Last mile delivery has become one of the most important concepts on the frequently changing and emerging eCommerce stage. “Traditional” supply chain management is being turned on its head by consumer demands for more options, and increased expectations around the last mile experience.
Understanding last mile delivery and its role in effect on customer satisfaction is critical to every business today, from global enterprise to smaller e-commerce sellers. Companies that are looking further down the road, are already identifying and implementing last mile logistics solutions to help them compete with the giants of eCommerce.
In this guide, we’ll discuss the latest trends in last mile delivery, how they are impacting businesses, and the capabilities you need to create a competitive customer experience.
Why is last mile delivery important?
eCommerce has become an increasingly larger percent of retail sales, causing eCommerce fulfillment in general, and last mile delivery in particular, to become a mission-critical arena for brands and the logistics providers who deliver for them.
The COVID 19 pandemic threw eCommerce ages forward with almost no advanced notice. eCommerce growth expected to take the next 5-10 years occurred within 6-12 months, bringing with it a major hurdle for online sellers: the eCommerce fulfillment process.
Spurred on by rising consumer expectations for faster delivery and more convenient options, major players in the industry are setting new expectations for fulfillment speed, cost and convenience. This increased competition means that retailers and marketplaces need to step up and improve their logistics operations and last mile delivery services. However, operational costs can be prohibitive, and shipping companies are struggling to keep up with record-breaking demand. Solving these challenges will to a large degree define whether retailers and other eCommerce players will successfully scale their online sales.
Major trends in last mile delivery
Home delivery is growing rapidly
With the boom in eCommerce, home deliveries are increasing rapidly and presenting new and unique challenges for last mile logistics providers. Shipping companies must keep up with increasing consumer demands and meet high expectations in order to keep both retailers and parcel recipients satisfied with services.
Contactless and white glove delivery
Convenience and safety are two of the major areas that retailers must emphasize in their last mile delivery process today, which is why many companies have started offering premium services, such as white glove delivery. This is usually available for high-ticket items or physically large items and can include delivery and installation or assembly in the correct room of your house.
Contactless delivery – Many customers prefer to have contactless fulfillment options. Offering to drop off packages at the customer’s doorstep and other contactless delivery processes may boost brand loyalty and be a new customer magnet for those looking for this option.
What is last mile delivery, and how it works
Last mile delivery, also known as final mile delivery, is the last leg of the supply chain – the handoff between the business and the end customer.
There are five main steps to the primary last mile delivery flow:
- Online orders are processed through a centralized system. This gives both the sender and the recipient the ability to track and understand where the order is on the supply chain.
- The order makes its way and arrives at the transportation hub.
- Packages are dispatched to a specific fleet or vehicle, which is assigned a route. This process can be automated (in the case of on demand delivery), manual, or a combination of the two.
- Orders are scanned when leaving the transportation hub in order to keep the system – and all stakeholders – updated along the last mile.
- The package arrives at the final delivery destination and the delivery attempt is confirmed.
Types of last mile delivery
There are two main types of last mile delivery: scheduled and on-demand.
Scheduled is when a customer places an order to be delivered the next day, two days later or even a week later. On-demand delivery is when an order must be delivered the same day or even ASAP (such as food and restaurant delivery).
In last mile delivery, customer experience is everything
eCommerce competition is vast and constantly expanding. To maintain customer loyalty, brands and last mile logistics providers must invest in an exceptional delivery experience. In particular, same day delivery has become a “must” in order to keep customer loyalty high.
Take Amazon, for example. In addition to one-day shipping, the eCommerce behemoth maintained its competitive advantage by coming out with 2-hour delivery on certain products for Prime subscribers, pushing the boundaries of fast delivery.
We already know that customers love brands who offer same day delivery. In fact, 57% of customers say that same day delivery will make them more loyal to a specific brand. So why isn’t everyone doing it?
The answer is simple: costs. Last mile logistics and fast delivery are so expensive, that Amazon decided it would be more cost-effective to build its own supply chain.
The exact order fulfillment models that consumers demand are also the most costly for retailers and their logistics partners to implement.
Running the last mile delivery process through both internal and external fleets
Companies which need to deliver goods use either an ‘owned’ fleet, third party delivery providers, or a combination of the two.
Internal fleets or ‘owned’ fleets are run and are dispatched internally within a company. Internal fleets have an advantage of being easily accessible and flexible to use.
External fleets refer to third party delivery providers, including crowdsourced fleets, 3PL logistics companies, and shipping carriers. Today companies often turn to third party carriers when their own fleet can’t handle the last mile volume anymore, or if they don’t want the burden of managing the process themselves.
The challenges of last mile logistics
As the shift from brick and mortar to online retail continues, new customer expectations regarding last mile fulfillment speed, convenience and costs have strengthened existing challenges for online retailers and logistics providers.
