1. Why last mile logistics is important?

Last-mile logistics is the most complex and, happened to be believed, most costly part of the distribution supply chain. While there is a growing buzz around the expression, the last mile implies different things for different industries. So, before moving forward with the recommendations of how to optimize last-mile logistics one should first define what it actually means for the specific operating model and where the inefficiencies are?      

With the accelerated growth of e-commerce, increasing requirements is creating burdens on the logistics chain, which amplifies the final mile. According to a 2022 report by Deloitte, as consumers’ delivery-related demands increase—as does the cost and complexity of meeting those demands—new, nimbler options are arising to enable retailers to outsource last-mile delivery to the gig economy. Amazon Flex and Walmart’s Spark Delivery enable independent drivers to deliver online purchases to the retailers’ customers. Along with the growth of e-commerce, last-mile logistics has its specifics and new challenges for traditional sectors as well. These challenges can be sector-specific, such as decreasing delivery times and increasing density of fulfillment centers but also can result from general macroeconomic trends such as shortages of employees and supply chain problems.  

2. Last mile delivery logistics is not just home deliveries

“Last-mile” logistics or deliveries might have different meanings for different sectors and industries. First of all, different companies might be implementing final mile deliveries using private fleets or hiring carriers. Thus, we can differentiate between private fleet shippers and for-hire carriers. While for private fleet shippers logistics operations are supplementary to their main businesses, for-hire carriers or logistics service providers (LSP) generate income for transportation services. Secondly, the last mile will be different for companies that are in the B2B business such as wholesale distributors, or focusing mainly on home deliveries such as retailers. Some e-commerce companies could be put into a category of their own as they mostly don't own vehicles but may combine both retail and wholesale operations.   

Retailers and e-commerce

“Last-mile logistics” in the retail sector mainly implies the organization of store-to-customer small-size delivery processes.   

According to U.S. Census Bureau News Total e-commerce sales for 2021 were estimated at $870.8 billion, an increase of 14.2% from 2020. Total retail sales in 2021 increased 17.9% from 2020. E-commerce sales in 2021 accounted for 13.2% of total sales. E-commerce sales in 2020 accounted for 13.6% of total sales.

Demands for faster, cheaper shipping result in a growing complexity of last-mile delivery operations. Consumers can now choose to get their purchases in a variety of ways: home delivery, ship-to-store, ship-to-locker, or reserve online and pick up in-store. Returns can now be made in-store or by shipping the product back to the retailer. Linear supply chains have given way to complex, interconnected supply chain networks. And the subscription services offered by a growing number of retailers often subsidize or waive delivery fees, making it incredibly easy for consumers to place many small orders instead of a few large ones. The result? More—and more frequent— orders, a sharp rise in demand for expedited delivery, an e-commerce logistics market with a compound annual growth rate (CAGR) of 20.4 percent, and rising costs for retail and consumer goods companies. Amazon is able to meet consumers’ demands by spending 15.6 percent of its net sales revenue on shipping costs and an incredible 27.9 percent on combined fulfillment costs. Retailers, by comparison, spend about 8 percent of revenue on e-commerce fulfillment on average; in the current retail environment, it would be hard for them to cover more of the delivery costs and still stay profitable.

Different companies prefer different last-mile delivery logistics models. Larger retailers tend to run private fleets of vehicles, while smaller ones rely on outsourced transportation. It should be mentioned that most private fleet companies usually combine both operational models. Hence, processes and problems may differ for different types of shippers.

We can also divide retail deliveries into grocery and the rest as delivery patterns and velocity are quite different. The average lead time for delivery of groceries is 0.7 days, compared to electronics which take 3 days, and 5 days for apparel. Thus, consolidation and logistics management models can vary substantially.    

Logistics service providers (LSP) and delivery companies

We can conditionally divide logistics service providers into long-haul and local delivery models. There are a number of LSPs that operate on both markets, we see a growing number of specialized local delivery companies, especially during the Covid 19 pandemic. We see also the emergence of platforms that connect shippers and individual vehicle owners. Later are essentially networks of independent couriers and delivery agents connected to a delivery ecosystem that pick up and deliver small packages. The other distinct difference between long-haul and local deliveries is that local deliveries are usually on the same day while long-haul deliveries can vary from 1-7 days.

As it turns out that the final mile can be used to describe the sharply different distribution and delivery models there is a wide range of estimated market sizes. The Bureau of Economic Analysis (BEA) reports that the last leg of overall transportation costs makes up as much as 28% of logistics expenses. Transportation’s contribution to the economy can be measured by its contribution to gross domestic product (GDP). The Bureau of Transportation Statistics reports the final (finished) transportation goods and services purchased by people, businesses, and governments in 2018 contributed $1,489.7 billion, or 8.9%, to U.S. GDP. If we apply the aforementioned 28% BEA figure, we could say the market for the final mile (from a GDP perspective) is an astounding $417 billion. Contrary, if we narrow down the final mile to home deliveries and assume that these are small-sized we need to look into parcel delivery numbers in the picture below⁴. 

There is also another important distinction between the organization of long-haul and same-day logistics - long-haul deliveries are usually done using semi-tractors or sleeper trucks while local deliveries are implemented by smaller trucks or even passenger cars. Thus, contracting, company and driver onboarding are different for long-haul transportation needs. The latter is a highly regulated industry that needs special licenses and drivers. The value of the average delivery is also much higher hence the carriers are going through much meticulous due diligence. The important peculiarity is that while more individuals can be involved in local deliveries, continued driver shortage, increasing insurance, and, lately, fuel costs make long-haul capacity scarcer and pressure on the costs higher. 

As you may see in the picture above, the ground transportation rates almost doubled during the last two years. 

Wholesale distributors

Wholesale distributors are the middleman between producers and retailers with slight differences from industry to industry. It is one of the more complex industries driven by high numbers of SKUs, customers, suppliers, and transactions, and their pricing and rebate structures. They can be grouped into major ones such as food, beverages, pharmaceutical, electronics, industrial, and building materials. According to the National Association of Wholesale Distributors (NAW) total wholesale distribution revenue ended the year at $5.970 trillion, just slightly below the April 2019 record high. GDP for the year totaled a record-high $21.734 trillion with a growth rate of 4.0%. The Wholesale Distribution industry is 27.5% of U.S. GDP. 

Last-mile logistics from the wholesale distributor perspective is different. As they are middlemen between producers and retailers/local businesses their last mile will be the leg between the distribution centers and local warehouses/shops. The wholesalers tend to rely on private fleet operations as they operate in an environment of rigid deadlines. The average size of a single drop also tends to be larger and distances longer, while the number of stops in daily routes will be fewer compared to home deliveries. We observe changes in the industry in the form of growing concentration as well as the emergence of disruptive business models as well. For example, Amazon’s sales platform is supported by more than 2 million third-party sellers worldwide. Of those sellers, 26% sell products using a wholesale sales model. 

3. Challenges of last mile logistics

Scheduling and routing is a great challenge

Scheduling and routing daily package deliveries for a relatively smaller delivery radius, i.e. 50 miles is different from scheduling and routing deliveries of hundreds or even thousands of boxes per one drop for a 300 miles radius. The first is going to be for home deliveries from warehouses of fulfillment centers located closer to city centers. The latter is the case of a food distribution operation to stores, restaurants, and other businesses. Large building or construction material distributors may have lesser stops per route but their route can strain through the weeks. Apart from the difference in distances, route durations, and the number of stops per route, this distribution model requires drivers with different skill sets and driving habits/work models as well as sometimes radically different equipment. When it comes to large 3PLs or LSP this process may combine all of the abovementioned with the need to solve the consolidation problem to/from multiple warehouses and the involvement of different counterparts.   

Planning multi-leg deliveries creates delays 

As we have already established, last-mile delivery logistics can mean different things for different industries. So, the complexity of the operational model hence the complexity of the planning process can sometimes differ cardinally. It is becoming even more cumbersome when planners are trying to coordinate the timing between the different legs of the supply chain, such as the first, the middle, and the last miles. While manufacturers and distributors will mostly use last-mile consolidation centers and warehouses, transportation companies and logistic service providers (LPS) might even bypass these centers and implement multi-day delivery to the final customers. It is going to be the case, especially for B2B or heavier deliveries. 

Coordination between different delivery operators

It can be a great challenge when planning the last mile. It is generally assumed that when the last mile is concerned there is one delivery party that moves the freight. While that could be a case for home or packaged deliveries, in many operational models or industries there are more than one or even two delivery/transportation partners. Thus along with the larger planning range (weekly or biweekly) and multiple consolidation locations involved, the need for coordination between multiple counterparts is going to pose another challenge. 

Visibility is important

When it comes to visibility, logistic managers usually imply to the consumer that they know where your truck is. While it is good information to have, especially in real-time, locating your delivery is one (small) part of the total visibility. It should help not only track deliveries but also make preventive operational management and long-term data analytics and efficiency optimization. 

Capturing data: Capturing data is essential as it is created in real-time or near time and distributed across different operational decision-makers. It particularly includes stops or order level updates of estimated times of arrivals (ETA) at a driver, customer, dispatcher, or DC level. Post factum delivery data such as late deliveries and actual service times is also important to capture and store properly. To minimize late deliveries by implementing dynamic routing, dispatchers need timely data that shows ETAs with service times and other variables not being produced by GPS tracking software.  

Aggregating data: Capturing and aggregating delivery data per different instances and layers is the key to efficient operational and strategic middle-mile network management. The difficulty of it is that systems across different parts of the logistics chain are captured and stored differently, so it is not always possible to have different levels of data aggregation without a synchronized ecosystem.    

Supporting decision-making: Aggregated data is a foundation for retrospective and prospective data analytics. One of the major problems of growingly complex logistic supply chains is the absence of full digitization and synchronization of all the necessary information across different layers of an organization.

Trucking capacity is scarce 

The ongoing truck driver shortage is now estimated at 80,000, up from 61,000 just three years ago. A new study by Bob Costello, chief economist for the American Trucking Associations (ATA), estimates that the industry will have to recruit 1 million new drivers within the next nine years to replace retiring drivers. This shortage makes it really hard for fleet-light shippers to cover loads and implement proper long-term transportation planning. This is also one of the main reasons for the rising freight costs described above.

4. Less Platform as the best last mile delivery software

Depending on the type of the operational model and or the sector of industry, last-mile deliveries can span from a couple of stops per vehicle per day to high volume short distance stops. Less Platform is capable to route and scheduling deliveries that are peculiar to any distribution model.  

Types of industries using last mile logistics software

Lest's discuss several use cases.

For B2C type of high volumes deliveries that are peculiar to e-commerce and retail, it is important that the algorithms could plan 10’s stops in the routes. These deliveries are usually planned daily while vehicles usually cover shorter distances. Dynamic capabilities are also more important as a high level of discrepancies between optimized delivery plans and live deliveries can happen

The next type of local or city dispatch operations is fleet-light operations in case of which delivery companies don't own vehicles. In this case, they may either crowdsource deliveries before or after planning or signup with major carriers (FedEx, UPS, DHL). 

The separate operations model of deliveries is the delivery companies that don't have warehouses or distribution centers. These companies usually do high-volume pickups and deliveries during the day. Hence, a different class of algorithms is developed for these types of movies in Less Platform. 

For the wholesale distributors and also retailers that need to plan B2B moves such as DC-to-Store or Store-to-DC in case of reverse logistics, a distribution model covers a larger area. In the meantime, the number of stops on the routes will be lower, while the weight of each delivery higher. Vehicles are going to be larger as well so capacity becomes more important. 

There are also large use cases of long-haul delivery planning and routing by 3PLs, large shippers, and carriers. Two types of moves are being planned; a) consolidation and routing of LTL’s (Less than truckload) shipments into FTLs (Full truckloads) both by asset-light and asset-based shippers, b) Forward planning of FTLs. It is worth note that in the former case the main optimization parameter is the mileage for fleet-based operations while for fleet-light shippers and 3PLs total cost should be minimized. In the case of FTL forward planning the main optimization parameter is the deadhead or the empty moves between stops (which should be minimized). Decision-making functions also might differ depending on who is making these decisions - shippers and 3PLs would be interested in mainly cost optimization by finding cheaper carriers, although 3PLs might also reach that via better preliminary consolidation or forward planning. Fleet-based logistics service providers (LSPs), such as LTL trucking companies might be interested in an increase in loaded mileage. 

