Making sense of the ever so expensive Last Mile

The buying pattern and behaviour of consumers have changed. Their reliance on delivery has been brought to light, and speedy and efficient fulfilment is no more a nice-to-have, it’s something that the consumers today expect. They want cheap, fast, better, and free delivery. These expectations and growing demands make the last few steps of a product’s journey to its delivery address much more complex.

The last mile or the final stretch of shipment which typically involves multiple stops with low drop sizes has become the key to customer satisfaction, but it is also the most expensive and time-consuming part of the shipping process, making it a classic issue for businesses concerned with logistics and transportation, as well as anyone who ships products

In the entire delivery chain, the last mile is the most expensive making up for 53% of the total cost – a major issue in the last mile. 

But why is the Last Mile so expensive? 

Several internal and external factors make the cost of last-mile delivery overwhelming. While it is easier to manage and mitigate the internal factors the externals factors are unpredictable and depend on changing geopolitical scenarios or market situations. 

Some of the major reasons for the increase in last-mile delivery costs are: 

Failed deliveries: E-commerce, designed to deliver the utmost satisfaction to the consumer, give them the power to cancel, not accept, or return the order. In some instances, the address of delivery is incorrect or the consumer is not available which also fails the delivery of the product. This weigh heavy on the last mile as companies need to reattempt the delivery. According to a survey of 200+ global enterprises, 15% of all the orders don’t get delivered on the first attempt. 

Inefficient routing: The lack of route optimization and unavailability of enough data points often makes the last mile journey longer and at times even results in failed deliveries, causing inconvenience to the consumer. Also, companies using manual routing increase their last-mile cost as it results in 25-20% extra distance travelled. 

Quick delivery expectations: The rapid change in consumer behaviour has led to the surge in demand for same day, next day, and free shipping with added benefits of choosing delivery time windows, putting pressure on e-commerce platforms, as they are expected to bear the shipping cost. 

Driver Shortage: Shortage of last-mile delivery partners also adds to the cost. The hype the online deliveries has put more pressure on the last mile segments and created a need for more delivery personnel. The management and shortage of delivery drivers have been exacerbated. 

How does it affect the business? 

The last-mile costs can stack up in the form of hidden overhead costs. The last mile expenses can cost 53% of the total shipping cost for residential deliveries as well as for deliveries to smaller warehouses, distribution centres, and retail stores. This means you either have to pass this cost onto your customer or absorb it yourself – and today’s customers aren’t keen on paying premium prices for shipping.

Last-mile costs can cut into profits if they aren’t held in check. This can put you in a situation where you need to decide to either sacrifice delivery speed or profits. And in today’s climate of economic tightening and constricting supply chain pressures, neither sacrifice seems like a good option.

Technology – the missing piece

Maintaining high standards of shipping speed and quality requires modern technology. Technologies are enabling process improvements with their capabilities to analyze real-time information for better decision-making. Thus, companies must invest in technology to streamline the processes.

While there are many competing hardware and software solutions for last-mile bottlenecks, some technologies simply help navigate the last-mile issues better than others.

Route Optimization: Leveraging route optimization technology helps meet the SLA and delivery time. A route optimization technology can make the last mile efficient as it takes into account all the variables and exceptions to plan the last-mile trips and guides you most efficiently. Further, it saves the delivery cost and GHG emissions by reducing travel time and fuel consumption.  

Hybrid Fleet Management: The hybrid fleet model is a combination of a trucking company’s fleet, paired with contractors, third-party providers, and freelance drivers. The model is gaining popularity as it helps to scale fleet size in accordance with changes in demand and offers greater flexibility and affordability than the traditional model. 

Auto allocation: With auto allocation one can configure planning properties and reduces manual work. The tech helps able to release orders for picking, packing, and delivery to the customer at the click of a button.

Increased order acceptance: Investing in tech increases the acceptance of order as it gives you metric and actionable insights from a detailed analytics dashboard. With increased acceptance of orders, one can further improve the driver’s performance and facilitate quicker deliveries. 

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