versus 10.6% a year ago, according to a survey by the National Retail Federation and Appriss Retail.
That adds up to more than $761 billion of merchandise that retailers expect will wind up back at stores and warehouses. Even worse, if the return is an item that’s now out of season, like a winter coat finding its way back in Spring, it is unlikely to be profitable.
Predictability and Flexibility
According to a report from UPS Capital, “69% – the vast majority of shoppers – are willing to pay for the ability to personalise, control and up-level their shipping experience. They are looking for new services from merchants including guaranteed delivery timelines, real-time tracking, replacement of lost/stolen/damaged packages, and pre-order or special deal opportunities.”
In other words, shoppers want to know with certainty what they’re getting, when they’re getting it and how it’s getting there.
For shippers and supply chain leaders, these expectations are in direct conflict with the shipper’s other desire for flexibility — the ability to put the package on a different truck or deliver at a different time of day if conditions have changed and it’s more efficient to do so.
Managing the increasing expectations and demands of shoppers can create all sorts of chaos for Last Mile Delivery.
Customer Satisfaction and Loyalty
A bad delivery experience can cause customers to jump ship. Perfecting the delivery experience can seem like an impossible task but shippers who can master Last Mile Delivery and meet consumers’ increasingly difficult demands – expectations like deliveries arriving in two days or less – will satisfy and win loyal customers.
According to a survey by DispatchTrack and reported by FreightWaves, six-in-10 consumers said they were unlikely to purchase from a retailer again when a previous order misses the scheduled delivery window. Yet 44% said their item was delivered outside the scheduled delivery window, with 52% of those saying the item arrived late and 35% early.
Meanwhile, sustainability and purpose-driven brands aligned with customer values will also win hearts and minds. The IBM Institute for Business Value (IBV), in association with the National Retail Federation, conducted a global survey of more than 19,000 respondents across 28 countries and found that those who choose products and brands based on how well they align to their values represent 44% of consumers.
As we’ve shared before, the pandemic largely shattered consumers’ loyalties to retailers and brands. Forty-four percent of consumers say their habits have changed with the retailers they shop at and the brands they buy. This presents an enormous opportunity to gain share and invest for customer retention.
Optimising Last Mile Delivery empowers shippers to enhance their delivery experience, delight their customers, and retain a base of loyal customers.
How Can You Improve Last Mile Deliveries?
So where can shippers start? How can they overcome the challenges of the final mile?
While a handful of the 400+ last-mile companies show promise of solving these problems, it’s not sufficient enough to simply outsource the solution.
Here are some practical steps that can be taken today to tackle the final mile.
How to Optimise Last Mile Deliveries:
- Assess Your Network
- Improve Collaboration
- Implement Real-Time Visibility
- Assess Your Network
The pendulum is shifting back in favour of shippers. With more available capacity, rationalising your network to work with the providers that make the right impact is wise.
Commodity-specific providers can help make a difference in your Last Mile Delivery customer experience, especially with white glove and “deluxe” capabilities.
Developing a universal provider scorecard that considers the cost-to-quality ratio can help you fine tune your delivery experience, reduce costs and improve customer retention.
Identifying how your network will handle your plans for micro-fulfillment and omni-channel distribution is also critical.
The pandemic forced the industry to adopt truly revolutionary channels for fulfillment. Now, with more retail space available for localised fulfillment models, there’s a precedent for moving inventory deeper into population centres, reducing your time-to-consumer and improving your ability to compete with Last Mile Delivery juggernauts.
Improve Collaboration Across Your Supply Chain
Collaboration both within and among supply chain organisations can help companies make significant strides in eliminating waste, maximising profits and promoting sustainability.
Poor communication is often one of the biggest hurdles to effective supply chain collaboration.
The logistics industry has a long history of decentralisation – proprietary workflows, processes and systems that are largely unknown or unintelligible to those outside an organisation or department.
Believe it or not, many companies still operate out of spreadsheets and emails to manage their supply chain!
These workflow chokepoints can be overcome by implementing dedicated, shared systems that enable efficient communication with supply chain networks, partners and outside stakeholders.
Data is critical to any effective supply chain collaboration.
For organisations of all shapes and sizes, good data is the foundation of strong decision-making. It facilitates efficient performance not only among individual team members but across entire organisations.
Without good data, the best anyone can do is make an educated guesses – and for shippers that need to succeed, that’s simply not good enough.
Start improving collaboration across your supply chain to not only optimise for last mile, but optimise your entire delivery process.
Implement Real-Time Visibility
Optimising Last Mile Delivery and improving your supply chain starts with better data, better collaboration, and better network enablement.
Supply chain visibility platforms are a good place to start to improve across the board.
The last mile is hard and expensive to perfect. Retailers and logistics service providers (LSPs) who gain efficiencies elsewhere in their supply chain – like optimising labour, inventory, and transportation – can make the investments necessary to conquer the final mile.
What Can Real-Time Visibility Do?
Imagine empowering employees to be more productive by eliminating manual processes and leveraging real-time ETAs to ensure people are in the right place at the right time.
Or having more accurate cycle time calculations and tighter inbound shipping tolerances that enable you to operate with less excess safety stock.
Or gaining the power to quickly adapt to rapidly changing consumer demand by knowing where popular products are in their journeys from plant to warehouse.
This kind of supply chain agility requires real-time visibility across all modes, including inbound visibility into vendor-managed shipments, and the ability to facilitate handoffs between modes and legs.
But visibility is not a one-size-fits-all approach — each shipper or LSP has unique operating processes, suppliers and carrier networks. An interoperable real-time visibility platform is key.
Real-Time Visibility and Last Mile Deliveries
It’s a tough journey to efficiently reach a consumer’s doorstep, but leveraging real-time supply chain visibility to optimise your network, collaborate, and proactively communicate can make the ride much smoother and cost-effective. Plus, a Real-Time Visibility Solution that integrates with last mile software gives shippers and customers visibility across the supply chain – from the manufacturer to the front door.
Author: Mark Delaney VP, Industry Strategy, Retail & CPG at FourKites