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 delivery experience. The biggest change is that eCommerce has become an increasingly more valuable arena for brands and the logistics providers who deliver for them.
Today, eCommerce sales make up an increasingly larger percent of total retail sales. In Q3 of 2020, almost $1 in $5 spend was online, with almost 50% of U.S. shoppers doing most of their shopping online.
Understanding why last mile delivery is so critical to anyone selling a product, as is understanding its massive effect on customer satisfaction and loyalty, is critical to every business today, from global enterprise to smaller e-commerce sellers. Many companies simply do not realize how focal the last mile experience and last mile logistical operations are to their overall business. Those who are looking further down the road, are already looking for and implementing 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 making the mile even more challenging for businesses, and the capabilities you need to create competitive last mile delivery experiences that keep customers coming back for more.
The COVID 19 pandemic has changed almost every aspect of our world. eCommerce has been thrown ages forward with almost no advanced notice. The expected growth of eCommerce for the next 5-10 years occurred within 6-12 months, an exciting, yet often overwhelming process for businesses. One of the major hurdles that the eCommerce boom has brought to online sellers is the last mile delivery process.
The rules of the game have changed. 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 that competitors have to keep up with, or risk getting swallowed in the massive eCommerce sea. Last mile delivery costs can be prohibitive and shipping companies are struggling to keep up with record-breaking demand.
Competition is vast and constantly expanding. The explosion of the eCommerce world and the breakdown of borders makes customer experience and the emphasis on customer loyalty more critical now than ever.
Take Amazon. The eCommerce behemoth launched one-day delivery for Amazon Prime subscribers back in early 2019. By October of that year, however, Amazon found that the increase in shipping costs led to a decrease in profits.
This is the catch-22 of last mile delivery: Amazon is the perfect example of the unique last mile delivery challenges that eCommerce introduces to the shipping process:
Increased competition means that retailers and marketplaces like Amazon need to step up and offer better delivery costs (free, if possible) as well as convenient and fast last mile delivery and fulfillment options.
Amazon shakes the market time after time and constantly raises the bar for consumer expectations regarding shipping speed, cost, and convenience.
In addition to the one-day delivery change, Amazon also came out with 2-hour delivery on certain products for Prime subscribers. In highly competitive markets, same and next-day delivery have become a “must” in order to keep customer loyalty high. 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.
However, there is a flip side to the coin: costs. Last mile delivery is so expensive, that Amazon decided it would be more cost-effective to build its own supply chain.
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.
Convenience and safety are two of the major areas that retailers must emphasize in their last mile delivery process today. More and more companies are offering premium services including white glove services for their products. White glove delivery 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 is a concept that we may have never imagined before COVID-19. It is essential today that the delivery process takes into consideration that distance has become a part of our lives. Many customers prefer to have contactless delivery options in the last mile and as we’ve mentioned, customer experience is everything. Adding a contactless option (depending on the product) may boost brand loyalty and be a new customer magnet for those looking for this option.
Last mile delivery, also known as final mile delivery, is the last step in the supply chain – the handoff between the business and the end customer. Studies show that in the order fulfillment process, customers place a higher value on convenience than on anything else. This, coupled with the rising percent of overall sales stemming from online shopping, is putting pressure on enterprises to provide more convenient delivery options. However, providing the perfect customer experience depends on efficient, flexible delivery operations – which in turn are based on having the right infrastructure and processes in place.
There are five main steps to the primary last mile delivery flow:
There are additional steps, such as obtaining proof of delivery or customer feedback, but these do not apply to every organization.
There isn’t just one way to provide efficient last mile delivery. The process for many companies happens with internal, external or both types of fleets.
Internal fleets are those that are run and dispatched internally within a company. While this is the less popular option in most cases, it has been successful in the restaurant industry (although that is also changing today). Internal fleets have an advantage of being easily accessible and companies can change last mile delivery tactics and methods quickly to meet customer needs.
External fleets refer to third party delivery providers. This includes crowdsourced fleets, third party logistics (3PL) companies, and shipping carriers. Most brands today use third party providers in order to meet their last mile delivery demands as well as relying on the professionalism and experience such companies provide. Today companies with internal fleets often turn to shipping carriers when their own fleet can’t handle the last mile volume anymore, or if they don’t want the burden of managing the delivery process themselves.
As the shift from brick and mortar to online retail continues, the difficulties of managing last mile delivery grows. New customer expectations regarding time to delivery, overall delivery experience, and open communication have forced online retailers to invest in new technological solutions to manage their delivery operations.
There are many challenges when it comes to last mile delivery for eCommerce, but the critical ones fall into four categories:
Speed is a major factor in the last mile delivery process. 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 delivery would make them more loyal to a customer’s brand.
