Last Mile Delivery: A Comprehensive Guide

Last mile delivery refers to the final leg of the delivery process, where goods are transported from a transportation hub to the final destination. As e-commerce continues to grow, last mile delivery has become increasingly important for retailers looking to provide fast and convenient delivery to customers.

However, last mile delivery also comes with complex logistical challenges that retailers must overcome.

This comprehensive guide will provide an in-depth look at what last mile delivery is, why it’s important, the challenges involved, and strategies for optimizing last mile operations.

What is Last Mile Delivery?

The last mile delivery process begins when an item arrives at a transportation hub near the final destination. This could be a store, distribution center, or sorting facility. From there, the item must be delivered over the “last mile” to the buyer’s doorstep. The last mile is the most expensive, least efficient, and most complicated leg of the delivery journey. Despite the challenges, last mile delivery is a critical part of the supply chain. Retailers must find ways to get purchased products into the hands of buyers as quickly and affordably as possible.

Last mile delivery includes business-to-consumer (B2C) as well as business-to-business (B2B) deliveries. In the age of e-commerce, last mile has become synonymous with the home delivery of online purchases. However, last mile also applies to B2B deliveries like parts, supplies, equipment, and products between businesses. As companies increasingly rely on just-in-time inventory management, last mile performance directly impacts operations.

Why Is Last Mile Delivery Important?

Last mile delivery is the final step in the fulfillment process and the moment of truth for customers. Even if all other parts of the supply chain are running smoothly, a poor last mile experience can sour the customer’s perception of a retailer. On the other hand, retailers who excel at last mile delivery can gain big advantages over their competition. Here are some of the key reasons last mile delivery performance matters:

• Customer satisfaction – Fast, free, and convenient delivery options are highly valued by buyers. Meeting last mile delivery expectations is key for retaining happy customers.
• Customer retention – Approximately 20% of customers will abandon their cart due to unsatisfactory delivery options or costs. Effective last mile delivery helps turn shoppers into loyal repeat purchasers.
• Competitive advantage – Leading retailers like Amazon are setting high bars for delivery speed and convenience. Meeting and exceeding customer expectations with last mile delivery can be a competitive differentiator.
• Profitability – Last mile delivery is expensive. Optimizing routes, balancing speed and cost, and finding efficiencies can help improve margins on the last mile.
• Sustainability – With rising concerns over emissions, optimizing last mile delivery also presents an opportunity for retailers to improve their carbon footprint.
• Flexibility – Customers want delivery options that match their schedule and location. Nailing last mile delivery means providing flexible delivery windows, pickup points, and return processes.

With the stakes high for customer satisfaction and retention, last mile excellence is mandatory for retailers. Failing to prioritize last mile delivery can quickly lead to losing customers and market share.

Challenges of Last Mile Delivery

While vital for modern retail, last mile delivery also comes with a unique set of challenges, including:

Inefficient Routes

Delivery routes must be carefully planned to avoid wasting time and fuel. However, optimal route planning becomes extremely difficult with hundreds of daily addresses. Retailers struggle to balance efficiency with flexibility as customers request narrow delivery windows.

Costs

The last mile accounts for over 50% of total shipping costs. With complex route planning, frequent stops, and the occasional return trip for missed deliveries, last mile legs are expensive to operate. The challenge is keeping costs down while offering free or low-cost delivery options to maintain customer satisfaction.

Logistics

Coordinating pickups, sorting inventory, planning routes, managing fleets, and making deliveries is a logistical puzzle. Retailers must smoothly integrate their distribution centers and stores with their last mile delivery operations. Any breakdown leads to delays and exceptions that must be handled.

Tracking and Visibility

Customers expect real-time tracking and visibility into their order status. Retailers must implement systems to provide updates on last mile delivery status while items are in transit. Lack of updates leads to anxious customers and call center inquiries.

Exceptions and Missed Deliveries

Even with perfect planning, exceptions like invalid addresses and missed delivery attempts routinely occur. This requires additional time and costs to retry delivery or reroute misdirected packages. Retailers need efficient exception handling to resolve issues quickly.

Returns and Reverse Logistics

Last mile delivery also includes reverse logistics to handle returns, warranty claims, or service needs. Managing the inbound flow of items adds further complexity to daily delivery routes and schedules.

Capacity and Scalability

Retailers may struggle to scale last mile operations to match spikes in demand like holiday peaks. Delivery capacity becomes constrained, leading to longer quoted lead times that can negatively impact conversion and abandonment rates.

