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 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 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 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:
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.
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.
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.
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.
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