A special case is the companies that run a mix of fleet-based and fleet light operations. These are large 3PLs such as Hub Group or JB Hunt as well as retailers such as Walmart, Hope Depot, or Pepsico. They need to combine delivery routing technologies with load outsourcing or even by relying on spot markets.   

Software Functionality

The are many features in Less Platform that support or work for almost all the abovementioned delivery models.

Multiple DCs. For example, multiple depots or distribution centers (DC) planning functionality. It is very convenient for companies that have centralized operational planning activities. Secondly, it helps to generate data for separate DCs as well as aggregate it on a company level. A number of warehouses or DCs is growing and getting closer to customers these days, making both operational and strategic routing harder and potential inefficiencies bigger. In the meantime, companies that run multiple pickups and delivery operations without consolidating their shipments in the warehouses can use Less Platform’s pickup and delivery routing and scheduling algorithms.

Delivery windows and variable service times. Two important constraints that make it hard to plan are daily delivery windows and variable service times. These two constraints can also drastically affect capacity used and routes planned. The absence of proper planning tools can make a planner's work daunting and consume too much time. It is also the main cause why distributors use excessive capacities, drive unnecessary miles and have late deliveries. These effects are being amplified due to increased demand variability, speed of deliveries, and tightening delivery windows. 

Dynamic planning. Automatic routing is easiest the job but there are plenty more situations requiring manual planning. Less platform as a delivery software provides dynamic planning functional for both pre-dispatch and post-dispatch stages. After getting a route plan, a planner can reroute different stops by assigning them to different routes both individually and in bulk. Then sequencing algorithms will re-optimize the total plan. After making changes algorithms assess the feasibility of delivery windows by checking with recalculated ETAs. All the changes are instantly visible for drivers post-dispatch.  

Scheduling. Planned loads can be scheduled both daily and weekly for respective drivers. Less Platform’s dispatch

management software is connected to the driver app so all drivers have planned loads once they are assigned to them. After the dispatch, the driver app updates all ETAs and synchronizes them with the dispatch board. Less Platform’s algorithms then check potential late deliveries by comparing ETAs with delivery windows. This way dispatchers can be proactive to avoid late deliveries or dynamically optimize the delivery process otherwise.

Optimization with contracted carriers. Less Platform also brings together demand and supply by helping shippers cover more loads at lower cost and carriers increase loaded mileage and earn for additional stops. According to our calculations and based on the information provided by more than 50 trucking companies, the average over-the-road truck has 10 linear feet or approximately 10,000 pounds of unused capacity. This “dark capacity” has a market value of over $200 billion. We help carriers to fill a partially loaded truck as fast as an empty truck, leading to a dramatic increase in asset utilization, the main driver of profitability for carriers. As shown in the picture below both shippers and carriers can find shipments or available space in the trucks using our AI algorithms. 

This was a small list of various tools and innovations that Less Platform offers to different industries and companies.

Please contact [email protected] if you want to learn more about Less Platform's Last-mile delivery logistics orchestration capabilities.  

Grocery delivery is a booming industry.

As the demand for grocery delivery continues to grow, so does the need for route optimization. Route optimization will help you get more out of your fleet and use this as a growth channel.

Here's what you need to know.

Why is Grocery Delivery So Popular?

Grocery delivery has become one of the most popular business models for entrepreneurs to invest in. In fact, it's been estimated that there are now more grocery delivery companies than chains and independent stores combined.

In a time when many businesses struggle to keep up with demand, supermarkets have an edge over other retailers because they already have a built-in customer base. Because of this, they're able to quickly convert trial users into paying customers.

With their existing infrastructure and customer base, supermarkets can ride out the initial challenges that come with such a strenuous business model more easily than other businesses.

Having an efficient fleet helps these companies expand even further and stay ahead of the curve when it comes to the quickly-changing grocery delivery landscape.

What Makes Grocery Delivery Difficult?

Delivering products to customers' homes is a difficult business model that comes with a number of unique challenges.

For one, it's a labor-intensive process. Unlike going to the store, checking out products, and bringing them back, grocery delivery requires users to have their items delivered straight to their doorstep - which involves many more steps overall. In addition to this, grocery delivery companies need their employees to cover a much larger territory in a limited amount of time.

Freshness is also a concern. Grocery delivery is still a relatively new industry, so the shelf life of products isn't as guaranteed as other retailers might have you believe. If an item spoils or expires en route to the customer, it's the driver who will be held responsible - making this issue even more difficult.

Customers are very picky when it comes to their groceries. They don't just want a bunch of bananas -- they want the right bunch of bananas. And according to a recent study, almost half of the grocery shoppers in the US cite product assortment as their top issue with eCommerce.

Because online stores have a limited amount of space for displaying their products, they need to make sure they get it right - which sometimes means making multiple trips to fulfill the customer's order. This eats up valuable time and increases the chance of human error.

So why are grocery delivery companies so reliant on route optimization?

Route Optimization is Needed to Make Delivery More Efficient

To ensure that they provide the best customer experience possible, grocery delivery companies need to maximize their efficiency through an optimal route planning system. By using a dedicated route optimization tool, you can optimize your drivers' routes so they cover more ground in a limited amount of time, visit fewer places and return home sooner.

Most importantly, this helps you ensure that each driver is continuously working on a route that makes sense for them. This way, they can focus on getting their assigned areas done rather than wasting time trying to figure out where to go next as they make their rounds.

This is important for grocery stores for a few reasons:

1. More Efficiency = Lower Costs

More efficient delivery means more customer orders are fulfilled, which boosts revenue per driver. This, in turn, leads to fewer drivers needed to operate your fleet -- which means lower costs on labor and gas.

2. Time is Money

When you're working on the same route every day, it's easy to get into a routine. Routes that are visited daily can be planned out in advance, allowing drivers to finish faster and spend less time on the road. This gives them more time to visit multiple stops and keep their workday going longer without sacrificing time at home with family or friends.

3. Less Driving = More Rest

Drivers who operate on less-efficient routes are more likely to arrive home tired and worn out because they're spending so much time behind the wheel. This, in turn, increases the risk of accidents - hurting both your company's reputation and increasing liability costs.

How Can I Optimize My Deliveries?

The good news is that there are several software solutions available that can help you maximize your efficiency. These are especially helpful for smaller independent grocery stores who are just starting out -- they have fewer resources to dedicate to developing their own route optimization system.

There are three main aspects of a delivery service that need to be optimized: customers, drivers, and routes.

Customer segmentation means being able to identify the best customers to visit on a given day. In the morning, some customers may receive their groceries before others -- meaning it makes more sense to visit them first.

On the other hand, you might want to prioritize certain customers who live greater distances away from your store location. That way, you can use up hours of time driving past these locations without stopping.

Even if customers live on the same street, the time of day affects which customer you should visit first. One may be on their way to work or school, while another might be at home with nothing to do but wait for their groceries!

Customer segmentation is especially important when it comes to delivery services because they are reliant on making frequent stops. With fewer visits, they can deliver more orders and increase their per-driver revenue and efficiency.

Knowing the best time to visit is even more important for grocery delivery companies who offer same-day service. Customers expect fresh produce and meat - which means groceries need to be picked up from your store as soon as possible! If you're using an automated route optimization tool, you can also specify when they need to leave the store.

This allows you to guarantee a faster turnaround for pick-ups and deliveries - which keeps customers happy and saves them a trip back to your store.

Another important aspect of route planning is driver allocation. Because grocery delivery companies have a lot of drivers on the road at once, it's essential to make sure they're equipped for the right tasks. In some cases, you might want to allocate drivers by area for a certain number of hours, then change their status.

This way, they can be working on one part of the city while someone else is taking care of another -- making more efficient use of your entire fleet!

What Software Can I Use?

Great question! There are a number of different solutions available that can help.

We've put together a helpful list here. But we think that Less Platform is your best option.

Less is the only route optimization tool that helps grocery stores find their most profitable deliveries. It automatically determines which stops to visit in the morning based on the best number of drivers and hours you have available.

The best part? It's free to try for 30-days.

The last few miles a delivery takes from facility to recipient might just be the most essential part of a delivery journey. People are prepared to pay premiums to get their package delivered in a day, with customer loyalty increasing for businesses that meet these deadlines. Amazon invested in their last-mile logistics heavily in 2020, with many large retailers following suit.

What is Last-Mile Logistics?

Last-mile delivery (or logistics) refers to the final few miles a package takes between a distribution centre and the customer. It could be one-mile (if the customer lives one-mile away from the facility) but the delivery distance is frequently over 50 miles or more. Unlike the middle-mile, which traditionally only impacts larger retailers and producers, the last-mile of a delivery affects everyone, as all goods need to get to the customer.

Costs for those final miles can reach over 50% of the total cost of delivery, and also carry the highest risk of business loss. If a customer pays a premium and the delivery doesn’t arrive on time, the last-mile can cost the producer the whole order.

Who is Involved in Last-Mile Logistics?

The last mile can impact everyone in the supply chain, from producer to customer. The size of the delivery may mean that a wholesale distributor is involved in sending the goods to the retailer before it reaches the final fulfillment center. Let’s take a look at how these parties interact with delivery in the last mile.

Wholesale Distributors

Wholesale distributors assist the supplier or producer of the goods by distributing them in bulk to retailers. They are an integral part of the supply chain for multiple sectors, from fast-moving consumer goods to construction materials and electronics. Wholesalers ensure that the goods reach the distribution hub in time to meet the demands of the last-mile delivery.

Wholesalers have also been disrupted in recent years by an uptake in producers selling directly to the customer. A Deloitte study suggests that this has led to a decline of almost 8.3% for wholesalers between 2006 and 2016. This leads to increased pressure on wholesale distributors to fulfil timelines for retailers and add value to their role in the supply chain.

Retailers

Retailers also face pressure in fulfilling the demands of the last-mile. They require wholesalers and producers to deliver on time, in order to meet the delivery date for the customer. This is particularly essential with fast moving consumer goods like groceries. A CapGemini survey revealed that 40% of customers cited food delivery services as an essential part of grocery purchases, with half those surveyed prepared to switch to a retailer that provided a better delivery service.

Retailers have two options when coordinating last-mile deliveries:

• - Manage their own distribution hubs for online shopping and orders
• - Outsource to a delivery service or fulfillment center to meet customer demand

The huge premiums and customer loyalty associated with deliveries are an integral part of a retailer’s income. Speed in last-minute delivery will also expedite the processing of return goods for the retailer (currently estimated to cost retailers £60 billion a year in the UK alone), getting items back on the shelves as quickly as possible.

Fulfilment Centers

Fulfilment centers are warehouses or facilities that store goods for retailers and producers and carry out distribution services on their behalf. Unlike simply renting a warehouse, a fulfilment center will also carry out the last-mile delivery to the customer. The success of a fulfilment center rests entirely on their ability to carry out the last-mile. In 2020, online orders increased by 50%, accelerating the evolution of fulfilment centers by more than a decade.

How is the Last-Mile Logistics Organized and What are the Biggest Challenges?

Check out the structure of last-mile logistics and how it is organized below.

There are four main areas that present the largest logistical challenges for delivery:

Speed

The speed of the delivery is determined by the expectations of the customer. But each route will present its own operational changes that can impact the speed of the delivery. A delivery driver that needs to make multiple stops in a large urban area may be impacted by traffic, while deliveries to countryside areas may need to cover large distances within the small window of a one-day delivery. The shorter the delivery timeline, the more likely it is that even small delays will impact the speed of the delivery.

Cost

The decision to outsource deliveries to third party fulfilment centers or businesses like Amazon will leave you without the responsibilities of handling the last-mile. However, fulfillment by Amazon does lead to the additional costs of storage fees. As long as your stock sits in one of their fulfilment centers, you pay fees to the center. With a seller or company fulfilled delivery, you don’t have to worry about the fees you pay to the third party fulfilment center, but will be responsible for all dispatch costs and logistics.

Efficiency

Route optimization is an essential part of successful last-mile deliveries. Enabling drivers to view upcoming obstacles and delays will make it much easier to meet delivery deadlines. Inventory management will also allow drivers to have eyes on their goods, allowing for better route planning.

Transparency

Customers value transparency in the last-mile; in 2020 international supermarket retailer Tesco increased its delivery slots from 600,000 a week from 1.4 million due to the increase in demand for delivery time slots. To meet the challenge of demand, companies like Amazon also arrange collection lockers, so that customers can pick up packages at their convenience.

How Can Less Platform Resolve These Issues?