These logistics challenges fall into four main categories:
One Incisive report showed that 84% of surveyed shoppers ranked speed of pickup for “buy online pickup in-store” or curbside orders to be very important. In an American Express and Forrester survey, 57% of respondents stated that same-day shipping would make them more loyal to a customer’s brand.
Still, speed is not as critical of an issue today as it was in the past. Safety and convenience have taken the lead as top priorities for customers. Price, as always, is another major consideration. Many customers prefer to wait another day for free shipping rather than pay 5 or 10 dollars for same-day shipping. By offering flexible choices, customers are able to choose if speed, price or other considerations are their priority.
Businesses may have an advantage by delivering faster as this will reduce their cost to deliver and, as a byproduct, their shipping prices. Also, the faster that orders get delivered, the sooner capacity is opened up, enabling more deliveries with the same amount of resources.
Last mile delivery anxiety is the stress consignees feel when they don’t know where their order is, or when it is arriving – and it’s become a serious concern for brands and ecommerce sellers.
In the era of on-demand everything, tracking codes are no longer enough. Shippers and end customers want and expect full, real time tracking with their order: to see where the driver is at any given moment and exactly when he or she will arrive.
Customers today expect fast delivery that requires efficient last mile logistics processes. One method of increasing efficiency is to make sure that vehicles maximize load capacity. Take, for example, a mattress company with an order to ship 20 mattresses, but a truck which can only manage 5 mattresses at a time. The driver has to perform several runs back and forth between warehouse and end location to complete a single order. The cost of gas is greater than if a more appropriate vehicle had been assigned to that order. This is an example of an inefficient last mile process.
This inefficiency costs both logistics companies and retailers large sums of money. The same goes for dispatchers who manually plan routes, the call centers that have to deal with unhappy or confused customers and more. As soon as the process becomes efficient, everybody wins.
For both retailers and logistics companies, efficiency is also critical to increasing order fulfillment capacity. When lacking efficiency, large order volumes can cause your services to veer off schedule and lead to late or failed deliveries and annoyed customers.
This is where technology can make a difference. Innovative logistics management software allows retailers to automate traditionally manual processes: from deciding where to fulfill orders from, to dispatching orders to different fleets or drivers across multiple geographic locations based on multiple variables.
Managing a last mile delivery service provider
Today, 3 out of 4 retailers expect to work with third party fleets, often in combination with an in-house fleet. Being able to manage drivers from third party sources on the same dashboard and through the same system as your own fleet is crucial for scaling last mile delivery operations.
When planning order fulfillment, evaluating and choosing the best last mile carrier or 3PL for your business is of the utmost importance . At the end of the day, the carrier is the face of your brand when it finally meets your customer. It is important to evaluate a last mile delivery service provider based on your specific needs, and have access to operational and commerce performance in order to effectively compare logistics providers.
On demand vs. scheduled deliveries
Efficiency also means different things for on demand and scheduled deliveries:
Planned deliveries – Planned deliveries typically fit a highly specialized cadence. For example, one type of planned delivery might require that any orders for next-day delivery be placed by noon. Dispatchers would review the next day’s deliveries at noon, often with the help of automated route optimization software. There are numerous variables to be taken into account, including driver ratings, driver certifications (e.g., licensed for cable installation), inventory availability, transit time, parking availability, time-on-site, vehicle type and vehicle capacity. To take more variables into account requires a dedicated technology.
Whereas manual routing typically takes dispatchers a few hours, an intelligent route planner app can provide a fully optimized route within minutes. Many dispatchers will then further optimize these routes based on their personal knowledge of the business, the drivers and the local geography. When drivers arrive the next morning, they are given their runs so they can begin their day’s work.
Same day delivery – on demand delivery comes with its own set of problems to tackle, revolving mostly around lack of time and the costs involved.
- Lack of planning: with ASAP orders, dispatching and mapping routes must be done automatically, otherwise it is essentially impossible to optimize for speed and cost.
- Managing customer expectations: There’s no time for customers to make changes such as delivery location or even a change in the order.
- Costs: Sending out a delivery to one person is typically not highly cost-effective. You don’t have time to figure out what goes in each vehicle, and how to organize to get each delivery out and to its destination in the shortest amount of time possible and with the smallest use of resources, unless you are digitized and automated.
Dealing with exceptions
Every on-demand fulfillment model needs to include the ability to efficiently manage delivery exceptions, such as:
- An order that includes an out-of-stock item
- An order is not staged on time, so it is not ready when the truck is due to leave
- A customer requests a change in the delivery time or address
- A previous delivery, particularly a service delivery, cannot be completed on time, delaying the next service appointment
- A failed or missed delivery
- The customer rejects part of the order due to missing or faulty products
Each of these issues can have an impact on every other function in the last mile delivery process, as well as on the customer.