With that said, speed is not as critical of an issue today as it was in the past. With new safety concerns on the line, safety and convenience have taken the lead as top priorities along the last mile for customers. Price, as always, is also a major consideration. Many buyers would actually prefer to pick up orders when convenient if they want an order on the same day. This reminds eCommerce sellers why having multiple delivery and pick-up options is so important.
Many customers consider price vs. speed and may prefer to wait another day for free shipping rather than pay 5 or 10 dollars for two-hour delivery. 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, the prices for delivery. Also, the faster orders get delivered, the greater your delivery capacity. Both last mile pricing and delivery capacity are priorities for shippers and their end customers.
People have a basic drive to know, understand and anticipate. Businesses that deliver, and 3PLs in particular, realized that consumers have this basic need, and began generating tracking codes that allowed consumers to see where their delivery was (in theory).
In the era of on-demand everything, tracking codes are simply not enough anymore. Shippers and end customers want and expect full, real-time visibility over their order fulfillment. In particular, they want to see the last mile in its entirety: to see where the driver is at any given moment and exactly when he or she will arrive.
Uber helped encourage this new rise in expectations by allowing customers to see exactly where their driver was, in real time, with full visibility over where their driver is. Now, consumers are starting to expect this kind of visibility for all services, including last mile deliveries.
Visibility is important not only for the customer but also for logistics companies who need to provide such visibility to both shippers and consignees along the last mile.
Customers have higher expectations than ever today, and the desire to keep them satisfied has been the driving force for efficient last mile logistics. The world has become largely on-demand with customers expecting quick delivery that runs on efficient processes.
However, efficiency is about far more than delivering quickly. Efficiency improves the customer experience and lowers costs. One method of increasing efficiency is to make sure that delivery trucks and people are maximizing their loads when going out to make a last mile delivery.
Take, for example, a mattress company which needs to ship 20 mattresses to a certain location, but whose delivery truck 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, and the delivery capacity significantly lower, than if a more appropriate delivery vehicle had been assigned to that order. This is an example of an inefficient last mile process.
This inefficiency costs both delivery 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.
As for retailers, last mile efficiency relates to both customers and costs. When retailers are able to use the same people to pick delivery and pick-up orders off the shelves, pack them, etc. they will be able to offer a wider range of delivery services (same day, next day, curbside pickup, etc.) without the need to hire more staff. This means that customers benefit by having more options due to increased efficiency. Even if a retailer uses its own fleet of drivers, efficiency is a massive motivator to drive down costs.
For both retailers and logistics companies, efficiency is also critical to increasing last mile fulfillment capacity. When lacking efficiency, large order volumes can cause your services to veer off course. This will cause a late or failed delivery and upset customers, a situation that no one wants. Spending money on hiring more drivers and other resources to deal with the extra capacity will have a tremendous impact on your bottom line. Efficiency is critical in order to deal with exceptional order growth and turning it into higher revenue.
Implementing technology into your supply chain management an important technique for increasing efficiency in last mile delivery solutions. New innovative last mile delivery and fulfillment technology 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. .
Today, 3 out of 4 retailers expect to work with carriers for last mile delivery. Whether they are shipping companies, restaurants, or retailers, businesses who deliver often use a variety of third party delivery fleets. Many utilize third-party fleets as well as independent, crowdsourced drivers, 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 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. Evaluating right last mile carriers based on your specific needs is critical. Having access to statistics for companies can be an advantage, as you’ll be able to see the rate of on-time delivery and the reasons for missed deliveries or a windows.
Planned deliveries pose different challenges than on-demand delivery and 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. In this scenario, dispatchers will review the next day’s deliveries at noon, often with the help of automated route optimization software. There are numerous variables that dispatchers must take into account, including driver ratings, driver certifications (e.g., licensed for cable installation), the number of team members required, inventory availability, inventory location, transit time, parking availability, time-on-site, vehicle type and vehicle capacity. Obviously, a human being can only take a limited number of variables into account, which is why technology must be involved in the process.
Continuing the example above, an automated routing system would be able to efficiently match driver certifications and truck capacity with delivery requirements. This frees up dispatchers to deal with exceptions and situations where humans need to apply common sense in order to fine-tune the machine’s results.
Whereas manual routing typically takes dispatchers a few hours, automated routing technology 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, one and two-hour deliveries come with their own set of problems to tackle, revolving mostly around lack of time and last mile delivery costs involved.
For more insights on effectively managing on-demand, same-day last mile deliveries, click here.
Every on-demand last mile delivery model needs to include the ability to address contingencies and exceptions, such as:
Each of these issues can have an impact on every other function in the last mile delivery supply chain, as well as on the customer.