Less is enterprise-grade, cloud-managed distribution management software. Less can reduce the costs traditionally spent on last-mile deliveries by streamlining route planning and optimization to increase efficiency and meet same-day delivery deadlines. Drivers can effectively manage orders with real-time ETAs and easily track goods for deliveries. Make the last-mile deliveries on time and with minimal vehicles, saving you costs on overheads while still meeting customer demand.

Resolve Last-Mile Logistics Challenges with Less

The last-mile is the most expensive and high-demand link in the supply chain. Even the smallest delays in the supply chain can jeopardize a delivery and lose producers an order. That’s why Less as a distribution management software can play an essential role by reducing your costs and boosting your delivery transparencies in order to meet the expectations of the consumer. Request a demo today to find out how Less can help you make more out of your last-mile logistics management.

Author
Vardan Markosyan is the CEO at Less® Platform
MBA from the University of Chicago Booth School of Business
PhD in Economics from the Institute of Economy of NAS RA
He spent decades of research and consultancy on business process optimization and system design

1. Why last mile logistics is important?

Last-mile logistics is the most complex and, happened to be believed, most costly part of the distribution supply chain. While there is a growing buzz around the expression, the last mile implies different things for different industries. So, before moving forward with the recommendations of how to optimize last-mile logistics one should first define what it actually means for the specific operating model and where the inefficiencies are?      

With the accelerated growth of e-commerce, increasing requirements is creating burdens on the logistics chain, which amplifies the final mile. According to a 2022 report by Deloitte, as consumers’ delivery-related demands increase—as does the cost and complexity of meeting those demands—new, nimbler options are arising to enable retailers to outsource last-mile delivery to the gig economy. Amazon Flex and Walmart’s Spark Delivery enable independent drivers to deliver online purchases to the retailers’ customers. Along with the growth of e-commerce, last-mile logistics has its specifics and new challenges for traditional sectors as well. These challenges can be sector-specific, such as decreasing delivery times and increasing density of fulfillment centers but also can result from general macroeconomic trends such as shortages of employees and supply chain problems.  

2. Last mile delivery logistics is not just home deliveries

“Last-mile” logistics or deliveries might have different meanings for different sectors and industries. First of all, different companies might be implementing final mile deliveries using private fleets or hiring carriers. Thus, we can differentiate between private fleet shippers and for-hire carriers. While for private fleet shippers logistics operations are supplementary to their main businesses, for-hire carriers or logistics service providers (LSP) generate income for transportation services. Secondly, the last mile will be different for companies that are in the B2B business such as wholesale distributors, or focusing mainly on home deliveries such as retailers. Some e-commerce companies could be put into a category of their own as they mostly don't own vehicles but may combine both retail and wholesale operations.   

Retailers and e-commerce

“Last-mile logistics” in the retail sector mainly implies the organization of store-to-customer small-size delivery processes.   

According to U.S. Census Bureau News Total e-commerce sales for 2021 were estimated at $870.8 billion, an increase of 14.2% from 2020. Total retail sales in 2021 increased 17.9% from 2020. E-commerce sales in 2021 accounted for 13.2% of total sales. E-commerce sales in 2020 accounted for 13.6% of total sales.

Demands for faster, cheaper shipping result in a growing complexity of last-mile delivery operations. Consumers can now choose to get their purchases in a variety of ways: home delivery, ship-to-store, ship-to-locker, or reserve online and pick up in-store. Returns can now be made in-store or by shipping the product back to the retailer. Linear supply chains have given way to complex, interconnected supply chain networks. And the subscription services offered by a growing number of retailers often subsidize or waive delivery fees, making it incredibly easy for consumers to place many small orders instead of a few large ones. The result? More—and more frequent— orders, a sharp rise in demand for expedited delivery, an e-commerce logistics market with a compound annual growth rate (CAGR) of 20.4 percent, and rising costs for retail and consumer goods companies. Amazon is able to meet consumers’ demands by spending 15.6 percent of its net sales revenue on shipping costs and an incredible 27.9 percent on combined fulfillment costs. Retailers, by comparison, spend about 8 percent of revenue on e-commerce fulfillment on average; in the current retail environment, it would be hard for them to cover more of the delivery costs and still stay profitable.

Different companies prefer different last-mile delivery logistics models. Larger retailers tend to run private fleets of vehicles, while smaller ones rely on outsourced transportation. It should be mentioned that most private fleet companies usually combine both operational models. Hence, processes and problems may differ for different types of shippers.

We can also divide retail deliveries into grocery and the rest as delivery patterns and velocity are quite different. The average lead time for delivery of groceries is 0.7 days, compared to electronics which take 3 days, and 5 days for apparel. Thus, consolidation and logistics management models can vary substantially.    

Logistics service providers (LSP) and delivery companies

We can conditionally divide logistics service providers into long-haul and local delivery models. There are a number of LSPs that operate on both markets, we see a growing number of specialized local delivery companies, especially during the Covid 19 pandemic. We see also the emergence of platforms that connect shippers and individual vehicle owners. Later are essentially networks of independent couriers and delivery agents connected to a delivery ecosystem that pick up and deliver small packages. The other distinct difference between long-haul and local deliveries is that local deliveries are usually on the same day while long-haul deliveries can vary from 1-7 days.

As it turns out that the final mile can be used to describe the sharply different distribution and delivery models there is a wide range of estimated market sizes. The Bureau of Economic Analysis (BEA) reports that the last leg of overall transportation costs makes up as much as 28% of logistics expenses. Transportation’s contribution to the economy can be measured by its contribution to gross domestic product (GDP). The Bureau of Transportation Statistics reports the final (finished) transportation goods and services purchased by people, businesses, and governments in 2018 contributed $1,489.7 billion, or 8.9%, to U.S. GDP. If we apply the aforementioned 28% BEA figure, we could say the market for the final mile (from a GDP perspective) is an astounding $417 billion. Contrary, if we narrow down the final mile to home deliveries and assume that these are small-sized we need to look into parcel delivery numbers in the picture below⁴. 

There is also another important distinction between the organization of long-haul and same-day logistics - long-haul deliveries are usually done using semi-tractors or sleeper trucks while local deliveries are implemented by smaller trucks or even passenger cars. Thus, contracting, company and driver onboarding are different for long-haul transportation needs. The latter is a highly regulated industry that needs special licenses and drivers. The value of the average delivery is also much higher hence the carriers are going through much meticulous due diligence. The important peculiarity is that while more individuals can be involved in local deliveries, continued driver shortage, increasing insurance, and, lately, fuel costs make long-haul capacity scarcer and pressure on the costs higher. 

As you may see in the picture above, the ground transportation rates almost doubled during the last two years. 

Wholesale distributors

Wholesale distributors are the middleman between producers and retailers with slight differences from industry to industry. It is one of the more complex industries driven by high numbers of SKUs, customers, suppliers, and transactions, and their pricing and rebate structures. They can be grouped into major ones such as food, beverages, pharmaceutical, electronics, industrial, and building materials. According to the National Association of Wholesale Distributors (NAW) total wholesale distribution revenue ended the year at $5.970 trillion, just slightly below the April 2019 record high. GDP for the year totaled a record-high $21.734 trillion with a growth rate of 4.0%. The Wholesale Distribution industry is 27.5% of U.S. GDP. 

Last-mile logistics from the wholesale distributor perspective is different. As they are middlemen between producers and retailers/local businesses their last mile will be the leg between the distribution centers and local warehouses/shops. The wholesalers tend to rely on private fleet operations as they operate in an environment of rigid deadlines. The average size of a single drop also tends to be larger and distances longer, while the number of stops in daily routes will be fewer compared to home deliveries. We observe changes in the industry in the form of growing concentration as well as the emergence of disruptive business models as well. For example, Amazon’s sales platform is supported by more than 2 million third-party sellers worldwide. Of those sellers, 26% sell products using a wholesale sales model. 

3. Challenges of last mile logistics

Scheduling and routing is a great challenge

Scheduling and routing daily package deliveries for a relatively smaller delivery radius, i.e. 50 miles is different from scheduling and routing deliveries of hundreds or even thousands of boxes per one drop for a 300 miles radius. The first is going to be for home deliveries from warehouses of fulfillment centers located closer to city centers. The latter is the case of a food distribution operation to stores, restaurants, and other businesses. Large building or construction material distributors may have lesser stops per route but their route can strain through the weeks. Apart from the difference in distances, route durations, and the number of stops per route, this distribution model requires drivers with different skill sets and driving habits/work models as well as sometimes radically different equipment. When it comes to large 3PLs or LSP this process may combine all of the abovementioned with the need to solve the consolidation problem to/from multiple warehouses and the involvement of different counterparts.   

Planning multi-leg deliveries creates delays 

As we have already established, last-mile delivery logistics can mean different things for different industries. So, the complexity of the operational model hence the complexity of the planning process can sometimes differ cardinally. It is becoming even more cumbersome when planners are trying to coordinate the timing between the different legs of the supply chain, such as the first, the middle, and the last miles. While manufacturers and distributors will mostly use last-mile consolidation centers and warehouses, transportation companies and logistic service providers (LPS) might even bypass these centers and implement multi-day delivery to the final customers. It is going to be the case, especially for B2B or heavier deliveries. 

Coordination between different delivery operators

It can be a great challenge when planning the last mile. It is generally assumed that when the last mile is concerned there is one delivery party that moves the freight. While that could be a case for home or packaged deliveries, in many operational models or industries there are more than one or even two delivery/transportation partners. Thus along with the larger planning range (weekly or biweekly) and multiple consolidation locations involved, the need for coordination between multiple counterparts is going to pose another challenge. 

Visibility is important

When it comes to visibility, logistic managers usually imply to the consumer that they know where your truck is. While it is good information to have, especially in real-time, locating your delivery is one (small) part of the total visibility. It should help not only track deliveries but also make preventive operational management and long-term data analytics and efficiency optimization. 

Capturing data: Capturing data is essential as it is created in real-time or near time and distributed across different operational decision-makers. It particularly includes stops or order level updates of estimated times of arrivals (ETA) at a driver, customer, dispatcher, or DC level. Post factum delivery data such as late deliveries and actual service times is also important to capture and store properly. To minimize late deliveries by implementing dynamic routing, dispatchers need timely data that shows ETAs with service times and other variables not being produced by GPS tracking software.  

Aggregating data: Capturing and aggregating delivery data per different instances and layers is the key to efficient operational and strategic middle-mile network management. The difficulty of it is that systems across different parts of the logistics chain are captured and stored differently, so it is not always possible to have different levels of data aggregation without a synchronized ecosystem.    

Supporting decision-making: Aggregated data is a foundation for retrospective and prospective data analytics. One of the major problems of growingly complex logistic supply chains is the absence of full digitization and synchronization of all the necessary information across different layers of an organization.

Trucking capacity is scarce 

The ongoing truck driver shortage is now estimated at 80,000, up from 61,000 just three years ago. A new study by Bob Costello, chief economist for the American Trucking Associations (ATA), estimates that the industry will have to recruit 1 million new drivers within the next nine years to replace retiring drivers. This shortage makes it really hard for fleet-light shippers to cover loads and implement proper long-term transportation planning. This is also one of the main reasons for the rising freight costs described above.

4. Less Platform as the best last mile delivery software

Depending on the type of the operational model and or the sector of industry, last-mile deliveries can span from a couple of stops per vehicle per day to high volume short distance stops. Less Platform is capable to route and scheduling deliveries that are peculiar to any distribution model.  

Types of industries using last mile logistics software

Lest's discuss several use cases.

For B2C type of high volumes deliveries that are peculiar to e-commerce and retail, it is important that the algorithms could plan 10’s stops in the routes. These deliveries are usually planned daily while vehicles usually cover shorter distances. Dynamic capabilities are also more important as a high level of discrepancies between optimized delivery plans and live deliveries can happen

The next type of local or city dispatch operations is fleet-light operations in case of which delivery companies don't own vehicles. In this case, they may either crowdsource deliveries before or after planning or signup with major carriers (FedEx, UPS, DHL). 

The separate operations model of deliveries is the delivery companies that don't have warehouses or distribution centers. These companies usually do high-volume pickups and deliveries during the day. Hence, a different class of algorithms is developed for these types of movies in Less Platform. 

For the wholesale distributors and also retailers that need to plan B2B moves such as DC-to-Store or Store-to-DC in case of reverse logistics, a distribution model covers a larger area. In the meantime, the number of stops on the routes will be lower, while the weight of each delivery higher. Vehicles are going to be larger as well so capacity becomes more important. 

