Last-mile delivery is where goods are moved to their final destination, usually from the warehouse or delivery depot to the customer's doorstep. It's the most crucial part of the delivery process because it's the stage most likely to impact the customer experience.
This article explores the last-mile delivery problem—how easily things can go wrong—and the solutions you can implement to ensure this step runs smoothly. You'll also discover how getting last-mile delivery right will lead to happier customers, reduced costs, and improved operational efficiencies.
What is the last-mile delivery process?
To understand the last-mile delivery process, let's examine a product's journey from a storage facility to the customer's hands step-by-step.
A customer uses an ordering system to place an order. They may go through an online store's checkout page or order an item through social media, phone, or email.
The order is received by the store and is entered into an order management system.
The business acknowledges the order by sending the customer an order confirmation.
At the warehouse, an employee picks the order from the shelves, packs it and adds a shipping label. The order management system is updated to reflect the inventory change.
The delivery route is planned based on the customer's address.
The business ships the order using a delivery company.
The customer receives a notification to say their order has been dispatched.
The order is delivered to the customer.
The delivery person may obtain proof of delivery via an electronic or physical signature or photographic evidence stored within an app on their mobile device.
What is the main problem with last-mile delivery?
The main problem with last-mile delivery is that customers want and expect free and fast shipping, yet the last delivery stage is the most expensive and time-consuming to achieve.
Shelagh Dolan wrote an article for Business Insider in 2022, suggesting that last-mile delivery costs equate to 53% of the total shipping costs. More often than not, retailers and logistics providers shoulder this cost because customers are increasingly unwilling to pay a delivery fee.
Retailers and eCommerce businesses must adapt to survive this expectation while removing inefficiencies that can affect their bottom line. This involves factoring a proportion of the shipping costs into the product price, renegotiating carrier fees, optimising product margins and ensuring the delivery process operates as efficiently as possible.
The last mile delivery problem: an example
Many inefficiencies can occur in last-mile delivery, not least because of the challenges a driver faces when shifting goods to their final destination. Here's an example:
Kyle delivers groceries for a nationwide supermarket chain. He commutes half an hour to his local store to start work. He loads his van with orders and gets fuel from a nearby service station.
The logistics department sends Kyle the planned routes for that day. The routes aren't optimised properly, so he must travel in one direction and then another to drop off multiple deliveries according to the time slots customers have requested.
Because the routes aren't optimised, Kyle needs to refuel by mid-day. This causes a brief delay and results in extra costs for the supermarket chain. Later in the afternoon, an accident occurs on the road, adding further time to Kyle's planned route.
Because of ineffective route planning and the unforeseen traffic jam, Kyle is over two hours late with his last two drops. The customers are very unhappy after waiting longer than anticipated for their shopping to arrive, so they call customer service to complain.
Imagine the chaos should Kyle also suffer a puncture that day or if the refrigeration equipment on his van broke down, spoiling the customers' chilled goods…
What factors affect last-mile delivery?
Cost is the main factor that causes challenges with last-mile delivery operations. It's expensive for several reasons, including rising fuel costs and the frequent stop-starting that comes with traffic congestion and multiple drop-offs.
Inefficient route planning also drives up costs as drivers take more long-winded or complex routes. You'll face the same high shipping costs even when delivering low-value shipments – and tight delivery slots, which often involve logistical complications, cost substantially more than week-long delivery times.
Here are some other last-mile delivery challenges:
Inefficiencies and mistakes – with so many moving parts involved in the process, any glitch can lead to delayed deliveries and costs to your business. For example, manual route planning prevents drivers from taking the most optimised and cost-effective routes because they're not working off real-time information.
Outdated technology and tools – it's hard to meet customer expectations and scale your business without modern software.
Poor delivery infrastructure – building efficient delivery routes in crowded cities with frequent congestion, narrow streets, and a lack of parking is also challenging. The same goes for remote and rural areas with dilapidated roads and a lack of signage.
Numerous delivery attempts – drivers may need to revisit a destination several times if customers aren't in to receive their parcel. This leads to wasted trips and unexpected fuel consumption (even more costs).
Unpredictable transit – anything can happen while a driver is on the road – an accident that causes a roadblock, a puncture or vehicle breakdown and even the driver falling ill. This factor is outside of your control.
Lack of transparency – if fleet managers can't have real-time visibility of delivery vehicles and parcels, they can't make informed decisions – or satisfy customers wanting to know where their order is.
Fluctuation in seasonal demand – this can cause an inventory imbalance, labor shortages and supply chain disruption.
Solutions to the last mile delivery problem
There are several ways to address the last-mile delivery problem. A key solution is optimising delivery routes to find the most cost-effective and time-efficient routes for drivers. Ideally, you should invest in last-mile delivery software with a dynamic route planning feature – where automatic adjustments to planned routes are made using real-time traffic data. Optimising routes will help reduce delays, improve delivery success rates and boost customer satisfaction. Here are some other solutions to consider:
Customer/warehouse proximity – ensure the last distribution point is located as near as possible to customers. You could also offer the distribution centre as a customer pickup location, which should reduce the number of last-mile drops.
Offer convenient customer pickup points – aside from a distribution centre, consider curbside pickup for customers or delivery to central postal lockers, often found at shops and supermarkets.
Improve customer communication – Taavi Rebane, Messente's marketing lead, says, "Good communication goes a long way in improving customer satisfaction. Keep customers informed about their orders at every step of the way and offer real-time order tracking. We recommend starting with a shipping confirmation message, followed by a delivery window text alert or a message notifying the customer how many stops away their driver is. Texts are direct and easy to read, which is why 98% of messages are opened. Even better, this type of communication can be easily automated (saving you time) via a text alert system."
Obtain proof of delivery – to help ensure parcels are being sent and delivered on time and to reduce delivery disputes.
Auto-dispatch orders – with last-mile delivery management software, you can automatically assign orders to drivers on the road according to their location and vehicle type. This helps reduce labor costs and delivery waiting times.
Keep an eye on drone delivery innovation – drones have the potential to massively speed up delivery times, but there are hurdles to overcome, such as airspace restrictions and government regulations. One to watch is the big fish Amazon, which already has a small drone delivery operation in the US and is set to bring drone deliveries in under an hour to the UK by the end of 2024.
The impact of the last mile solution
Streamlining your last-mile delivery process, largely achieved by investing in the right software, results in several benefits. First, you'll have better visibility into daily operations and can track and locate drivers, vehicles, and parcels in real time. That's vital for gaining more control over a third-party logistics provider.
With effective route planning, you'll reduce fuel consumption and your carbon footprint. And with analytical tools at your fingertips, you'll glean valuable insights to help improve margins and profitability.
Ultimately, you'll be able to provide super fast (overnight or same-day) deliveries, which means happier customers, especially if you utilise good communication practices to personalise the customer experience.
Challenges and solutions for the last-mile delivery problem
Customers today expect timely deliveries, at the very least. Ideally, they want them within 24 hours. Any business involved in product deliveries or logistics faces the last-mile delivery problem – how to achieve customer expectations while making the last leg of delivery as cost and time-efficient as possible.
The challenges with last-mile deliveries include outdated technologies, unpredictable transit, route planning inefficiencies, fluctuation in product demand, and poor delivery infrastructure. Last-mile operations are also naturally expensive, accounting for more than half of the total shipping costs.
Some of these challenges are outside your control, but there are solutions to help make the process more effective and cheaper. Investing in modern technology that gives you access to real-time insights is key.
Further reading: discover how to use SMS in the logistics industry to improve last-mile delivery communications.