Successfully executing complex delivery flows using a planned / on-demand model requires that every flow be carefully orchestrated and, to a large extent, automated. While exceptions are inevitable, they should not stop or slow down the delivery progress. Common exceptions and the correct resolution flows should be pre-programmed into the order fulfillment flow and logic.
For example, if a picker finds that the grocer is out of a specific brand of potato chips, the picker app might be programmed to instruct the picker to substitute another similarly priced brand of potato chips. The picker app will note the substitution, and the customer’s order receipt will reflect this change. If the customer is dissatisfied with the substitution, the grocer will refund the money and note on the customer profile that the customer does not want substitutions.
In contrast, big and bulky appliance delivery flows will rarely need to deal with inventory issues or deploy a substitution flow. However, customers increasingly look for the ability to reschedule deliveries up to the day of delivery. In this case, the retailer must determine how and when it can accommodate these requests, with the goal of providing an exceptional customer experience without damaging the bottom line.
Regardless of the vertical, every operations team must have a clear, centralized view of delivery activities from order placement through hand-off to the customer, and a preset flow for handling the inevitable bumps along the way. Today’s technology solutions make this possible by providing real-time visibility into delivery fulfillment progress, as well as automating the logic and flows across the organization. There are even applications that will proactively notify dispatchers or management of projected and actual delays, so they can take corrective action both proactively and reactively. For example, if a driver is running late returning from a previous delivery and may miss their next delivery time slot, the dispatcher will be alerted to the problem. The dispatcher can then either send an SOS broadcast to all on-shift drivers asking if they can fulfill the delivery, or engage a third party service, all without leaving the application.
Investing in optimized routes and efficient last mile delivery flows are 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 and reduced delivery costs. A centralized system where all data on driver locations is fed into allows businesses to keep track of drivers’ locations on map in real-time and receive proactive smart alerts (e.g. idle, out of route, late) of their progress along the last mile.
According to some estimates, 28% of the total delivery cost to a business comes from the last-mile. Too often, companies pass the costs on to the end customer, who is expecting the complete opposite: a free or low-cost delivery. Whether it is or isn’t passed to the customer, these costs have a negative impact on the bottom line.
Combine the issue of cost with the heightened expectations for same day, on demand delivery, and you have a recipe for strain on budgets and logistics providers. Additionally, retailers often find their 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 eliminate expenses for last mile deliveries. However, proper planning, and injecting technology into your supply chain management can go a long way to reducing some of these costs.
Growing demand should be a blessing for any business. But while the rise in eCommerce and online sales 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.
The list of possible issues along the last mile goes on. Inefficient routing and dispatching can be incredibly expensive. The need for a “truck roll” or to dispatch a truck specifically to a certain consignee is inefficient and a waste of resources. Late and missed deliveries can anger your customers and hurt brand loyalty. All of these must be considered when searching for the correct last mile delivery service for your business needs.
Managing both internal and multiple external fleets can pose a problem for retailers in the last mile delivery process. It can be difficult to maintain visibility and control over the last mile experience when using multiple systems for deliveries.
Ship from store – With store foot traffic in decline, now is the time for retailers to restructure some stores as micro fulfillment centers – effectively ‘dark’ stores’. When operated efficiently, these stores turn into hyperlocal fulfillment centers for multiple fulfillment models – curbside or click and collect, in store returns, and of course as a pickup point for delivery. Turning stores into fulfillment centers is often a pivotal part of guaranteeing same-day delivery, with service providers picking up orders from stores and often delivering them within hours.
If retailers want to operate deliver from store alongside other fulfillment models, 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.
A logistics company has to deal with managing last mile delivery costs surfacing from a few major areas. First, they need to reduce the common and costly “where is my order” calls to service centers. By being able to provide full visibility, these calls can be brought to a minimum. Balancing different models of delivery (on-demand and planned, B2B and B2C) and optimizing routing for 3 pls both can have high price tags if done inefficiently.
Top logistic providers must be able to give customization and flexibility to each last mile shipper. While one brand may want members only to have free 2-hour shipping while charging for non-members, another brand may want free shipping for everyone or maybe not at all. The ability to adjust to each shipper’s needs is critical in creating a successful logistics system. The idea of pivoting from B2B to B2C (home deliveries) and providing the ultimate last mile delivery experience is also an important part of this customization and learning process.
Lastly, last mile logistic providers must work to make their drivers happy and therefore to keep more drivers and avoid high driver churn, leading to wasted money and resources.
Despite the inevitable pains associated with last mile delivery, delivery technology and logistics solutions exist that will allow any company to scale up and optimize their last mile logistics.
Manual operations are simply not an option anymore for retailers with large-scale orders, and is largely inefficient and not accurate.
Front-end delivery experiences – Today, the more innovative brands use technology to create unique, optimized and automated last mile delivery experiences, with the visibility, flexible delivery services and reasonable prices that help them remind competitive in a saturated market.
