Last Mile Delivery: Identifying Difficulties and Discovering Answers
As the popularity of home delivery continues to soar, so do customer expectations. The urgency of digital transformation due to COVID-19, coupled with the rise of same-day delivery startups like Postmates, has resulted in customers anticipating swift and complimentary deliveries.
In this climate, businesses are tasked with streamlining their delivery process, dealing with hurdles such as rising fuel expenses, traffic congestion, and more. The final stretch of the delivery route, often referred to as the "last mile", poses the most significant challenge.
In this piece, we will discuss the concept of the last mile delivery problem, the evolving customer expectations, and innovative approaches to last mile delivery that are assisting businesses in reducing associated costs while keeping up with customer preferences.
Understanding the Last Mile Delivery Issue
Both individuals and businesses regularly order goods for delivery. The typical shipping process involves several stages, starting from order fulfillment and long-distance transport, to delivering the shipment from the local dispatch hub to the final recipient.
This final phase is often referred to as the “last mile”. Though the distance traversed in this phase may be more or less than a mile, the concept remains consistent. This step of the delivery process can be costly as it requires delivery to individual locations, often containing relatively small shipments, making the last mile delivery problem a significant challenge for businesses.
To understand the problem better, consider a company based in Austin, Texas, with 100 orders to deliver in California. The cost of transporting these orders from the company’s warehouse in Austin to the airport and then via plane to Los Angeles gets divided among all orders, making it relatively cheap.
However, the challenge begins when these orders have to reach 100 different locations in California. Whether the deliveries are from hub to hub or from hub to final destination, the cost gets split between significantly fewer orders, resulting in a hike in the average cost of shipping.
Exploring Consumer Expectations
Free delivery, once a pleasant surprise, has now become a norm. 80% of online shoppers expect free shipping for purchases above a certain amount, and 66% anticipate free shipping on all purchases. This expectation is driven by the rise of online shopping.
Companies like Amazon have normalized free shipping, leading to smaller businesses also having to meet this expectation. Furthermore, the COVID-19 pandemic has led to an explosive growth in online shopping and curbside pickups.
Today’s consumers not only anticipate swift and free delivery but also demand a transparent delivery process with tracking and updates. A study revealed that 91% of consumers actively track their packages.
Who Needs to Address the Last Mile Delivery Challenge?
The surge in online shopping has intensified the last mile delivery issue. With half of the consumers doing the majority of their shopping online and 29% doing all their shopping online, businesses of all sizes are striving to deliver their products efficiently.
Local restaurants and retailers, ecommerce websites, small businesses, and even large retailers that haven't historically delivered, are expected to provide home deliveries. Brick-and-mortar businesses are now also functioning as order distribution centers to meet this demand.
Importance of Last Mile Delivery Tracking
The modern consumer doesn’t just want to know if their order has been shipped; they want real-time tracking information at every step of the way. Up-to-the-minute tracking gives consumers specific and accurate delivery times and allows direct communication with delivery personnel.
To prevent disputes, many businesses have introduced proof of delivery as part of the tracking process. This often involves the delivery professional taking a picture of the package at the delivery location.
Last Mile Delivery Trends and Innovations
Businesses, faced with heightened customer expectations and the last mile delivery problem, are exploring new technologies and innovations.
In addition to meeting customer needs, businesses are also focusing on more sustainable solutions. While some of these innovations are widely used, others are still being tested.
Crowdsourcing platforms such as Uber, Postmates, and Instacart offer swift deliveries using gig workers. However, the reliability of these services can be a concern due to their fluctuating labor supply.
Collection points and pickup lockers pass on the last mile delivery problem to the customer, thereby reducing the need for delivery trucks. Amazon Hub Lockers are a prime example of this method.
Dark stores or order fulfillment centers that aren’t open to the public help businesses manage their online orders efficiently. Additionally, optimization of delivery routes using software and artificial intelligence has proved beneficial in reducing last mile delivery costs.
Lastly, businesses are exploring delivery drones, robotic deliveries, and autonomous vehicles to address labor costs and challenges associated with delivery.