There are also large use cases of long-haul delivery planning and routing by 3PLs, large shippers, and carriers. Two types of moves are being planned; a) consolidation and routing of LTL’s (Less than truckload) shipments into FTLs (Full truckloads) both by asset-light and asset-based shippers, b) Forward planning of FTLs. It is worth note that in the former case the main optimization parameter is the mileage for fleet-based operations while for fleet-light shippers and 3PLs total cost should be minimized. In the case of FTL forward planning the main optimization parameter is the deadhead or the empty moves between stops (which should be minimized). Decision-making functions also might differ depending on who is making these decisions - shippers and 3PLs would be interested in mainly cost optimization by finding cheaper carriers, although 3PLs might also reach that via better preliminary consolidation or forward planning. Fleet-based logistics service providers (LSPs), such as LTL trucking companies might be interested in an increase in loaded mileage. 

A special case is the companies that run a mix of fleet-based and fleet light operations. These are large 3PLs such as Hub Group or JB Hunt as well as retailers such as Walmart, Hope Depot, or Pepsico. They need to combine delivery routing technologies with load outsourcing or even by relying on spot markets.   

Software Functionality

The are many features in Less Platform that support or work for almost all the abovementioned delivery models.

Multiple DCs. For example, multiple depots or distribution centers (DC) planning functionality. It is very convenient for companies that have centralized operational planning activities. Secondly, it helps to generate data for separate DCs as well as aggregate it on a company level. A number of warehouses or DCs is growing and getting closer to customers these days, making both operational and strategic routing harder and potential inefficiencies bigger. In the meantime, companies that run multiple pickups and delivery operations without consolidating their shipments in the warehouses can use Less Platform’s pickup and delivery routing and scheduling algorithms.

Delivery windows and variable service times. Two important constraints that make it hard to plan are daily delivery windows and variable service times. These two constraints can also drastically affect capacity used and routes planned. The absence of proper planning tools can make a planner's work daunting and consume too much time. It is also the main cause why distributors use excessive capacities, drive unnecessary miles and have late deliveries. These effects are being amplified due to increased demand variability, speed of deliveries, and tightening delivery windows. 

Dynamic planning. Automatic routing is easiest the job but there are plenty more situations requiring manual planning. Less platform as a delivery software provides dynamic planning functional for both pre-dispatch and post-dispatch stages. After getting a route plan, a planner can reroute different stops by assigning them to different routes both individually and in bulk. Then sequencing algorithms will re-optimize the total plan. After making changes algorithms assess the feasibility of delivery windows by checking with recalculated ETAs. All the changes are instantly visible for drivers post-dispatch.  

Scheduling. Planned loads can be scheduled both daily and weekly for respective drivers. Less Platform’s dispatch

management software is connected to the driver app so all drivers have planned loads once they are assigned to them. After the dispatch, the driver app updates all ETAs and synchronizes them with the dispatch board. Less Platform’s algorithms then check potential late deliveries by comparing ETAs with delivery windows. This way dispatchers can be proactive to avoid late deliveries or dynamically optimize the delivery process otherwise.

Optimization with contracted carriers. Less Platform also brings together demand and supply by helping shippers cover more loads at lower cost and carriers increase loaded mileage and earn for additional stops. According to our calculations and based on the information provided by more than 50 trucking companies, the average over-the-road truck has 10 linear feet or approximately 10,000 pounds of unused capacity. This “dark capacity” has a market value of over $200 billion. We help carriers to fill a partially loaded truck as fast as an empty truck, leading to a dramatic increase in asset utilization, the main driver of profitability for carriers. As shown in the picture below both shippers and carriers can find shipments or available space in the trucks using our AI algorithms. 

This was a small list of various tools and innovations that Less Platform offers to different industries and companies.

Please contact [email protected] if you want to learn more about Less Platform's Last-mile delivery logistics orchestration capabilities.  

Status of the new normal

The new normal requires firms that want to stay afloat or grow to understand its peculiarities and take action. So adaptation to post - COVID19 environment is crucial. Low Touch Economy is the new state of our society and economy and has been permanently altered by Covid-19. It is characterized by low-touch interactions, health and safety measures, new human behaviors, and permanent industry shifts. For the distribution industry, it creates both internal and external challenges.  

The most prominent and probably lasting external hardship is the behavioral shift. Particularly, people will know how they interact with each other and businesses. Thus, we can expect lower demand for the entities which are most affected by the behavioral shift such as restaurants, schools, and other places for public gatherings. People are also changing their behaviors relative to how they try and touch things with health and safety issues being paramount.   

Secondly, some of these changes seem like they are here to stay. Thus, for some distributors such as foodservice and apparel, demand shock of this new normal can last longer and changes in demand patterns can be permanent.  

 And lastly, behavioral changes also affect how people co-exist in the workspace and interact with clients. Working from home has particularly become more widespread. Additionally, fieldwork will produce interactions inherently riskier.   

Adapting your organization’s external strategy 

Consider the instability in supply and demand. As the recent meat crisis in the US shows, sudden supply chain disruptions are possible. To mitigate demand shock or even prepare for further growth companies should focus on their competitive position and expand on it by searching for new opportunities or moving into new subsectors. One example could be adopting better e-commerce practices by creating tools to support online purchasing. Improving the interface for online food menus is a good example. Changing product assortment and looking for new verticals is also a viable option.     

Adapting your organization’s internal strategy to post - COVID19

a) Taking care of the health and safety of field-service personnel by limiting close interaction with customer representatives and move to electronic document exchange.

b) Change office and warehouse rules. For example; less personal interaction and meetings, office space redesign to lower the proximity between employees.  

c) Adapt new remote managerial and operational technologies. Try to keep as many people working remotely as possible, especially vulnerable groups. It also requires adapting cloud-based load and route planning and delivery execution platforms.  

d) Adapt to new staffing and HR procedures. 

Adapting to the new normal is not going to be an easy task and will require a good amount of brainstorming by everyone. The key is to understand industrial, behavioral, social, and regulatory changes and to be able to mitigate current losses and seize new opportunities.   

1. Why last mile logistics is important?

Last-mile logistics is the most complex and, happened to be believed, most costly part of the distribution supply chain. While there is a growing buzz around the expression, the last mile implies different things for different industries. So, before moving forward with the recommendations of how to optimize last-mile logistics one should first define what it actually means for the specific operating model and where the inefficiencies are?      

With the accelerated growth of e-commerce, increasing requirements is creating burdens on the logistics chain, which amplifies the final mile. According to a 2022 report by Deloitte, as consumers’ delivery-related demands increase—as does the cost and complexity of meeting those demands—new, nimbler options are arising to enable retailers to outsource last-mile delivery to the gig economy. Amazon Flex and Walmart’s Spark Delivery enable independent drivers to deliver online purchases to the retailers’ customers. Along with the growth of e-commerce, last-mile logistics has its specifics and new challenges for traditional sectors as well. These challenges can be sector-specific, such as decreasing delivery times and increasing density of fulfillment centers but also can result from general macroeconomic trends such as shortages of employees and supply chain problems.  

2. Last mile delivery logistics is not just home deliveries

“Last-mile” logistics or deliveries might have different meanings for different sectors and industries. First of all, different companies might be implementing final mile deliveries using private fleets or hiring carriers. Thus, we can differentiate between private fleet shippers and for-hire carriers. While for private fleet shippers logistics operations are supplementary to their main businesses, for-hire carriers or logistics service providers (LSP) generate income for transportation services. Secondly, the last mile will be different for companies that are in the B2B business such as wholesale distributors, or focusing mainly on home deliveries such as retailers. Some e-commerce companies could be put into a category of their own as they mostly don't own vehicles but may combine both retail and wholesale operations.   

Retailers and e-commerce

“Last-mile logistics” in the retail sector mainly implies the organization of store-to-customer small-size delivery processes.   

According to U.S. Census Bureau News Total e-commerce sales for 2021 were estimated at $870.8 billion, an increase of 14.2% from 2020. Total retail sales in 2021 increased 17.9% from 2020. E-commerce sales in 2021 accounted for 13.2% of total sales. E-commerce sales in 2020 accounted for 13.6% of total sales.

Demands for faster, cheaper shipping result in a growing complexity of last-mile delivery operations. Consumers can now choose to get their purchases in a variety of ways: home delivery, ship-to-store, ship-to-locker, or reserve online and pick up in-store. Returns can now be made in-store or by shipping the product back to the retailer. Linear supply chains have given way to complex, interconnected supply chain networks. And the subscription services offered by a growing number of retailers often subsidize or waive delivery fees, making it incredibly easy for consumers to place many small orders instead of a few large ones. The result? More—and more frequent— orders, a sharp rise in demand for expedited delivery, an e-commerce logistics market with a compound annual growth rate (CAGR) of 20.4 percent, and rising costs for retail and consumer goods companies. Amazon is able to meet consumers’ demands by spending 15.6 percent of its net sales revenue on shipping costs and an incredible 27.9 percent on combined fulfillment costs. Retailers, by comparison, spend about 8 percent of revenue on e-commerce fulfillment on average; in the current retail environment, it would be hard for them to cover more of the delivery costs and still stay profitable.

Different companies prefer different last-mile delivery logistics models. Larger retailers tend to run private fleets of vehicles, while smaller ones rely on outsourced transportation. It should be mentioned that most private fleet companies usually combine both operational models. Hence, processes and problems may differ for different types of shippers.

We can also divide retail deliveries into grocery and the rest as delivery patterns and velocity are quite different. The average lead time for delivery of groceries is 0.7 days, compared to electronics which take 3 days, and 5 days for apparel. Thus, consolidation and logistics management models can vary substantially.    

Logistics service providers (LSP) and delivery companies

We can conditionally divide logistics service providers into long-haul and local delivery models. There are a number of LSPs that operate on both markets, we see a growing number of specialized local delivery companies, especially during the Covid 19 pandemic. We see also the emergence of platforms that connect shippers and individual vehicle owners. Later are essentially networks of independent couriers and delivery agents connected to a delivery ecosystem that pick up and deliver small packages. The other distinct difference between long-haul and local deliveries is that local deliveries are usually on the same day while long-haul deliveries can vary from 1-7 days.

As it turns out that the final mile can be used to describe the sharply different distribution and delivery models there is a wide range of estimated market sizes. The Bureau of Economic Analysis (BEA) reports that the last leg of overall transportation costs makes up as much as 28% of logistics expenses. Transportation’s contribution to the economy can be measured by its contribution to gross domestic product (GDP). The Bureau of Transportation Statistics reports the final (finished) transportation goods and services purchased by people, businesses, and governments in 2018 contributed $1,489.7 billion, or 8.9%, to U.S. GDP. If we apply the aforementioned 28% BEA figure, we could say the market for the final mile (from a GDP perspective) is an astounding $417 billion. Contrary, if we narrow down the final mile to home deliveries and assume that these are small-sized we need to look into parcel delivery numbers in the picture below⁴. 

There is also another important distinction between the organization of long-haul and same-day logistics - long-haul deliveries are usually done using semi-tractors or sleeper trucks while local deliveries are implemented by smaller trucks or even passenger cars. Thus, contracting, company and driver onboarding are different for long-haul transportation needs. The latter is a highly regulated industry that needs special licenses and drivers. The value of the average delivery is also much higher hence the carriers are going through much meticulous due diligence. The important peculiarity is that while more individuals can be involved in local deliveries, continued driver shortage, increasing insurance, and, lately, fuel costs make long-haul capacity scarcer and pressure on the costs higher. 

As you may see in the picture above, the ground transportation rates almost doubled during the last two years. 

Wholesale distributors

Wholesale distributors are the middleman between producers and retailers with slight differences from industry to industry. It is one of the more complex industries driven by high numbers of SKUs, customers, suppliers, and transactions, and their pricing and rebate structures. They can be grouped into major ones such as food, beverages, pharmaceutical, electronics, industrial, and building materials. According to the National Association of Wholesale Distributors (NAW) total wholesale distribution revenue ended the year at $5.970 trillion, just slightly below the April 2019 record high. GDP for the year totaled a record-high $21.734 trillion with a growth rate of 4.0%. The Wholesale Distribution industry is 27.5% of U.S. GDP. 