While daunting, these challenges are not insurmountable. Retailers are testing innovative solutions to optimize efficiency, speed, and costs within the last mile.

Last Mile Delivery Models

There are four primary models for handling last mile delivery:

Retailer Delivery

The retailer utilizes its own fleet and personnel to handle last mile delivery. This provides full control and oversight of the last mile process. However, operating their own delivery also comes with large capital and labor costs associated with vehicles, drivers, fuel, etc. Major retailers like Walmart and Target leverage their existing store footprint to offer last mile delivery to customers from local outlets.

Third-Party Courier

Retailers can outsource last mile delivery to third-party logistics providers (3PLs) that specialize in local delivery services. Popular examples include UPS, FedEx, DHL, and regional carriers. 3PLs already have the infrastructure, fleet, drivers, and routing knowledge to efficiently handle last mile legs. Retailers avoid operational costs but sacrifice some control over the last mile experience.

Crowdsourced Delivery

Emerging crowdsourced delivery providers like UberRush and Postmates tap into the sharing economy to provide on-demand delivery services. They leverage part-time and temporary couriers who sign up for delivery gigs. Crowdsourcing offers scalable capacity for handling last mile volume spikes. However, inconsistent performance and limited oversight are downsides to consider.

Autonomous Delivery

Autonomous vehicles and drones represent the future of last mile delivery. Retailers like Amazon and UPS are piloting autonomous ground vehicles and drones that can reduce costs and environmental impact. While still in early development, autonomous last mile shows long-term promise once technology and regulations advance further.

Each model has pros and cons, and many leading retailers utilize a combination of options. There is no universally superior approach, and retailers will select last mile models that align with their specific operational capabilities.

Last Mile Delivery Optimization Strategies

Retailers employ a combination of strategies to improve efficiency and reduce costs across their last mile operations:

Leverage Stores for Final Mile

Local stores can double as final mile hubs using options like ship-from-store and curbside pickup. Stores located closer to customers help shorten delivery routes and provide more flexible pickup options. Customers receive faster delivery while retailers reduce the distance each order must travel within the last mile.

Focus on Density

Planning routes and batches for higher delivery density improves efficiency. Combining multiple orders and addresses within a concentrated area minimizes miles driven. Retailers configure their delivery zones, networks, and routes to increase drop density for last mile legs.

Refine Cutoff Times

Order cutoffs impact how many deliveries must go out each day. Pushing cutoff times earlier in the day allows more orders to qualify for next-day delivery. This improves route optimization and capacity usage while reducing miles driven across daily routes.

Implement Real-Time Tracking

Detailed tracking throughout the last mile improves efficiency in case of exceptions. Drivers can communicate issues immediately such as invalid addresses and customers can reschedule missed deliveries. Tracking data also provides retailers visibility into driver performance and frequent problem addresses.

Automate Scheduling and Routing

Advanced algorithms and software optimize routing efficiency down to the turn-by-turn directions for drivers. Automated scheduling ensures balanced capacity and workloads across delivery windows. Together, intelligent scheduling and routing software reduce miles driven while increasing stops per route.

Consider Seasonality

Retailers adjust last mile staffing, assets, and partners to accommodate seasonal order volume. Additional capacity cushions against the risk of constrained last mile operations during peak periods like holidays and school openings, which helps retailers avoid delivery delays..

Pilot Innovative Delivery Options

New delivery innovations can help retailers address last mile challenges in their specific markets. Piloting approaches like crowdsourced couriers, automated vehicles, in-vehicle package lockers, and drone delivery provide insight into future optimization opportunities.

Getting the last mile right combines detailed logistics planning, process refinement, and customer experience focus. Retailers must diligently work on last mile delivery to turn the “final frontier” into a competitive advantage.

Conclusion

The last mile stage of delivery presents a complex mix of challenges that retailers must overcome to satisfy customer expectations. Precise coordination and route optimization are required to balance speed, cost, and flexibility. While difficult, retailers can unlock substantial value by perfecting last mile delivery performance.

Consumers increasingly select retailers based on delivery capability. By leveraging the strategies outlined in this guide, retailers can excel at last mile delivery to gain market share, improve profitability, and cultivate loyalty. In the world of e-commerce, the last mile determines who reaches the customer first. Retailers must prioritize optimizing their final mile operations to maintain competitiveness and drive growth.