Big Savings In The Last-Mile
By Bradford Peirce | December 13, 2023
For online retailers, the e-commerce has been a boon in recent years. But as delivery costs have outpaced inflation, e-commerce has become an increasingly costly business. And retailers know this. A staggering 55% of online retailers made reducing costs per delivery a focus in 2023, marking it as their top priority according to FarEye's Eye on Last Mile Delivery report.
But must retailers compromise on delivery experiences to reduce delivery costs? Will cost cutting result in slow, late or failed deliveries? Can retailers have both low delivery costs and great delivery experiences?
The pursuit of this so-called “holy grail” in retail delivery — lowering delivery costs while simultaneously enhancing the overall customer delivery experience - is an achievable goal. With advancements in technology, achieving this delicate balance is not only feasible but can revolutionize the way online retailers approach the last mile.
To navigate the complex terrain of last-mile cost reduction, retailers can adopt three interconnected approaches:
1. Commingling or Consolidating Deliveries
One effective strategy is the consolidation of deliveries through commingling. By optimizing delivery routes and combining shipments, retailers can significantly reduce costs. Imagine the fuel savings and operational efficiency gained when multiple deliveries share the same route.
Consolidating deliveries can be made easier with proactive monitoring through a centralized command center. This management enables retailers to keep a watchful eye on parcels in real-time. This proactive approach allows for quick response to potential delays or issues, ensuring that deliveries stay on track and customers remain satisfied.
2. Carrier Network Integration & Control:
Another key strategy involves integrating and controlling the carrier network. Retailers can optimize for cost, speed, or strike a balance between both. Allocating deliveries based on carrier rates and performance metrics allows for a strategic approach. This includes controlling serviceable areas, integrating with Warehouse Management Systems (WMS), and other legacy systems, ensuring a seamless flow of information across the supply chain. Automated selection further streamlines the process, ensuring that each delivery is assigned the most cost-effective and expedient route.
Diversifying carrier partnerships is a prudent move. By signing different rate contracts with various carriers, retailers can strategically allocate deliveries based on cost, performance, and serviceable areas. This flexibility enables them to navigate varying operational landscapes and respond to market dynamics efficiently.
3. Dynamic Routing: Balancing Customer Experience & Cost
Dynamic routing is a linchpin in the cost-saving strategy. FarEye's roundtable discussions reveal that dynamic routing can reduce the number of vehicles on the road by a staggering 60%, simultaneously slashing delivery times by 27%. This dynamic approach not only optimizes routes for cost savings but also enhances the customer experience by ensuring timely and efficient deliveries.
By leveraging technology to dynamically optimize routes based on real-time factors such as fuel prices, traffic conditions, and delivery constraints, retailers can minimize fuel consumption and enhance overall delivery efficiency.
The last mile of delivery is a frontier where costs can be trimmed without compromising customer satisfaction. By embracing technology, adopting dynamic routing strategies, and optimizing carrier networks, online retailers can achieve the elusive balance of reducing costs per delivery while elevating the overall customer delivery experience. As we navigate the evolving landscape of e-commerce, these strategies will undoubtedly shape the future of last-mile delivery, driving innovation and efficiency in the online retail space.
Bradford is a veteran of the retail and logistics industries, with 5 years of experience in research and corporate strategy. He has a deep understanding of the trends, challenges and opportunities of last-mile logistics and how technology is increasingly playing a role in the industry.