Last-mile logistics from the wholesale distributor perspective is different. As they are middlemen between producers and retailers/local businesses their last mile will be the leg between the distribution centers and local warehouses/shops. The wholesalers tend to rely on private fleet operations as they operate in an environment of rigid deadlines. The average size of a single drop also tends to be larger and distances longer, while the number of stops in daily routes will be fewer compared to home deliveries. We observe changes in the industry in the form of growing concentration as well as the emergence of disruptive business models as well. For example, Amazon’s sales platform is supported by more than 2 million third-party sellers worldwide. Of those sellers, 26% sell products using a wholesale sales model. 

3. Challenges of last mile logistics

Scheduling and routing is a great challenge

Scheduling and routing daily package deliveries for a relatively smaller delivery radius, i.e. 50 miles is different from scheduling and routing deliveries of hundreds or even thousands of boxes per one drop for a 300 miles radius. The first is going to be for home deliveries from warehouses of fulfillment centers located closer to city centers. The latter is the case of a food distribution operation to stores, restaurants, and other businesses. Large building or construction material distributors may have lesser stops per route but their route can strain through the weeks. Apart from the difference in distances, route durations, and the number of stops per route, this distribution model requires drivers with different skill sets and driving habits/work models as well as sometimes radically different equipment. When it comes to large 3PLs or LSP this process may combine all of the abovementioned with the need to solve the consolidation problem to/from multiple warehouses and the involvement of different counterparts.   

Planning multi-leg deliveries creates delays 

As we have already established, last-mile delivery logistics can mean different things for different industries. So, the complexity of the operational model hence the complexity of the planning process can sometimes differ cardinally. It is becoming even more cumbersome when planners are trying to coordinate the timing between the different legs of the supply chain, such as the first, the middle, and the last miles. While manufacturers and distributors will mostly use last-mile consolidation centers and warehouses, transportation companies and logistic service providers (LPS) might even bypass these centers and implement multi-day delivery to the final customers. It is going to be the case, especially for B2B or heavier deliveries. 

Coordination between different delivery operators

It can be a great challenge when planning the last mile. It is generally assumed that when the last mile is concerned there is one delivery party that moves the freight. While that could be a case for home or packaged deliveries, in many operational models or industries there are more than one or even two delivery/transportation partners. Thus along with the larger planning range (weekly or biweekly) and multiple consolidation locations involved, the need for coordination between multiple counterparts is going to pose another challenge. 

Visibility is important

When it comes to visibility, logistic managers usually imply to the consumer that they know where your truck is. While it is good information to have, especially in real-time, locating your delivery is one (small) part of the total visibility. It should help not only track deliveries but also make preventive operational management and long-term data analytics and efficiency optimization. 

Capturing data: Capturing data is essential as it is created in real-time or near time and distributed across different operational decision-makers. It particularly includes stops or order level updates of estimated times of arrivals (ETA) at a driver, customer, dispatcher, or DC level. Post factum delivery data such as late deliveries and actual service times is also important to capture and store properly. To minimize late deliveries by implementing dynamic routing, dispatchers need timely data that shows ETAs with service times and other variables not being produced by GPS tracking software.  

Aggregating data: Capturing and aggregating delivery data per different instances and layers is the key to efficient operational and strategic middle-mile network management. The difficulty of it is that systems across different parts of the logistics chain are captured and stored differently, so it is not always possible to have different levels of data aggregation without a synchronized ecosystem.    

Supporting decision-making: Aggregated data is a foundation for retrospective and prospective data analytics. One of the major problems of growingly complex logistic supply chains is the absence of full digitization and synchronization of all the necessary information across different layers of an organization.

Trucking capacity is scarce 

The ongoing truck driver shortage is now estimated at 80,000, up from 61,000 just three years ago. A new study by Bob Costello, chief economist for the American Trucking Associations (ATA), estimates that the industry will have to recruit 1 million new drivers within the next nine years to replace retiring drivers. This shortage makes it really hard for fleet-light shippers to cover loads and implement proper long-term transportation planning. This is also one of the main reasons for the rising freight costs described above.

4. Less Platform as the best last mile delivery software

Depending on the type of the operational model and or the sector of industry, last-mile deliveries can span from a couple of stops per vehicle per day to high volume short distance stops. Less Platform is capable to route and scheduling deliveries that are peculiar to any distribution model.  

Types of industries using last mile logistics software

Lest's discuss several use cases.

For B2C type of high volumes deliveries that are peculiar to e-commerce and retail, it is important that the algorithms could plan 10’s stops in the routes. These deliveries are usually planned daily while vehicles usually cover shorter distances. Dynamic capabilities are also more important as a high level of discrepancies between optimized delivery plans and live deliveries can happen

The next type of local or city dispatch operations is fleet-light operations in case of which delivery companies don't own vehicles. In this case, they may either crowdsource deliveries before or after planning or signup with major carriers (FedEx, UPS, DHL). 

The separate operations model of deliveries is the delivery companies that don't have warehouses or distribution centers. These companies usually do high-volume pickups and deliveries during the day. Hence, a different class of algorithms is developed for these types of movies in Less Platform. 

For the wholesale distributors and also retailers that need to plan B2B moves such as DC-to-Store or Store-to-DC in case of reverse logistics, a distribution model covers a larger area. In the meantime, the number of stops on the routes will be lower, while the weight of each delivery higher. Vehicles are going to be larger as well so capacity becomes more important. 

There are also large use cases of long-haul delivery planning and routing by 3PLs, large shippers, and carriers. Two types of moves are being planned; a) consolidation and routing of LTL’s (Less than truckload) shipments into FTLs (Full truckloads) both by asset-light and asset-based shippers, b) Forward planning of FTLs. It is worth note that in the former case the main optimization parameter is the mileage for fleet-based operations while for fleet-light shippers and 3PLs total cost should be minimized. In the case of FTL forward planning the main optimization parameter is the deadhead or the empty moves between stops (which should be minimized). Decision-making functions also might differ depending on who is making these decisions - shippers and 3PLs would be interested in mainly cost optimization by finding cheaper carriers, although 3PLs might also reach that via better preliminary consolidation or forward planning. Fleet-based logistics service providers (LSPs), such as LTL trucking companies might be interested in an increase in loaded mileage. 

A special case is the companies that run a mix of fleet-based and fleet light operations. These are large 3PLs such as Hub Group or JB Hunt as well as retailers such as Walmart, Hope Depot, or Pepsico. They need to combine delivery routing technologies with load outsourcing or even by relying on spot markets.   

Software Functionality

The are many features in Less Platform that support or work for almost all the abovementioned delivery models.

Multiple DCs. For example, multiple depots or distribution centers (DC) planning functionality. It is very convenient for companies that have centralized operational planning activities. Secondly, it helps to generate data for separate DCs as well as aggregate it on a company level. A number of warehouses or DCs is growing and getting closer to customers these days, making both operational and strategic routing harder and potential inefficiencies bigger. In the meantime, companies that run multiple pickups and delivery operations without consolidating their shipments in the warehouses can use Less Platform’s pickup and delivery routing and scheduling algorithms.

Delivery windows and variable service times. Two important constraints that make it hard to plan are daily delivery windows and variable service times. These two constraints can also drastically affect capacity used and routes planned. The absence of proper planning tools can make a planner's work daunting and consume too much time. It is also the main cause why distributors use excessive capacities, drive unnecessary miles and have late deliveries. These effects are being amplified due to increased demand variability, speed of deliveries, and tightening delivery windows. 

Dynamic planning. Automatic routing is easiest the job but there are plenty more situations requiring manual planning. Less platform as a delivery software provides dynamic planning functional for both pre-dispatch and post-dispatch stages. After getting a route plan, a planner can reroute different stops by assigning them to different routes both individually and in bulk. Then sequencing algorithms will re-optimize the total plan. After making changes algorithms assess the feasibility of delivery windows by checking with recalculated ETAs. All the changes are instantly visible for drivers post-dispatch.  

Scheduling. Planned loads can be scheduled both daily and weekly for respective drivers. Less Platform’s dispatch

management software is connected to the driver app so all drivers have planned loads once they are assigned to them. After the dispatch, the driver app updates all ETAs and synchronizes them with the dispatch board. Less Platform’s algorithms then check potential late deliveries by comparing ETAs with delivery windows. This way dispatchers can be proactive to avoid late deliveries or dynamically optimize the delivery process otherwise.

Optimization with contracted carriers. Less Platform also brings together demand and supply by helping shippers cover more loads at lower cost and carriers increase loaded mileage and earn for additional stops. According to our calculations and based on the information provided by more than 50 trucking companies, the average over-the-road truck has 10 linear feet or approximately 10,000 pounds of unused capacity. This “dark capacity” has a market value of over $200 billion. We help carriers to fill a partially loaded truck as fast as an empty truck, leading to a dramatic increase in asset utilization, the main driver of profitability for carriers. As shown in the picture below both shippers and carriers can find shipments or available space in the trucks using our AI algorithms. 

This was a small list of various tools and innovations that Less Platform offers to different industries and companies.

Please contact [email protected] if you want to learn more about Less Platform's Last-mile delivery logistics orchestration capabilities.  

Logistics and supply chain management are standard business terms, and a day does not pass by without them getting mentioned in a business setting. Some experts believe that the two terms are very similar and can be used interchangeably. However, some differ from this belief.
These two have been used interchangeably in many countries; for instance, we have no other term for supply chain management in America. However, the Europeans call it logistic management.
Although they seem similar, they differ factually. Let's take a close look at each.

Logistics

It is the process where goods are handled and managed within a department or in the organization. It is also associated with any activity that involves the movement and handling of goods. An inventory document tracks the movement and handling of the inventories.

Logistic management involves activities such as warehousing, transportation, packaging, among others. Logistics aims to ensure that the inventory gets delivered to the intended party at the right location and time.

Supply Chain Management

It involves all the activities in an organization and sometimes also includes some logistical aspects. Supply chain management starts from buying raw material to manufacturing and delivering the end product to your clients.
Most of these processes require coordination between various companies to ensure the quality of the inventories. For example, one company mines the raw material and another buys the raw material and manufactures or processes it, and the next company delivers the end product to the consumer.

Logistics VS Supply chain management: What are the differences?

The two refer to the same business practice. Logistics and supply chain management are all aspects of the supply, transfer and management of inventories and people. They all ensure that business operations are efficient.
However, though they may seem similar, supply chain management links the manufacturing, purchasing and distribution of goods into one process. It works with the manufacturers, retailers, suppliers and final consumers. The way it collaborates with the channels of distribution makes it provide efficient quality services. Logistics is critical in supply chain management.

Other differences are:

• Logistics management is the process in which goods are integrated and managed in an organization. In contrast, the supply chain is involved with the management or movement and coordination of supply chains of a business.
• Logistics management is concerned with client satisfaction, while supply chain management focuses more on the competitive advantage.
• Only one organization is involved in logistics management compared to supply chain management, which involves multiple businesses.
  Supply chain management is concerned with planning, implementation and storage of inventory to meet consumer requirements. These processes occur between the point of origin of the goods and services and the point of consumption. In comparison, logistics management is only concerned with delivering the right product at the required time.
• Supply chain management comprises many interconnected activities linked and ensures the raw materials are handled until they are manufactured and reached. On the other hand, logistics management is concerned with warehousing, packaging, controlling and managing stock and fulfilling orders.
• Supply chain management is a broad term that involves the connection of supplies and manufacturers to consumers. On the other hand, logistics management is only involved with how goods are stored and managed.

The Five Basic Steps of Supply Chain Management

1. Planning

Before any chain management process begins, you should first plan. Since the aim is to deliver the goods at the right time and place, look for components that will help you, such as delivery models, the business's location, designing and warehouse, among other essential things. It would help if you also came up with a model of how you will transport the goods and where they will be stored.

2. Sources

After planning, you should identify the vendors or suppliers that will help you obtain the goods and services to meet the demand efficiently and cost-effectively. Since supplies have to meet specific quality standards before operating, they will supply you with quality goods.
You can source for both perishable and non-perishable goods. But if you are sourcing for perishable goods, give the supplier minimal lead time to help you with the minimal inventory approach. Whereas when sourcing for non-perishable products, ensure that the supplier quotes a lead time that is less than the period in which the inventory reaches zero. Doing so safeguards you from losing inventory.

3. Make

After getting the product, you should transform it into a final product according to the consumer's taste and preferences. At this stage, activities such as testing, assembling and packaging occur. You can also get feedback from the consumers. The feedback will help you make any necessary product improvements.

