What is Last Mile? A Complete Guide to Last Mile Delivery & Logistics

With the continued growth of e-commerce, last mile delivery has become more important than ever for consumers and more complex and challenging for shippers. The last mile is typically the most expensive leg of the entire supply chain, accounting for 53% of overall shipping costs.

The last mile is also unpredictable, with delivery destinations and timelines unknown until a consumer places an order. Combine that with various fulfillment and fleet types for shippers to choose from, and the last mile distribution process becomes even more complex and challenging.

Getting the delivery experience right is of utmost importance for shippers and carriers in an increasingly e-commerce-driven world. Product and price are no longer the only considerations to winning sales and delighting consumers. Delivery has taken center stage as a key factor that consumers evaluate when deciding where to purchase their online goods. A great delivery experience is a great competitive advantage.

Supply chain leaders, whether e-commerce retailers, grocery chains, restaurants or manufacturers, need to revisit their last mile delivery strategy. Companies need to dramatically simplify the most complicated aspects of delivery logistics, especially in the last mile. For shippers and carriers, getting the last mile delivery experience right is critical in an increasingly e-commerce driven world.

Here’s a table of contents:

• What is Last Mile?
• Why the last mile is critical in supply chains
• The Evolution of Last Mile
• The Concept of Last Mile in Logistics
• What is Last Mile Delivery?

• 5 Key Steps in the Last Mile Delivery Process

• What is the “Last Mile Delivery Problem”?

• Why is last mile delivery important?

• How much does last mile delivery cost?

• What are the challenges in last mile logistics?

• 5 Ways Technology Can Solve Your Biggest Challenges
• 7 Trends That Will Shape Last Mile Delivery in 2024
• Conclusion
• FAQ's

The term "last mile" refers to the final step in a broader process of delivery, service provision, or connectivity that brings products or services directly to end users. It’s often the most critical and complex stage, where a company or service must efficiently bridge the gap between a central hub or provider and the customer's location, whether it’s a home, office, or other destination.

The last mile is critical in supply chains because it directly impacts customer satisfaction, costs, and operational efficiency. It’s often the most expensive part of the delivery process due to factors like traffic, multiple stops, and failed deliveries. A smooth last mile ensures timely and accurate deliveries, which boosts customer loyalty. It also serves as a key differentiator for businesses in competitive markets. Lastly, optimizing the last mile can address sustainability concerns, as it’s where most emissions and inefficiencies occur. Efficient last mile operations are crucial for both customer retention and profitability.

The last mile concept has evolved significantly over time, driven by advancements in technology, urbanization, and changing consumer expectations. Here’s a look at its historical development:

• Early Postal Services:
  • Last mile originated with postal workers delivering mail and parcels, often on foot or by bike.
• Retail and Parcel Delivery:
  • Home delivery services for newspapers, groceries, and other goods became common in the mid-20th century.
• E-Commerce Boom:
  • The rise of Amazon and eBay in the late 1990s transformed the last mile, emphasizing speed and delivery accuracy for individual parcels.
• Technological Advancements:
  • The 2010s introduced GPS tracking, AI-driven route optimization, and real-time updates, enabling faster and more efficient last mile deliveries.
• Sustainability and Hyperlocal Delivery:
  • Focus on green delivery methods (EVs, bikes) and hyperlocal models (1-hour deliveries) emerged to meet consumer and environmental demands.
• Future Trends:
  • Automation through drones, autonomous vehicles, and robots will further optimize last mile efficiency.

1. Origin of the Term: Where and How It Was First Used

• The term “last mile” originated in the telecommunications industry in the early 20th century, referring to the final leg of delivering telephone or internet services from the provider to a customer's home or business.
• Over time, it was adopted by the logistics industry to describe the final step in delivering goods from a transportation hub to the end customer.

2. Last Mile vs. Long-Haul Transportation: Key Differences

• Long-haul transportation involves moving goods over long distances, often across cities or countries, usually in bulk on large trucks, ships, or planes.
• The last mile focuses on short-distance, individual deliveries directly to the customer’s location. It involves multiple stops and often encounters urban traffic and accessibility challenges, making it more complex and costly.