Backend flexibility and integrated operations – The right delivery management software will provide the flexibility that dispatchers and operational teams need to ensure that deliveries run smoothly and to deal with exceptions quickly and seamlessly. Dispatching technology solutions should provide a variety of dispatching models to support varying levels of manual and automated dispatch, and which should be based on specific operational requirements and businesses preferences. All dispatching solutions should include real-time visibility across the entire last mile ecosystem, including delivery through external contracted fleets and third party delivery.
Last mile solutions that match your business logic – When looking at delivery and logistics platforms, it is important to verify that they will enable you to achieve the necessary efficiencies across your entire last mile ecosystem—from operations to drivers, and finally to end customers—with the core of business focused on the last mile. 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.
As we’ve discussed, both shippers and consignees expect maximum visibility. They want to know where their order is at every stage of the shipping process, including specifically where the driver is at any given moment along the last mile. Using a delivery or logistics solution can help streamline this process, making it accurate and easily accessible for all.
Visibility also allows for items to be tracked throughout the entire last mile, making coordination between warehouses, sorting centers, fulfillment centers, stores and delivery providers easier and smoother.
To operate last mile delivery profitably, it is important to identify which delivery models will best serve your business needs – then use delivery and logistics software to automate, optimize, and scale up your operations.
Last mile delivery software is able to plan and schedule routes for planned, on-demand and hybrid solutions better than ever before. Eliminating the need for dispatchers, and allowing them to spend their time on other important tasks, route planning software takes a wide range of factors into account to create highly efficient, well-planned delivery routes. This includes considering parcel size, vehicle size, route, cost of drivers, promised delivery times and more.
Given the very different natures of these delivery models, businesses looking to offer their customers the convenience of choosing different last mile fulfillment options must be able to efficiently manage their supply chain operations and delivery dispatch at scale.
For many businesses, this planned / on-demand hybrid delivery model takes the form of a set schedule of cut-offs that occur over the course of the day, at which times orders are aggregated and then planned for delivery during the same time slot. Whenever a cut-off kicks in — every 4 hours, for instance — a new batch of orders is consolidated and routed.
In order to meet these small cut-off windows, inventory picking and staging need to happen at regular intervals, with strict internal deadlines. While the inventory is being collected and staged, the delivery operations team needs to assign delivery drivers and vehicles, quickly optimizing the delivery route.
However, these tight delivery timeframes and complex operations require that every component of the delivery and fulfillment operation runs in perfect synchronization. If even one aspect of the process is not up to speed, it can expose your last mile delivery operations to potential errors or delays. 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 complex deliveries such as white glove deliveries, becomes exceptionally difficult with these tight timelines.
The last but most 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, picking and staging teams, to the drivers, shippers and end customers must be kept in the loop with the right information at the right time.
Once a parcel is out for delivery with a 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 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.
Driver safety is of the utmost importance to any delivery service. Today, more than ever, in addition to on-the-road measures, shipping companies are putting an emphasis on contactless delivery to ensure maximum health compliance. Driver apps allow photo proof of delivery, restricted phone use while driving, safe driving instructions to avoid dangerous areas, masked phone numbers for safe and easy communication and more.
Last mile software can help you create an exceptional experience for both brands and consumers, including providing automated updates whenever an order passes a certain stage in the last mile.
Send frequent updates and delivery notifications – For both logistics providers and retailers, the “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, fulfillment center or store, until the moment it arrives.
Prioritize your customer’s opinion with feedback on customer satisfaction – 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 customer feedback quickly and seriously is a major tool in creating brand loyalty.
Multiple delivery options – The ability to provide multiple delivery services that suit most people is a major advantage in the crowded eCommerce field today. 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 last mile delivery, 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 choose the day that their order is delivered if they are moving for example. Lastly, some customers want their order now and will race to a store or pick up point to get their new purchase as quickly as possible.
Providing all of these options can be confusing technologically and require the right tools and systems in place to guarantee that everything arrives on time and that customers receive what they are expecting and when.
Flexible technology gives businesses the ability to handle same-day and scheduled (multi day) deliveries under one eCommerce brand. We call this the hybrid-model and it has become increasingly popular in recent years.
One important objective of an effective planned / on-demand delivery operation is to allow the maximum time for order preparation, picking, staging and delivery, all at the minimum cost for the business and the customer. 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 delivery capacity, meeting high demand in certain seasons and providing the relevant delivery service only when needed.
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 the logistics companies who support them must adopt last mile 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 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 delivery, or launching a new delivery service.
Bringg’s delivery and fulfillment cloud platform provides retailers and logistic providers with the technology to scale up and optimize their last mile operations. With Bringg, this becomes automatic and digital, reducing the burden and allowing companies to grow.