4. Deliver

Delivering helps with both direct and indirect integration of the business with its clients. It can make or destroy the brand image of your business. When the consumers order a product, they have high expectations in your logistics and delivery channels. Businesses use different freights such as air and road, or rail and road, to have an easy and fast delivery.

5. Return

A consumer may sometimes return a product after a delivery has been made. This step is concerned with the return of products, and it is often referred to as "Reverse Logistics." A supply management system should ensure that their relationship with the final consumers does not deteriorate.
The step is also reversed: a business can return inventory to the supplier. Often, low-quality expired or undesired goods are returned to the vendors.

The Logistics Functions Within Supply Chain Management

Order Processing

It is where a buyer sends a purchase order to a supplier. The document contains the details of the product which the buyer wishes to be supplied, its price, the preferred delivery period, taxes, payment terms and any other terms that they have agreed upon.

Inventory Control

It is concerned with keeping enough inventories to fulfill client needs and ensure that the inventory carrying cost becomes lower. In short, it is an exercise that ensures that the business does not lose a market opportunity and does not incur huge costs when doing so.

Warehousing

It is a logistic process where the finished goods are stored until they get sold.

Transportation

Transportation is needed for the products to move from the supplier to the buyer. It is a crucial element of logistics.

Material Handling and Storage System

How fast the inventory moves in a supply chain is dependent on your handling systems. If the business has an improper material handling method, delays, damages and incidental overheads will increase.
It would help if you automated or mechanized your material handling.

Industrial Packaging

It influences the logistical system. Logistical packaging helps in damage protection, economizing storage space and handling of the inventories.

How Logistics Can Help Improve Efficiency and Reduce Costs

If your business uses an automated logistics system, your operational efficiency will increase. Also, it increases scalability and minimizes manual errors.

• Logistics reduces costs since it focuses on;
• Labour costs,
• Preventive maintenance
• Safety
• Use of systems and tactical technology
• The customer; and
• Suppliers for logistics cost reduction

Supply Chain Management Challenges and How to Overcome Them Through Logistics

Customer Service

An organization should provide its customers with the right quantity of the right goods or services to the right location and the right moment. However, an organization may fail at this. To succeed, set up a stable system or visual channel that updates the customers on how the product is fairing and inform them of any developing changes.

Cost Control

If there is an increase in energy prices, the number of global customers, labour rates and other factors, your operating costs may increase. When this happens, you need to invest in the right technology to reduce logistics and supply management's additional costs. Also, you should have a plan that you monitor closely and apply change when it is necessary.

Planning and Risk Management

Some changes can appear from nowhere and greatly affect your logistics and supply chain management. Such changes include; new political agendas, launching a new product, sudden consumer demands and credit availability. For your business to be effective and efficient at all times, it should conduct periodic redesigns and assessments.

Supplier Relationship Management

The supplier may sometimes not follow the set standards, which significantly affects your inventory. A business and its suppliers should build a strong relationship that will help each one understand one another's needs better. And the easiest way of doing this is by using visibility and communication.

Talent

Finding someone who is qualified and has the talent to manage inventory is sometimes challenging. And even if you find one, it is tough to groom them for this role.

How Less Platform Can Help Optimize Logistics and Supply Chain Management

The Less Platform will equip you with route planning software to reduce product delivery time from the supplier. It will also help you;

• Minimize the unnecessary work-hours of your planners
• Use few transportation vehicles for the same purpose; and
• Help you find the most co-efficient route.

Check out Less Platform's video demo for mobile here.

In conclusion, these two practices are fundamental. Although they are different, they must work together to achieve the bigger goal of providing products to the consumer.

Author
Vardan Markosyan is the CEO at Less® Platform
MBA from the University of Chicago Booth School of Business
PhD in Economics from the Institute of Economy of NAS RA
He spent decades of research and consultancy on business process optimization and system design

We have seen a surge in B2B 3PL and fulfillment operations during the last few years. This trend continues accelerating as e-commerce grows at a steady phase and delivery times shorten. Thus, traditional asset-based logistic providers such as; FedEx Logistics, J. B. Hunt, Hub group, Kenko Logistics, Distribution technology, Atlanta bonded, Cardinal logistics, have to deal with larger volumes and faster deliveries. It should be noted that 3PL’s specializing in B2B distribution usually keep their fleet of trucks in combination with contracted carriers. So delivery route planning fo 3PLs is becoming both the source of great efficiencies and potential losses.

Why is this difficult?

Delivery Route Planning for 3PLs

Unlike city dispatch and delivery, 3PLs might have a multiday delivery route planning horizon from multiple distribution centers (DCs). The asset-based 3PLs main goal is to have the maximum number of orders delivered in the shortest possible time while simultaneously taking into consideration variable distances, delivery windows, and service times of orders. Ideally, companies should be able to reach a maximum loaded mileage to achieve this goal. The best-loaded mileage can be reached by;

1. - increasing the loading ratio and/or
2. - decreasing driving time or mileage

Along with the need to consider different delivery days, time windows, and service times, reaching the best-loaded mileage is becoming a next to impossible task. No solution in the market can compile optimal routes for 1000s orders for multiday horizons with tight delivery windows, variable service, and flexible start times. Less Platform does that in a matter of minutes.

Multi-terminal operations

Large 3PLs usually operate using multiple DCs, so they need to have an option to plan their routes simultaneously. The absence of robust delivery route planning solutions for 3PLs dedicates more resources than required and creates massive inefficiencies. Less® has a multi-depot functionality and a wide range of as-if scenario analysis to plan orders from DCs offering maximum deliveries. 3PLs can even use the tool to plan the next DC location for optimal logistics.

Visibility

Having visibility on potential late deliveries beforehand helps to mitigate their occurrence. This can be done only through maximum visibility. Most companies are connected to ELDs or they use other GPS tracking software these days. While it helps to trace truck locations, it does not allow us to anticipate potential late deliveries at the stop level.

The problem is that delivery time equates to driving time and stop level service (or dwell) and other HOS required stops time. Less® works as a sophisticated system by getting information from the driver app, recalculating ETAs, checking feasibilities with delivery windows, and warning about potential late deliveries. This information is visible both to dispatchers and drivers. Companies need to have a unified dashboard of ongoing deliveries and should be able to identify potential risks beforehand. This unified visibility is the key to decreasing late deliveries and increasing customer satisfaction.

Integration with current tech infrastructure

3PLs use different TMS’, WMS’, and other company-specific ERP software. So any complex solution should be able to integrate with all these systems in a matter of hours. Less® Platform’s API-enabled configuration helps connect to ordering, TMS’, and WMS’ even at the SKU level. If 3PLs have their homegrown ERPs, they still can integrate with less at the engine level. This helps to use the customized interface while still getting all benefits that Less® Platforms route planning engine offers

Reporting and analytics

A well-thought-out reporting and analytics system helps to get sharpen a firm's competitive edge. Businesses operate in times of growing complexity of operations and an ambiguous external environment. Adding to this growing issue is that there is a considerable lag in terms of current solutions being offered in the market. 3PLs should be able to understand inefficiencies in their distribution operations at corporate, DC, and even dispatcher and driver levels. Due to a current lack of solutions providing proper visibility over analytics, this is not possible at an appreciable level of complexity. Along with performance analytics, accumulated information should be analyzed and turned into insightful forecasts for getting better plans and decreasing uncertainties. Data aggregation also should help to assess the performance of even more complex operations with thousands of trucks and 100s of fulfillment centers.

We tried to consider the major pain points that 3PLs have regarding increasing volumes and incorporate them into an enterprise-grade cloud-native SaaS solution. Please reach out at [email protected] for more info.

Author
Vardan Markosyan is the CEO at Less® Platform
MBA from the University of Chicago Booth School of Business
Ph.D. in Economics from the Institute of Economy of NAS RA
He spent decades of research and consultancy on business process optimization and system design

Less Than Truckload (LTL) logistics is different from that Full truckload (TL). Thus, Transportation Management Software for LTL carriers should take into consideration these differences. People might think that it is just a size of the load but there are fundamental differences in business models so strategic and operational management tools and methodologies should be used.

Less-Than-Truckload (LTL) model

To understand what is the best Transportation Management Software for LTL carriers, we need to describe LTL logistics. The baseline LTL logistics combines random short-distance pickups and long-distance haulage.

The fundamental difference of LTL logistics is that companies usually organize pickups with city cabs and then consolidate loads in the larger trailers for the long-distance haulage during the week.

In organizing Local pickups two types of operational challenges emerge:

• - How to organize daily local pickups so that available equipment could handle the most of loaded mileage and be balanced, in the meantime assuring the most accurate appointment times?
• - Dynamically rebalance new pickups when loads have already commenced.

Next, pickups usually being consolidated in depots/warehouses in larger equipment/trailers so they can be transported to a longer distance. While timely and safe delivery is a high priority, inefficiencies also arise as planners spent time in assuring the best delivery windows while taking into account available equipment, driver specifications, and a number of other factors. This process is time-consuming, can decrease the accuracy of deliveries, and substantially increase costs of operations by underutilizing existing equipment and increasing total mileage.

And finally, one should make sure the interoperability of both parts of operations, assuring the profitability of the business, in the meantime keeping operational expenses as low as possible. It particularly means the ability to plan both inbound and outbound operations simultaneously and establish the best consolidation or cross-docking model that creates optimized short-haul and long-haul loads.

A simple LTL model with pick-ups and deliveries can look like the one in Figure 1 below.

Figure 1 Less Platform’s multi-stop pickup and delivery sample loads

The route planning system in Transportation Management Software should be able to first plan multi-stop pickups for each day during the week and then consolidated deliveries.

We have presented problems of planning LTL operations in two graphs below:

Figure 2

As you can see, the system should assure high accuracy of both pickups and deliveries, trying to increase the number of orders in the mealtime keeping high equipment utilization and low driven mileage.

Transportation Management Software (TMS) for LTL carriers available on the market

We have implemented quick research to understand how the top firms on the market address these problems of LTL trucking and Transportation Management Software for LTL carriers are available. We have particularly looked at their websites. Some of the top solution providers and their offers are listed below:

Trimble transportation management

Shipment Planning and Execution

Optimize load matching success and customer satisfaction by analyzing load and equipment information such as driver hours (HOS), miles, costs, and availability for both the current load and future scenarios to plan and dispatch loads accurately and easily. Streamline day-to-day load matching so your team can focus on the more complex needs of today’s planning processes. Increase efficiency with load-power optimization planning tools for OTR and multistop scenarios.

Oracle transportation management

Operational Planning
A state-of-the-art optimization engine that automatically finds the best solutions for your logistics needs, while adhering to your business requirements and trading partner capabilities.

Create a more efficient and higher velocity logistics network

Plan and execute domestic and international shipments—in one system

Lower rates and manage equipment more efficiently

Optimize the cubic capacity of containers, consolidate orders, and streamline location flow and calendars

Omnitracs

Reduce Costs and Simplify Operational Processes
Managing any for-hire fleet is a constant battle between doing what’s best for the customer and what’s right for the business. For less-than-truckload (LTL) fleets, however, this balancing act is even more challenging due to the complex nature of the business. Juggling multiple customers, locations, delivery and pickup times, drivers, and vehicles while controlling costs can be an impossible task without the right tools in place. Thankfully, there are solutions built to simplify operations for LTL fleets while delivering improved efficiency and customer value.

SAP transportation management

Order management
Minimize freight costs and enhance customer service. Improve the efficiency of order and process management and generate optimized, rules-based routing proposals dynamically.

MercuryGate

Plan for And Deliver Better Load Building Outcomes
Increase space utilization while cutting freight and fuel costs. Leverage control tower visibility to take the guesswork out of load planning by easily generating precise calculations before shipping. Streamline loading and unloading and minimize labor errors with step-by-step planning.

MercuryGate’s load planning and load building takes into account all facets including weight, dimensions, densities, stackability constraints, and compatibility constraints. This empowers your whole team to significantly reduce the number of freight runs needed, as well as the emission your transportation produces.

JDA transportation management

Transportation
Supply chains are only going to get more complex, yet you are expected to consistently deliver while managing costs. With transportation, you can leverage every available asset, drive profitability, and sharpen your competitive edge. Our solutions enable you to transform your transportation operations by managing both inbound and outbound, integrating supplier and carrier collaboration tools and tackling whatever challenges tomorrow brings.