3. The Role of Last Mile in Connecting the Supply Chain to the End Customer

• The last mile is the final connection between the supply chain and the customer. It completes the delivery journey and determines whether the product reaches the customer as expected.
• As the most visible part of the logistics process, it plays a key role in customer satisfaction, influencing the overall experience and brand perception.

4. Importance of Speed and Accuracy in the Last Mile Phase

• Speed and accuracy are crucial in the last mile phase because consumers now expect fast deliveries, with same-day or next-day services becoming the norm.
• Mistakes or delays in this stage, such as incorrect addresses or missed delivery windows, can lead to customer dissatisfaction and increase operational costs due to re-deliveries or returns.

Last mile delivery is the final leg of the e-commerce supply chain that physically connects brands with consumers through the delivery of the purchase. Goods are transported from a warehouse or a distribution center and arrive either at a consumer’s home, business, or parcel locker. For the shipper, last-mile delivery is the most complex and expensive part of the product’s journey.

The goal of superior last- mile delivery is to enable every delivery to reach its destination every time, on time, accurately, efficiently, and sustainably.

Last mile delivery is the final step in the supply chain, where goods are transported from a transportation hub or warehouse to the customer's location. Here's how it typically works:

1. Order Placement: The customer places an order online or through a mobile app. The retailer or logistics company receives the order and processes it.
2. Order Fulfillment: The order is picked, packed, and prepared for shipment at the warehouse or fulfillment center. The shipment is then loaded onto a delivery vehicle, such as a truck or van.
3. Route Optimization: The delivery vehicle's route is optimized to ensure that packages are delivered in the most efficient way possible. The route may be optimized based on factors such as distance, traffic, and delivery time windows.
4. Last Mile Delivery: The driver delivers the package to the customer's location, which could be a residence, business, or public location such as a locker or pick-up point. The driver may also use technology, such as GPS and mobile apps, to navigate to the customer's location and communicate with the customer in real-time.
5. Delivery Confirmation: The driver confirms that the package has been delivered, often by obtaining a signature or using a photo capture system, and the order is marked as complete.

The final phase of the delivery journey presents complexities and obstacles like traffic, restricted visibility, and handling returns. However, advancements in technology and the introduction of innovative delivery solutions, like drones and autonomous vehicles, are enhancing the efficiency and cost-effectiveness of this crucial process.

Last mile operations have never been so complex. Increased variables in how, where and when deliveries depart and arrive are giving shippers and carriers alike greater flexibility, but they also provide greater complexity to the last mile.

There are multiple challenges that contribute to the last mile problem. One challenge for shippers and carriers is a lack of efficiency, which contributes to the expense of the last mile. Another challenge is providing real-time visibility regarding a delivery’s location for all stakeholders.

Amazon set the bar high with its ever-increasing ability to deliver in shorter time frames while also notifying the consumer about the transit delivery details. Brands with and without their own dedicated fleets strive to live up to the “Amazon effect,” and adhere to the promised delivery dates and times for consumers.

Consumers want visibility into their deliveries but they also expect faster delivery speeds. Keeping all stakeholders happy while delivering in increasingly shorter time frames in the most cost-effective and efficient manner is the last mile problem.

In short, the last mile delivery problem impacts all companies. In today’s world, every company wants to deliver products quickly, efficiently and provide superior customer experiences while working in an increasingly complex and competitive landscape.

What’s the biggest challenge with last mile deliveries?

Graph showing last mile delivery challenges Source

Last mile delivery is the only touchpoint between a customer and a brand. The front door has become the new storefront. Giving consumers the products they want is important but delivering a cohesive experience from order-to-delivery is now the holy grail for retailers worldwide. It is a crucial component of delivering a world-class brand experience and keeping consumers brand-loyal.

The stakes are extremely high in the last mile. A positive last mile interaction translates to strong brand equity and greater brand loyalty. A negative delivery can ruin a brand, making the last mile extremely critical. FarEye’s Last Mile Mandate survey conducted in June 2022 revealed that 85% of consumers will not shop with a retailer again due to a poor last mile experience.

This finding alone - despite the growth in e-commerce and home delivery, and steps retailers have made to create better consumer experiences - signifies the need to fundamentally change the way orders are delivered and returned to achieve a consistent, branded consumer experience with every purchase.