Driver efficiency and churn
Investing in optimized routes and other efficiency tech is worthless if there is no compliance from the drivers. For this reason (among others), the ability to track where all drivers are at any given time is tied with greater operational efficiency. A centralized system that tracks driver location in real time helps businesses keep track of their drivers, understand issues in performance, and see whether their tech solutions are being utilized.
Logistics providers can also tackle driver churn through a mobile app for drivers that helps them manage their routes and all the requirements per order. This makes the driver’s work easier, and also allows them to complete more orders per run.
According to some estimates, 28% of the total delivery cost to a business comes from the last-mile. Too often, companies pass these costs on to the customer. Combine the issue of cost with the heightened expectations for same day or on-demand delivery, and you have a recipe for strain on budgets and logistics providers.
Additionally, retailers often find their last mile delivery costs soaring when they haven’t properly planned for inconsistent demand – for example, during peak seasons or peak times of day. All of this makes it challenging to run delivery profitably.
Owning the entire supply chain is not a viable option for most businesses, and there is no one solution to cut costs for last mile deliveries. However, proper planning, and optimizing your supply chain through technology can go a long way to reducing some of these expenses.
The bottom line: efficient operations is a must for meeting demand
Growing demand should be a blessing for any business. But while the rise in eCommerce is a welcome transition for many online sellers, scaling up delivery services efficiently and quickly can be daunting.
Without an efficient supply chain and operations system in place, businesses will find themselves wasting money and resources in trying to reach new demand. In terms of logistics, hiring more drivers and contracting new fleets may also be wasteful if done without a plan and to ensure maximum efficiency.
Ship from store
With store foot traffic in decline, now is the time for retailers to restructure some stores as MFCs – micro fulfillment centers – effectively ‘dark’ stores’. When operated efficiently, these stores turn into hyperlocal fulfillment centers for multiple fulfillment models, including curbside or click and collect, and in store returns. Turning stores into MFCs is often a pivotal part of guaranteeing same-day fulfillment in urban areas, as service providers can pick up orders and deliver them within hours.
If retailers want to ship from retail stores as well as from distribution centers, they will need to rethink everything from the layout of the staging area, to picking and order prep, and how these steps will impact their store staff’s efficiency and performance across other tasks. Logistics providers may have to restructure their operations in order to offer ship-from-store services in urban areas.
Last mile delivery software: a competitive advantage
Manual operations are simply not an option anymore for retailers and logistics providers with large order volumes. Today’s innovative tech solutions will allow any company to scale up and optimize their last mile logistics.
Last mile experience – The more innovative brands today use technology to create unique, convenient and automated delivery experiences that help them stay competitive in a saturated market.
Backend flexibility and integrations – good delivery management software will provide the flexibility that dispatchers and operational teams need, including a variety of dispatching models to support varying levels of manual and automated dispatch, based on specific operational requirements and business preferences. All dispatching solutions should include real time visibility across the entire last mile ecosystem, including third party logistics providers.
Last mile solutions that match your business logic – When looking at various software solutions, verify that they will enable you to achieve the necessary efficiencies across your entire ecosystem—from operations to drivers, and finally to end customers—with the core of business focused on the last mile.
Technology makes visibility easy and accurate
Until recently, this stage of the delivery chain was a black hole: Drivers would leave the warehouse or other dispatching center with deliveries on their truck. The status of these deliveries would then remain unknown to both companies and customers until the driver returned to report on it. Today, there are several cloud-based platforms that are changing the status quo for last mile visibility, efficiency and costs.
This includes real time tracking that makes coordination between inventory management systems, warehouses, sorting centers, fulfillment centers, stores and delivery providers easier and smoother.
Key factors in last mile success
To orchestrate cost-effective last mile delivery , it is important to identify which delivery models will best serve your business needs – then use delivery and logistics management software to automate, optimize, and scale up your operations.
Operate both on demand and scheduled delivery
Some last mile software can plan both on-demand and scheduled routes, allowing dispatchers to spend their time on other important tasks. Route planning software takes a wide range of factors into account – including parcel size, vehicle size, route, cost of drivers, promised delivery times and more – to create highly efficient, well-planned delivery routes.
These tight timeframes and complex operations require that every component of the last mile delivery process operates in perfect sync. For example, when items are picked from the retail store, every inventory item’s location must be precisely mapped, and these retail maps must be updated every time inventory is moved. Manual delivery routing and optimization, particularly for multi-stop deliveries, becomes exceptionally difficult with these tight timelines.