Almost all of them have planning, dispatch, visibility, 3rd party carrier sourcing, and accounting capabilities for multi-modal business models. Some of them are on the market for decades. All of them have planning capabilities listed on their websites.

Conclusion

Transportation and logistics firms should have robust tools to increase operational efficiency without compromising client service and business goals. LTL planning optimization has limited offerings despite the variety of available TMS and fleet management software on the market. Robust planning toolbox, data interoperability, and visibility through all the business processes could help LTL firms substantially improve their efficiency, make planners and dispatchers' life easier, and equipment utilization better.

We understand that total macro instability, current low level of rates, decreased order numbers on certain lanes and for certain clients, and other factors may substantially affect the appetite of the management to improve the efficiency of operations. On the other hand, now is the time to start thinking more about efficiency and prepare for a better harvest when good times are back.

Less Platform can turn your data into loads within a couple of minutes and compare it with your historical results! You can also test all the necessary features for your logistic model and consult with our experts on your challenges.

Author
Vardan Markosyan is the CEO at Less Platform
MBA from the University of Chicago Booth School of Business
PhD in Economics from the Institute of Economy of NAS RA
He spent decades of research and consultancy on business process optimization and system design

1. Why last mile logistics is important?

Last-mile logistics is the most complex and, happened to be believed, most costly part of the distribution supply chain. While there is a growing buzz around the expression, the last mile implies different things for different industries. So, before moving forward with the recommendations of how to optimize last-mile logistics one should first define what it actually means for the specific operating model and where the inefficiencies are?      

With the accelerated growth of e-commerce, increasing requirements is creating burdens on the logistics chain, which amplifies the final mile. According to a 2022 report by Deloitte, as consumers’ delivery-related demands increase—as does the cost and complexity of meeting those demands—new, nimbler options are arising to enable retailers to outsource last-mile delivery to the gig economy. Amazon Flex and Walmart’s Spark Delivery enable independent drivers to deliver online purchases to the retailers’ customers. Along with the growth of e-commerce, last-mile logistics has its specifics and new challenges for traditional sectors as well. These challenges can be sector-specific, such as decreasing delivery times and increasing density of fulfillment centers but also can result from general macroeconomic trends such as shortages of employees and supply chain problems.  

2. Last mile delivery logistics is not just home deliveries

“Last-mile” logistics or deliveries might have different meanings for different sectors and industries. First of all, different companies might be implementing final mile deliveries using private fleets or hiring carriers. Thus, we can differentiate between private fleet shippers and for-hire carriers. While for private fleet shippers logistics operations are supplementary to their main businesses, for-hire carriers or logistics service providers (LSP) generate income for transportation services. Secondly, the last mile will be different for companies that are in the B2B business such as wholesale distributors, or focusing mainly on home deliveries such as retailers. Some e-commerce companies could be put into a category of their own as they mostly don't own vehicles but may combine both retail and wholesale operations.   

Retailers and e-commerce

“Last-mile logistics” in the retail sector mainly implies the organization of store-to-customer small-size delivery processes.   

According to U.S. Census Bureau News Total e-commerce sales for 2021 were estimated at $870.8 billion, an increase of 14.2% from 2020. Total retail sales in 2021 increased 17.9% from 2020. E-commerce sales in 2021 accounted for 13.2% of total sales. E-commerce sales in 2020 accounted for 13.6% of total sales.

Demands for faster, cheaper shipping result in a growing complexity of last-mile delivery operations. Consumers can now choose to get their purchases in a variety of ways: home delivery, ship-to-store, ship-to-locker, or reserve online and pick up in-store. Returns can now be made in-store or by shipping the product back to the retailer. Linear supply chains have given way to complex, interconnected supply chain networks. And the subscription services offered by a growing number of retailers often subsidize or waive delivery fees, making it incredibly easy for consumers to place many small orders instead of a few large ones. The result? More—and more frequent— orders, a sharp rise in demand for expedited delivery, an e-commerce logistics market with a compound annual growth rate (CAGR) of 20.4 percent, and rising costs for retail and consumer goods companies. Amazon is able to meet consumers’ demands by spending 15.6 percent of its net sales revenue on shipping costs and an incredible 27.9 percent on combined fulfillment costs. Retailers, by comparison, spend about 8 percent of revenue on e-commerce fulfillment on average; in the current retail environment, it would be hard for them to cover more of the delivery costs and still stay profitable.

Different companies prefer different last-mile delivery logistics models. Larger retailers tend to run private fleets of vehicles, while smaller ones rely on outsourced transportation. It should be mentioned that most private fleet companies usually combine both operational models. Hence, processes and problems may differ for different types of shippers.

We can also divide retail deliveries into grocery and the rest as delivery patterns and velocity are quite different. The average lead time for delivery of groceries is 0.7 days, compared to electronics which take 3 days, and 5 days for apparel. Thus, consolidation and logistics management models can vary substantially.    

Logistics service providers (LSP) and delivery companies

We can conditionally divide logistics service providers into long-haul and local delivery models. There are a number of LSPs that operate on both markets, we see a growing number of specialized local delivery companies, especially during the Covid 19 pandemic. We see also the emergence of platforms that connect shippers and individual vehicle owners. Later are essentially networks of independent couriers and delivery agents connected to a delivery ecosystem that pick up and deliver small packages. The other distinct difference between long-haul and local deliveries is that local deliveries are usually on the same day while long-haul deliveries can vary from 1-7 days.

As it turns out that the final mile can be used to describe the sharply different distribution and delivery models there is a wide range of estimated market sizes. The Bureau of Economic Analysis (BEA) reports that the last leg of overall transportation costs makes up as much as 28% of logistics expenses. Transportation’s contribution to the economy can be measured by its contribution to gross domestic product (GDP). The Bureau of Transportation Statistics reports the final (finished) transportation goods and services purchased by people, businesses, and governments in 2018 contributed $1,489.7 billion, or 8.9%, to U.S. GDP. If we apply the aforementioned 28% BEA figure, we could say the market for the final mile (from a GDP perspective) is an astounding $417 billion. Contrary, if we narrow down the final mile to home deliveries and assume that these are small-sized we need to look into parcel delivery numbers in the picture below⁴. 

There is also another important distinction between the organization of long-haul and same-day logistics - long-haul deliveries are usually done using semi-tractors or sleeper trucks while local deliveries are implemented by smaller trucks or even passenger cars. Thus, contracting, company and driver onboarding are different for long-haul transportation needs. The latter is a highly regulated industry that needs special licenses and drivers. The value of the average delivery is also much higher hence the carriers are going through much meticulous due diligence. The important peculiarity is that while more individuals can be involved in local deliveries, continued driver shortage, increasing insurance, and, lately, fuel costs make long-haul capacity scarcer and pressure on the costs higher. 

As you may see in the picture above, the ground transportation rates almost doubled during the last two years. 

Wholesale distributors

Wholesale distributors are the middleman between producers and retailers with slight differences from industry to industry. It is one of the more complex industries driven by high numbers of SKUs, customers, suppliers, and transactions, and their pricing and rebate structures. They can be grouped into major ones such as food, beverages, pharmaceutical, electronics, industrial, and building materials. According to the National Association of Wholesale Distributors (NAW) total wholesale distribution revenue ended the year at $5.970 trillion, just slightly below the April 2019 record high. GDP for the year totaled a record-high $21.734 trillion with a growth rate of 4.0%. The Wholesale Distribution industry is 27.5% of U.S. GDP. 

Last-mile logistics from the wholesale distributor perspective is different. As they are middlemen between producers and retailers/local businesses their last mile will be the leg between the distribution centers and local warehouses/shops. The wholesalers tend to rely on private fleet operations as they operate in an environment of rigid deadlines. The average size of a single drop also tends to be larger and distances longer, while the number of stops in daily routes will be fewer compared to home deliveries. We observe changes in the industry in the form of growing concentration as well as the emergence of disruptive business models as well. For example, Amazon’s sales platform is supported by more than 2 million third-party sellers worldwide. Of those sellers, 26% sell products using a wholesale sales model. 

3. Challenges of last mile logistics

Scheduling and routing is a great challenge

Scheduling and routing daily package deliveries for a relatively smaller delivery radius, i.e. 50 miles is different from scheduling and routing deliveries of hundreds or even thousands of boxes per one drop for a 300 miles radius. The first is going to be for home deliveries from warehouses of fulfillment centers located closer to city centers. The latter is the case of a food distribution operation to stores, restaurants, and other businesses. Large building or construction material distributors may have lesser stops per route but their route can strain through the weeks. Apart from the difference in distances, route durations, and the number of stops per route, this distribution model requires drivers with different skill sets and driving habits/work models as well as sometimes radically different equipment. When it comes to large 3PLs or LSP this process may combine all of the abovementioned with the need to solve the consolidation problem to/from multiple warehouses and the involvement of different counterparts.   

Planning multi-leg deliveries creates delays 

As we have already established, last-mile delivery logistics can mean different things for different industries. So, the complexity of the operational model hence the complexity of the planning process can sometimes differ cardinally. It is becoming even more cumbersome when planners are trying to coordinate the timing between the different legs of the supply chain, such as the first, the middle, and the last miles. While manufacturers and distributors will mostly use last-mile consolidation centers and warehouses, transportation companies and logistic service providers (LPS) might even bypass these centers and implement multi-day delivery to the final customers. It is going to be the case, especially for B2B or heavier deliveries. 

Coordination between different delivery operators

It can be a great challenge when planning the last mile. It is generally assumed that when the last mile is concerned there is one delivery party that moves the freight. While that could be a case for home or packaged deliveries, in many operational models or industries there are more than one or even two delivery/transportation partners. Thus along with the larger planning range (weekly or biweekly) and multiple consolidation locations involved, the need for coordination between multiple counterparts is going to pose another challenge. 

Visibility is important

When it comes to visibility, logistic managers usually imply to the consumer that they know where your truck is. While it is good information to have, especially in real-time, locating your delivery is one (small) part of the total visibility. It should help not only track deliveries but also make preventive operational management and long-term data analytics and efficiency optimization. 

Capturing data: Capturing data is essential as it is created in real-time or near time and distributed across different operational decision-makers. It particularly includes stops or order level updates of estimated times of arrivals (ETA) at a driver, customer, dispatcher, or DC level. Post factum delivery data such as late deliveries and actual service times is also important to capture and store properly. To minimize late deliveries by implementing dynamic routing, dispatchers need timely data that shows ETAs with service times and other variables not being produced by GPS tracking software.  

Aggregating data: Capturing and aggregating delivery data per different instances and layers is the key to efficient operational and strategic middle-mile network management. The difficulty of it is that systems across different parts of the logistics chain are captured and stored differently, so it is not always possible to have different levels of data aggregation without a synchronized ecosystem.    

Supporting decision-making: Aggregated data is a foundation for retrospective and prospective data analytics. One of the major problems of growingly complex logistic supply chains is the absence of full digitization and synchronization of all the necessary information across different layers of an organization.

Trucking capacity is scarce 

The ongoing truck driver shortage is now estimated at 80,000, up from 61,000 just three years ago. A new study by Bob Costello, chief economist for the American Trucking Associations (ATA), estimates that the industry will have to recruit 1 million new drivers within the next nine years to replace retiring drivers. This shortage makes it really hard for fleet-light shippers to cover loads and implement proper long-term transportation planning. This is also one of the main reasons for the rising freight costs described above.

4. Less Platform as the best last mile delivery software

Depending on the type of the operational model and or the sector of industry, last-mile deliveries can span from a couple of stops per vehicle per day to high volume short distance stops. Less Platform is capable to route and scheduling deliveries that are peculiar to any distribution model.  

Types of industries using last mile logistics software

Lest's discuss several use cases.

For B2C type of high volumes deliveries that are peculiar to e-commerce and retail, it is important that the algorithms could plan 10’s stops in the routes. These deliveries are usually planned daily while vehicles usually cover shorter distances. Dynamic capabilities are also more important as a high level of discrepancies between optimized delivery plans and live deliveries can happen

The next type of local or city dispatch operations is fleet-light operations in case of which delivery companies don't own vehicles. In this case, they may either crowdsource deliveries before or after planning or signup with major carriers (FedEx, UPS, DHL). 

The separate operations model of deliveries is the delivery companies that don't have warehouses or distribution centers. These companies usually do high-volume pickups and deliveries during the day. Hence, a different class of algorithms is developed for these types of movies in Less Platform. 