Price and product are no longer the most important differentiators for brands. FarEye's Last Mile Mandate survey reveals that 36% of consumers want fast delivery, while 28% of consumers want delivery tracking and ETA alerts. Providing delivery tracking ability, delivering a package quickly and at no cost to the consumer are the new differentiators that brands must focus on to win consumer loyalty. This makes the last mile delivery experience extremely important.

Last mile shipping accounts for 53% of the total cost of moving a product across first, mid and last miles. Pinpointing an exact number on last mile costs is difficult as each delivery is different. However, the average next-day shipping cost for a retailer is $27 per package while for Amazon, it’s $5.

With consumers demanding fast and free delivery, free to consumers doesn’t mean it’s free to shippers. Brands will need to absorb delivery costs in order to keep consumers coming back to them. Utilizing last mile delivery system can help reduce costs and improve performance.

Efficient last mile deliveries can decrease shipping costs for companies and also keep consumers happy. Consumers with positive last mile interactions with a company are more likely to return to that company for additional purchases. Over 70% of consumers say speed, convenience and friendly service matter most.

Failed deliveries also add to last mile costs, but their costs can be measured by more than money. 84% of consumers will not shop with a retailer again if they have a negative last mile experience. So while the cost of the last mile varies, the constant is that it must be done well to keep consumers satisfied.

Last mile delivery is a complex process that involves several challenges that can impact delivery times, costs, and customer satisfaction. Here are ten common challenges:

1. Traffic Congestion: Traffic congestion can significantly impact delivery times, making it difficult for drivers to reach customers on time.
2. Limited Visibility: Last mile delivery can be challenging to manage because it is difficult to track packages once they are out for delivery, leading to limited visibility for both logistics companies and customers.
3. Missed Deliveries: Undelivered packages pose a significant issue in the final stages of the delivery process, resulting in extra expenses for logistics firms and dissatisfaction among customers.
4. Managing Returns: Returns management is a complex process in that happens in last stage, requiring significant resources and logistics coordination to ensure that packages are returned to the appropriate location and processed in a timely manner.
5. Delivery Window Constraints: Customers often have specific delivery windows that can be challenging to meet, leading to missed deliveries and reduced customer satisfaction.
6. Cost Management: The final leg of the delivery process can be costly, particularly in urban areas where traffic and other challenges can increase delivery times and costs.
7. Unpredictable Demand: Managing this last leg can prove difficult due to unpredictable demand patterns, leading to inefficient use of resources and additional costs.
8. Security and Theft: Packages in the final mile stage are vulnerable to theft and damage, which can result in significant financial losses for logistics companies and frustration for customers.
9. Environmental Impact: The environmental impact caused in this stage is significant due to emissions from delivery vehicles and packaging waste.
10. Limited Access: In remote and rural regions, where access to roads and infrastructure is limited, the delivery process becomes even more challenging, leading to extended delivery times and increased expenses.

Every driver follows a route for deliveries. Ideally, these routes are simple, with multiple drop-offs along the way.

In reality, routes can span many miles with just a few deliveries, especially in rural areas, which means wasted time and fuel for fewer deliveries.

In urban areas, heavy traffic can eat up just as much time and fuel, despite shorter distances between drop-offs.

FarEye optimizes delivery routes by considering factors like time, location, vehicle capacity, and traffic to recommend the most efficient routes. Any real-time traffic updates are sent to drivers via SMS, keeping them on the best route and informing customers in real-time.

In addition to optimizing routes, using software to plan deliveries saves the time needed for manual planning. Since routes update in real-time, fewer drivers are needed to complete deliveries in a day.

Managers can create auto-assignment rules based on driver location, route distance, and task limits per driver. 

This dispatch feature introduces a new level of automation, helping to save time, optimize resource allocation, and allowing managers to focus on improving other aspects of the delivery process. By streamlining last mile logistics, it also helps to reduce inefficiencies that often lead to higher delivery costs.

In fact, an industry study revealed that 56% of consumers are demanding greater transparency in the delivery process. 

But what other features are customers expecting from their last mile services?

Source

One key expectation is proof of delivery. This involves verifying that an item has been successfully delivered, whether through a recipient’s signature or a photo of the package at the doorstep, complete with a time and date stamp.

FarEye makes proof of delivery simple. Drivers can capture signatures, take photos, scan barcodes, or add notes using a mobile app. This ensures both the sender and the recipient have confirmation that the delivery was successful.

