Last-mile e-commerce significance and challenges in delivery operations

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By FarEye | October 13, 2022

In the past decade, the retail sector has witnessed a paradigm shift with most sellers switching from conventional brick-and-mortar stores to an e-commerce focus. Last-mile e-commerce operations have also had to evolve to keep up with the change.

What is last mile e-commerce?

In e-commerce, last-mile delivery refers to the last phase of any shipment’s path from a warehouse to the final delivery destination. Last-mile e-commerce delivery is a critical part of supply chain management that ensures goods brought into a warehouse are adequately packaged and forwarded to the customer directly. In today’s highly competitive marketplace, last-mile e-commerce is all about price, speed and satisfying the consumer.

With growing demand from customers and the phenomenon of same-day delivery, last-mile delivery can make or break a company’s reputation. 

What is the significance of last-mile e-commerce in the 21st century?

The rule of the game is simple – fulfilling delivery promises. And the ones who do it diligently will rule the e-commerce space in the 21st century. Whether the delivery commitment is one-day, same-day or one-hour, online retailers are in a race to reach their customers and raise their brand identity with fast and accurate delivery. 

As online shopping continues to grow, consumers now expect fast deliveries. Prioritizing fast deliveries can help retailers and their logistics partners to grab a greater share of the market.

Mastering the art of last-mile delivery has yielded great results for companies like Amazon, FedEx and UPS. While consumer expectations around delivery continue to grow, sometimes their expectations are not met. For last mile e-commerce carriers, this last leg of the supply chain is important.

Rapid Changes in Retail Dynamics

Earlier the retail space was dominated by players like Sears, JCPenny and all,= who offered the convenience of getting everything you need under one roof. But today the definition of convenience and accessibility has changed dramatically. With the dominance of e-commerce players and easy home delivery, retail dynamics have changed globally. And this translates into a sheer focus on last mile delivery e-commerce. Players who have leveraged on last-mile delivery solution are the one shinning.

Exceeding Customer Expectations

Today's consumers enjoy online shopping where everything is available at the tip of their fingers. The “good to have” list quickly transforms into “must-haves,” and with such rapid changes in shopping and faster deliveries become the norm. Online retailers have to keep up with the delivery pace and not only meet customer expectations but exceed them to convert them into brand-loyal consumers. As much as 99% of U.S. customers expect faster delivery and with Amazon Prime’s next-day delivery, the competition has heated up with a greater focus on last-mile e-commerce.

Adapting New Technologies

Last-mile e-commerce companies are leveraging new technologies to optimize last-mile delivery. Artificial intelligence (AI), automation, delivery drones, autonomous delivery vans are now being used. E-commerce companies are now adopting and adapting these new technologies. 

7 key challenges in last mile e-commerce

Understanding the bottlenecks in the final leg of delivery is critical in achieving high efficiency among last-mile e-commerce companies. Some key challenges in last-mile delivery are as follows.

Poor Customer Experience

With the increase in customer expectations, their dissatisfaction with the last-mile experience is also surging. As per Capgemini Research Institute’s report, on an average, across all geographies, delivery services received a Net Promoter Score (NPS) of -9.

Increasing Delivery Costs

Even though customers are willing to pay a premium for the fastest delivery, many other consumers are not willing to pay more for quick deliveries. Last-mile delivery accounts for 53% of overall shipping costs

Damage to Packages

While the focus is on faster delivery, improper handling of shipment causing damages can also be a challenge. Damaged packages not only incur an additional cost but also can trigger dissatisfaction among customers. 

Inefficient Returns Management

Ineffective product returns can lead to a decline in revenues, higher operational costs, and rise in customer dissatisfaction. A dramatic increase in returns these days poses a challenge to last mile eCommerce.

Rigid Delivery Workflows

With changing shopping pattern and dynamic consumer behavior, there’s no place for rigid delivery processes. Conventional last-mile processes are mostly dependent on manual intervention that often fails to meet customer expectations. Consumers prefer brands that allow them to alter delivery locations and the delivery schedule as needed, which can be difficult if dynamic workflows are not in place.

Lack of Ground-level Logistics Visibility

This is a major challenge in last mile e-commerce where more dynamic visibility is required. Poor visibility leads to delays, route diversions, unnecessary fuel consumption, vehicle idling etc. which collectively frustrates consumers.

High Numbers of First-attempt Delivery Failures

Every unsuccessful first time delivery incurs extra costs, which is a challenge in last-mile delivery. Rescheduling the delivery, loss of man-hours and more miles traveled increases overhead costs. 

How can last-mile e-commerce companies improve delivery operations?

Increasing last-mile efficiency is all about marrying customer expectations with operational excellence. These methods can help improve last-mile delivery. 

1. Use of Smart Technology

Operational excellence can be achieved by using GPS and radio frequency identification (RFID), to locate their fleet and be able to communicate with them. Real-time tracking integrated with SMS and email notification can enhance efficiency. Advanced data analytics also help to predict and forecast. Robot and drone deliveries are also beginning to make last-mile deliveries.

2. Streamlining Resources

Due to a surge in demand, a company’s in-house resources can sometimes fall short. A hybrid model comes in handy during these hours of crisis when third-party logistics providers (3PLs) and freelancers can be utilized for better results. 

3. Faster Order Fulfillment

Meeting customer expectations with same-day delivery has become the latest trend. Fulfilling such demands by proper planning and strategies can enhance last-mile delivery.

4. Maintain Transparency and Flexibility

Consumers are always online and want to be able to track their orders at every stage of the delivery process. Letting the customers know about the exact coordinates of the package builds faith in the brand. Informing customers of any potential exceptions also help to maintain healthy customer relationship.

FarEye closely works with its clients to help them achieve seamless deliveries across the globe. With advanced technologies, reduced carbon footprint and quick TAT, we have been consistently achieving operation excellence by overpowering all challenges and thereby empowering enterprises of all sizes.

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