For the wholesale distributors and also retailers that need to plan B2B moves such as DC-to-Store or Store-to-DC in case of reverse logistics, a distribution model covers a larger area. In the meantime, the number of stops on the routes will be lower, while the weight of each delivery higher. Vehicles are going to be larger as well so capacity becomes more important. 

There are also large use cases of long-haul delivery planning and routing by 3PLs, large shippers, and carriers. Two types of moves are being planned; a) consolidation and routing of LTL’s (Less than truckload) shipments into FTLs (Full truckloads) both by asset-light and asset-based shippers, b) Forward planning of FTLs. It is worth note that in the former case the main optimization parameter is the mileage for fleet-based operations while for fleet-light shippers and 3PLs total cost should be minimized. In the case of FTL forward planning the main optimization parameter is the deadhead or the empty moves between stops (which should be minimized). Decision-making functions also might differ depending on who is making these decisions - shippers and 3PLs would be interested in mainly cost optimization by finding cheaper carriers, although 3PLs might also reach that via better preliminary consolidation or forward planning. Fleet-based logistics service providers (LSPs), such as LTL trucking companies might be interested in an increase in loaded mileage. 

A special case is the companies that run a mix of fleet-based and fleet light operations. These are large 3PLs such as Hub Group or JB Hunt as well as retailers such as Walmart, Hope Depot, or Pepsico. They need to combine delivery routing technologies with load outsourcing or even by relying on spot markets.   

Software Functionality

The are many features in Less Platform that support or work for almost all the abovementioned delivery models.

Multiple DCs. For example, multiple depots or distribution centers (DC) planning functionality. It is very convenient for companies that have centralized operational planning activities. Secondly, it helps to generate data for separate DCs as well as aggregate it on a company level. A number of warehouses or DCs is growing and getting closer to customers these days, making both operational and strategic routing harder and potential inefficiencies bigger. In the meantime, companies that run multiple pickups and delivery operations without consolidating their shipments in the warehouses can use Less Platform’s pickup and delivery routing and scheduling algorithms.

Delivery windows and variable service times. Two important constraints that make it hard to plan are daily delivery windows and variable service times. These two constraints can also drastically affect capacity used and routes planned. The absence of proper planning tools can make a planner's work daunting and consume too much time. It is also the main cause why distributors use excessive capacities, drive unnecessary miles and have late deliveries. These effects are being amplified due to increased demand variability, speed of deliveries, and tightening delivery windows. 

Dynamic planning. Automatic routing is easiest the job but there are plenty more situations requiring manual planning. Less platform as a delivery software provides dynamic planning functional for both pre-dispatch and post-dispatch stages. After getting a route plan, a planner can reroute different stops by assigning them to different routes both individually and in bulk. Then sequencing algorithms will re-optimize the total plan. After making changes algorithms assess the feasibility of delivery windows by checking with recalculated ETAs. All the changes are instantly visible for drivers post-dispatch.  

Scheduling. Planned loads can be scheduled both daily and weekly for respective drivers. Less Platform’s dispatch

management software is connected to the driver app so all drivers have planned loads once they are assigned to them. After the dispatch, the driver app updates all ETAs and synchronizes them with the dispatch board. Less Platform’s algorithms then check potential late deliveries by comparing ETAs with delivery windows. This way dispatchers can be proactive to avoid late deliveries or dynamically optimize the delivery process otherwise.

Optimization with contracted carriers. Less Platform also brings together demand and supply by helping shippers cover more loads at lower cost and carriers increase loaded mileage and earn for additional stops. According to our calculations and based on the information provided by more than 50 trucking companies, the average over-the-road truck has 10 linear feet or approximately 10,000 pounds of unused capacity. This “dark capacity” has a market value of over $200 billion. We help carriers to fill a partially loaded truck as fast as an empty truck, leading to a dramatic increase in asset utilization, the main driver of profitability for carriers. As shown in the picture below both shippers and carriers can find shipments or available space in the trucks using our AI algorithms. 

This was a small list of various tools and innovations that Less Platform offers to different industries and companies.

Please contact [email protected] if you want to learn more about Less Platform's Last-mile delivery logistics orchestration capabilities.  

Unlike the Full truckload (TL) carriers, in less-than-truckload (LTL) operations prevail lots of multi-stop pickups. For small LTL carriers, linehaul can also include an end to end multi-stop deliveries.

Good dispatch software help carriers to input orders and then dispatch them to drivers and trucks. They would also help to settle with drivers and bill clients. Some may have extensive assets (tractors, trailers, etc.) management systems. Advanced systems such as Trimble transportation (TMW) can offer tracking and mileage calculation option via their own solution such as PC miler. Others, especially those targeting SME’s will provide a plugin option to get data from PC miles or similar solutions. On top of the Dispatch system, companies should equip their trucks with ELDs (Geotab, Omnitracs, Samsara, etc.) which is a good tool to track mandatory Hours of Service (HOS). Almost all providers also offer telematics functional.

This is basically a tech environment for a typical mid or large LTL carrier. Smaller ones may be using spreadsheets and, in the meantime, one of the GPS tracking software. As ELDs are mandatory both in the US and Canada, every carrier can track the location of their trucks.

As you have noticed there are a couple of functions that require extensive labor force and basically remained untacked so far:

1) Multi-stop pickup planning.

Large carriers such as YRC, Old Dominion, and others in the top 50 list have thousands of trucks and hundreds of terminals. Each terminal handles 500+ inbound orders a day. Smaller LTL carriers can have a handful of terminals but per terminal volumes are going to be relatively similar. While linehaul planning from terminal a can be relatively easy, the inbound multi-stop planning is where planners mostly straggle.

2) Dynamic management and communication.

ELDs give a decent understanding of the locations of your trucks. While this is fine in the case of FTL linehauls, multi-stop LTL management requires a more granular approach. First, dispatchers should know what’s happening in each stop and how changing dwell times or other random occasions will affect the accuracy of deliveries to remaining stops. Second, it’s crucial to have timely and automated warnings of potential late deliveries to each and every stop. Third, drivers should be instantly updated about changing loads and routes. And last but not the least, customers should receive automated notification about approaching drivers and drivers should be notified about available docs in case of large customers.

We have calculated that the solving abovementioned problems properly helps to decrease total driven mileage by 5-7% annually, save about 300 hours of planner’s time and improve delivery accuracy by a whopping 30%. Does this imply that one needs to search for new dispatch or TMS software? That’s not necessary as today’s API enabled environment helps to get these problems solved without undertaking large projects or inquiring additional costs.

You can reach us out on [email protected] in case want to learn more about how we can mobilize these benefits for you.

Author
Vardan Markosyan is the CEO at Less® Platform
MBA from the University of Chicago Booth School of Business
Ph.D. in Economics from the Institute of Economy of NAS RA
He spent decades of research and consultancy on business process optimization and system design

Less Than Truckload (LTL) logistics is different from that Full truckload (TL). Thus, Transportation Management Software for LTL carriers should take into consideration these differences. People might think that it is just a size of the load but there are fundamental differences in business models so strategic and operational management tools and methodologies should be used.

Less-Than-Truckload (LTL) model

To understand what is the best Transportation Management Software for LTL carriers, we need to describe LTL logistics. The baseline LTL logistics combines random short-distance pickups and long-distance haulage.

The fundamental difference of LTL logistics is that companies usually organize pickups with city cabs and then consolidate loads in the larger trailers for the long-distance haulage during the week.

In organizing Local pickups two types of operational challenges emerge:

• - How to organize daily local pickups so that available equipment could handle the most of loaded mileage and be balanced, in the meantime assuring the most accurate appointment times?
• - Dynamically rebalance new pickups when loads have already commenced.

Next, pickups usually being consolidated in depots/warehouses in larger equipment/trailers so they can be transported to a longer distance. While timely and safe delivery is a high priority, inefficiencies also arise as planners spent time in assuring the best delivery windows while taking into account available equipment, driver specifications, and a number of other factors. This process is time-consuming, can decrease the accuracy of deliveries, and substantially increase costs of operations by underutilizing existing equipment and increasing total mileage.

And finally, one should make sure the interoperability of both parts of operations, assuring the profitability of the business, in the meantime keeping operational expenses as low as possible. It particularly means the ability to plan both inbound and outbound operations simultaneously and establish the best consolidation or cross-docking model that creates optimized short-haul and long-haul loads.

A simple LTL model with pick-ups and deliveries can look like the one in Figure 1 below.

Figure 1 Less Platform’s multi-stop pickup and delivery sample loads

The route planning system in Transportation Management Software should be able to first plan multi-stop pickups for each day during the week and then consolidated deliveries.

We have presented problems of planning LTL operations in two graphs below:

Figure 2

As you can see, the system should assure high accuracy of both pickups and deliveries, trying to increase the number of orders in the mealtime keeping high equipment utilization and low driven mileage.

Transportation Management Software (TMS) for LTL carriers available on the market

We have implemented quick research to understand how the top firms on the market address these problems of LTL trucking and Transportation Management Software for LTL carriers are available. We have particularly looked at their websites. Some of the top solution providers and their offers are listed below:

Trimble transportation management

Shipment Planning and Execution

Optimize load matching success and customer satisfaction by analyzing load and equipment information such as driver hours (HOS), miles, costs, and availability for both the current load and future scenarios to plan and dispatch loads accurately and easily. Streamline day-to-day load matching so your team can focus on the more complex needs of today’s planning processes. Increase efficiency with load-power optimization planning tools for OTR and multistop scenarios.

Oracle transportation management

Operational Planning
A state-of-the-art optimization engine that automatically finds the best solutions for your logistics needs, while adhering to your business requirements and trading partner capabilities.

Create a more efficient and higher velocity logistics network

Plan and execute domestic and international shipments—in one system

Lower rates and manage equipment more efficiently

Optimize the cubic capacity of containers, consolidate orders, and streamline location flow and calendars

Omnitracs

Reduce Costs and Simplify Operational Processes
Managing any for-hire fleet is a constant battle between doing what’s best for the customer and what’s right for the business. For less-than-truckload (LTL) fleets, however, this balancing act is even more challenging due to the complex nature of the business. Juggling multiple customers, locations, delivery and pickup times, drivers, and vehicles while controlling costs can be an impossible task without the right tools in place. Thankfully, there are solutions built to simplify operations for LTL fleets while delivering improved efficiency and customer value.

SAP transportation management

Order management
Minimize freight costs and enhance customer service. Improve the efficiency of order and process management and generate optimized, rules-based routing proposals dynamically.

MercuryGate

Plan for And Deliver Better Load Building Outcomes
Increase space utilization while cutting freight and fuel costs. Leverage control tower visibility to take the guesswork out of load planning by easily generating precise calculations before shipping. Streamline loading and unloading and minimize labor errors with step-by-step planning.

MercuryGate’s load planning and load building takes into account all facets including weight, dimensions, densities, stackability constraints, and compatibility constraints. This empowers your whole team to significantly reduce the number of freight runs needed, as well as the emission your transportation produces.

JDA transportation management

Transportation
Supply chains are only going to get more complex, yet you are expected to consistently deliver while managing costs. With transportation, you can leverage every available asset, drive profitability, and sharpen your competitive edge. Our solutions enable you to transform your transportation operations by managing both inbound and outbound, integrating supplier and carrier collaboration tools and tackling whatever challenges tomorrow brings.

Almost all of them have planning, dispatch, visibility, 3rd party carrier sourcing, and accounting capabilities for multi-modal business models. Some of them are on the market for decades. All of them have planning capabilities listed on their websites.

Conclusion

Transportation and logistics firms should have robust tools to increase operational efficiency without compromising client service and business goals. LTL planning optimization has limited offerings despite the variety of available TMS and fleet management software on the market. Robust planning toolbox, data interoperability, and visibility through all the business processes could help LTL firms substantially improve their efficiency, make planners and dispatchers' life easier, and equipment utilization better.

We understand that total macro instability, current low level of rates, decreased order numbers on certain lanes and for certain clients, and other factors may substantially affect the appetite of the management to improve the efficiency of operations. On the other hand, now is the time to start thinking more about efficiency and prepare for a better harvest when good times are back.

Less Platform can turn your data into loads within a couple of minutes and compare it with your historical results! You can also test all the necessary features for your logistic model and consult with our experts on your challenges.

Author
Vardan Markosyan is the CEO at Less Platform
MBA from the University of Chicago Booth School of Business
PhD in Economics from the Institute of Economy of NAS RA
He spent decades of research and consultancy on business process optimization and system design