Reporting helps identify bottlenecks before they escalate into bigger issues and highlights areas for improvement.

FarEye’s platform tracks key metrics such as success rates, on-time performance, service times, feedback scores, and distance traveled. This data can be filtered by team, driver, or time period, and you can export it to generate custom reports.

By tracking these KPIs, you gain insight into your last mile supply chain and can better understand how time and resources are being used.

Improving customer communication involves more than just providing a tracking number. Consumers now expect more from delivery services.

With FarEye, customers can do more than track their orders—they can communicate directly with the driver, receive SMS notifications about their delivery, and engage in a real-time feedback loop.

Source

Companies are continuously testing and implementing new strategies to perfect the last mile delivery process and keep pace with evolving consumer expectations. Here are seven trends:

As sustainability becomes a priority, many companies are transitioning to electric vehicles (EVs) for last mile deliveries. EVs help reduce carbon emissions, meet sustainability goals, and comply with stricter environmental regulations. Major logistics companies are investing in electric fleets, contributing to both environmental conservation and long-term cost savings.

Why it matters: Governments and customers are pushing for greener practices. EVs help companies reduce their carbon footprint, which can also enhance brand reputation.

Consumers now expect faster deliveries, and businesses are prioritizing same-day and next-day services to meet these demands. Retail giants like Amazon have set the standard, pushing competitors to optimize their last mile strategies for speed and efficiency.

Why it matters: Speed is a competitive advantage, and businesses that can’t offer rapid deliveries risk losing customers to those who can.

AI and machine learning are revolutionizing last mile delivery by enabling smarter route planning, predictive analytics, and real-time decision-making. AI-driven systems can optimize delivery routes based on traffic patterns, weather conditions, and customer preferences, reducing fuel consumption and improving on-time delivery rates.

Why it matters: AI-powered systems streamline logistics, reduce operational costs, and enable businesses to deliver more efficiently.

To meet the demand for faster deliveries, companies are investing in micro-fulfillment centers and urban warehousing. These smaller, strategically located hubs are positioned closer to urban areas, reducing the distance between the warehouse and the customer.

Why it matters: Micro-hubs reduce delivery times and help companies efficiently handle high-volume orders, especially in densely populated areas.

Autonomous delivery vehicles, including self-driving vans and drones, are gaining traction as businesses seek innovative ways to enhance last mile delivery efficiency. Drones can be particularly useful for deliveries in rural areas or during emergency situations, while autonomous vans can help reduce labor costs in urban deliveries.

Why it matters: While still in the early stages, autonomous deliveries have the potential to disrupt traditional logistics, making deliveries faster and less reliant on human drivers.

Crowdsourced delivery models, such as gig economy-based platforms (e.g., Uber Eats, DoorDash), are becoming more popular. This model allows businesses to tap into a network of freelance couriers to meet peak demand without the need to maintain a full-time delivery staff. It's especially useful for small and medium-sized businesses seeking cost-effective solutions.

Why it matters: Crowdsourcing delivery enables flexibility and scalability, allowing businesses to adjust resources based on demand without incurring fixed costs.

Hyperlocal delivery involves fulfilling orders from nearby stores or warehouses to serve a limited geographic area. This trend is being driven by local retailers, restaurants, and grocery stores, allowing them to compete with larger e-commerce platforms by offering quick delivery times and personalized service within specific neighborhoods or cities.

Why it matters: Hyperlocal delivery helps smaller businesses thrive in the last mile space by leveraging proximity and community-focused service, providing faster and more tailored customer experiences.

In conclusion, last mile delivery is a critical component of the supply chain, and its success is vital to ensure customer satisfaction and loyalty. However, the last mile poses several challenges such as traffic congestion, missed deliveries, limited visibility, and unpredictable demand. Fortunately, technology offers several solutions to overcome these challenges and streamline by including real-time tracking, route optimization, delivery drones, and autonomous vehicles. 

By embracing these technological solutions, logistics companies can improve the efficiency and effectiveness of last mile delivery, reduce costs, and enhance customer satisfaction. 

As the demand for e-commerce continues to grow, it is essential for logistics companies to stay abreast of these technological developments and leverage them to ensure the success of their last mile delivery operations.