Another important consideration is data collection, quality and synchronization. Operating both on demand and scheduled last mile deliveries require that different teams in an organization operate as a streamlined, efficient assembly line. Everyone from dispatch, to staging teams, to the drivers, shippers and end customers must be kept in the loop with the right information at the right time.
Invest in fleet and driver efficiency
Driver efficiency must remain high to guarantee delivery times and meet customer expectations. Real time updates are crucial for providing visibility for dispatchers and decision-makers, as well as the end customers.
Using automated delivery flow management, drivers can onboard and deliver more easily and intuitively. This system allows additional speed and accuracy and gives drivers the ability to provide updates, collect proof of delivery, signatures, tips and more.
Having access to customized driver management tools allows drivers to accept, create or update orders in real time depending on specific items. Managers have access to tools that allow them to organize based on specific driver, team or fleet as well as tracking locations.
See: The Bringg Driver App – boost driver efficiency, safety and accuracy
Prioritize the Last Mile Experience
Providing the perfect customer experience depends on efficient, flexible delivery operations – which in turn are based on having the right infrastructure, technology and processes in place.
Last mile delivery software is a key factor in creating an exceptional experience for both brands and consumers, including providing automated notifications for customers from the moment the order is prepared, to when it is en route, to arrival at the final destination.
Send frequent updates and delivery notifications – WIZMI ( “where is my order”) calls from end customers puts a strain on customer service teams, call centers and other employees. This friction and doubt in the shipping process is one of the first things that should be solved through customer experience technology.
Creating a frictionless delivery process requires technology that enables open communication between the customer and the delivery person, as well as full visibility over their deliveries. Provide customers with updates on order progress at every stage, from the moment it has left the warehouse, distribution center or store, until the moment it arrives.
Customer feedback – Give your customers the opportunity to provide valuable feedback. They will feel satisfied that they can praise you for what you’ve done well or provide criticism or suggestions to improve on weaker points of your service. Addressing issues affecting customer satisfaction quickly is a major tool in creating brand loyalty.
Multiple delivery options – Brands that give the options of in-store pickup, same day delivery vs. longer but free delivery, delivery with or without assembly, etc. are able to target multiple types of customers at once and satisfy them all.
When it comes to delivery options, it is important to remember that one size doesn’t fit all. Some customers prefer to wait a bit longer for their delivery if that means a cheaper option or even a more environmentally friendly option. Others want the option to schedule the day their white glove order arrives. Others will want to order online and pick it up at a local locker or other location at their convenience.
Providing all of these options can be technologically difficult and requires the right tools and systems in place to guarantee that everything arrives on time, when and where the customer expects.
Turning to flexible delivery and fulfillment technology
Flexible technology gives businesses the ability to handle same day and scheduled deliveries under one eCommerce brand. This ‘hybrid’ model has become increasingly popular in recent years.
Every element of the delivery flow has to be orchestrated so that each stage in the relay will have the optimal amount of time and direction required to meet tight delivery timeframes without affecting quality or reliability. This level of planning and integration of last mile logistics is nearly impossible without technological support.
Technology also allows brands to provide different service plans and levels to different shippers. This flexibility allows brands to expand and contract their last mile delivery capacity, meeting high demand as needed.
The future of last mile delivery
The eCommerce landscape keeps growing, and logistics will continue to shift in order to accommodate it. To keep up with the market, eCommerce retailers and their logistics partners must adopt best practices and look to solutions that help them provide relevant delivery options and services to their customers, while improving efficiency at every step of the delivery flow. Today’s technological tools make maximizing the delivery process easier than ever, allowing brands and last mile logistics providers to maximize efficiency and profits.
While answering their main pain points today, retailers and logistics providers must also ensure they have the tools to manage whatever will be demanded of them in the future. This can be delivering to an alternative fulfillment destination, dispatching autonomous vehicles or a drone, or launching a new fulfillment service.
Bringg’s delivery and fulfillment cloud platform provides retailers and logistic providers with the technology to scale up and optimize their logistics operations. To learn more about solutions for the last mile delivery experience and optimizing efficiency, click here.
Frequently asked questions
What does last mile mean in shipping?
The last mile is the last phase of the delivery process, typically beginning when a customer places an order and ending when the customer receives the package or item. The last mile is critical for online brands, as it highly influences customer satisfaction.
How does last mile delivery work?
The last mile includes 5 steps:
- Centralized processing for online orders, giving both sides transparency into where the order is.
- The order goes to the transportation hub
- Packages go through the process of being assigned or dispatched to specific fleets and then specific routes.
- Packages leave the transportation hub and are scanned – to make sure that everyone involved is updated on the order status
- The package makes its way to the final destination
How important is last mile delivery?
Last mile delivery is of the utmost importance to any brand that is selling online. Even while working with external shipping companies, brands must guarantee the best last mile delivery process so that customers receive the best service possible.