What is last mile delivery?

Last mile delivery, also referred to as final mile delivery, is the final step in the delivery process when a package is transported from a warehouse or distribution hub to the end-customer.

Final mile delivery is one of the most important factors affecting product costs, delivery speed, and the customer experience. Optimizing this key differentiator for speed and affordability enables brands to gain a competitive advantage and achieve customer satisfaction.

Last mile logistics is the make or break stage of the delivery process for many online retailers. The market size for last mile delivery on a global scale is projected to reach 55200 million US dollars by the end of 2025.

In this article, we’ll discuss the challenges of last mile delivery, how they affect logistics operations, and the solutions you need to deliver a fast and affordable buying experience to your customers.

Is last mile delivery eating away at your business revenue? Enhance your last mile delivery by clearly understanding your data with Sifted Logistics Intelligence.

Last Mile Delivery Challenges

A well-planned last mile delivery strategy helps companies deliver packages to their customers as fast as possible while reducing costs. However, last mile delivery processes are prone to financial and logistical challenges.

Below you will see common last mile delivery problems that businesses face.

High delivery cost

As much as 53 percent of your total cost of shipping can be attributed to last mile logistics. This makes it increasingly difficult to increase profit margins for eCommerce businesses and logistics companies. As a result, they have to pass the full or partial cost of shipping on to their customers.

Fueled by customers’ demand for fast delivery, businesses often end up losing money even if customers are willing to pay same-day delivery fees. A number of factors contribute to soaring last-mile delivery costs including excess fuel consumption due to inefficient route planning, and missed and failed deliveries.

In addition, there are inefficiency costs incurred by shippers, businesses, and logistics providers. For example, when a trucking company delivers a large order (such as 40 tables) to a remote location using a midsize truck, the vehicle completes the delivery in four trips. This time-consuming arrangement results in higher fuel consumption costs and labor hours, compared to the delivery being completed in a single trip using a large truck.

Explore how to stop losing your profits to last mile delivery for detailed information on lowering your shipping costs.

Lack of transparency

Lack of final mile visibility can be detrimental for modern logistics operations.

Ensuring transparency in your last mile deliveries is crucial for succeeding in the post-pandemic world. If you don’t offer real-time shipping updates to your customers, you’re likely spending more time answering customer queries about their order status.

Customers experience a number of problems when they order online such as lost and damaged goods, and delayed or failed delivery attempts. They’d like to be updated about every detail related to their order, from shipping status to the location of their package to the expected delivery time.

More visibility can help you stay cost competitive, build credibility, and deliver positive customer experiences. Most businesses use delivery management software to provide end-customers order updates on the delivery progress using tracking IDs.

Similarly, many online businesses like food delivery companies use route optimization software to identify cost-effective, efficient routes, as well as share the location of their delivery vehicle with customers.

Unpredictable elements

Unpredictability in transit is one of the biggest challenges in last-mile logistics. To start, the rise in eCommerce sales is responsible for more trucks on the road, leading to traffic congestion.

Similarly, there are a number of unexpected issues that can cause delays in last-mile deliveries including lack of parking spaces, bad weather conditions, unexpected one-way roads, trucks breaking down, and drivers calling in sick.

You can minimize the impact of unexpected delays by making backup plans while communicating effectively with your customers about the problem

Inadequate route optimization

Most shippers have to fulfill dozens, if not hundreds of orders on a daily basis. With a large number of possible delivery routes to reach a destination, distributors have to identify the most cost-effective optimal routes while avoiding delivery delays.

Route optimization has a key role in last-mile delivery operations. For planned deliveries (e.g. next day deliveries), route planning can be time-consuming and mentally exhausting even for professional last mile delivery service providers. They have to factor in traffic congestion during peak problems, fuel efficiency, maintenance costs, and environmental regulations. And even the courier dispatchers try to further optimize these routes using their personal knowledge about traffic and local geography.

Similarly, on-demand deliveries (same day delivery) presents another last-mile delivery challenge to shippers due to timelines. They have to meet customer expectations and have little time to optimize routes for cost and speed.

Sifted’s Logistics Intelligence solution empowers shippers through various cost optimizations, including route optimization.

Solutions for Last Mile Delivery

Now that you know challenges linked to the final leg of the order fulfillment process, let’s go over some of the ways eCommerce businesses and logistics companies minimize costs, offer greater visibility, and optimize their last mile delivery operations.

Last mile logistics software

A great way shippers and logistics companies minimize the impact of unexpected delays is by using last mile logistics software to re-route and reschedule deliveries, and notify customers about potential delays and expected time of arrival.

These solutions automate manual routing processes, enabling businesses to optimize their supply chain, increase ROI, and reduce operational costs.

New technologies like AI and machine-learning are allowing online businesses to collect and analyze data in real-time to improve decision making. This data is shared as useful information with everyone including dispatchers, warehouse staff, shippers, and customers to keep everyone in the loop.

Last mile delivery software can automatically plan time- and cost-efficient routes based on a number of factors including promised delivery time, traffic situation, package size, truck size, and labor costs.

Sifted is a logistics intelligence tool that uses AI prediction technology to learn from your shipping data from each step of the supply chain. This tool can optimize the distribution network as a whole, for example, finding a better location for a distribution center, so that when the package enters the “last-mile” fulfillment phase, it is closer to the end destination to begin with.

Visibility into the supply chain

Most eCommerce businesses use tracking IDs to implement visibility in their supply chain management. Although these tools offer trackability and traceability features, they don’t match the delivery experience offered by real-time updates at every step of the final-mile journey.

Last mile visibility tools like route optimization software use data-driven analytics and machine learning algorithms to predict package delivery times and interruptions well before it nears its final destination. This information is then used to create contingency plans, send alerts to dispatchers, and communicate updated arrival time notifications to customers.

Despite being a simple feature, order tracking notifications can help you achieve a higher level of customer satisfaction.

Additionally, they can be easily integrated into a company’s existing inventory management and fulfillment systems, enabling businesses to monitor the movement of packages from warehouses to customers’ doorstep in real-time.

Sifted uses machine learning and artificial intelligence to offer predictive visibility into your last mile delivery processes in one place.

Faster fulfillment

Modern customers expect rapid order fulfillment and are ready to pay extra for it. Rapid order fulfillment is a great way to improve customer experience and retention rates.

Last mile delivery software enables businesses to handle same-day deliveries. These solutions use real-time as well as historic data to devise delivery flows under tight timelines, enabling shippers to run their final mile delivery operations more easily. Plus, they allow drivers to communicate with dispatchers, collect signatures, proof of delivery, and feedback.

Another way to speed up order fulfillment is by establishing your distribution centers in high concentration areas, closer to your target market. This helps reduce fuel costs and shortens delivery times.

Solve your last mile delivery problems with Sifted’s solutions

Shipping delays, cost fluctuations, and factors outside your control can make it difficult for you to deliver to your customers on time. However, you can better manage your last mile delivery challenges by proactively preparing for contingencies, being transparent with your customers, and streamlining your supply chain by deploying a robust last mile logistics solution.

Sifted’s Logistics Intelligence solution helps shippers and businesses alike to optimize last mile delivery orders by identifying better routes and minimizing costs using AI-powered demand forecasting.

Ready to simplify your logistics management? Get a free demo from Sifted!

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