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What is last mile delivery? The definitive guide

Last mile delivery can be a hassle. We make it easy. FarEye can streamline your last mile delivery, cut delivery costs & delivers superior consumer experience

By Komal Puri | October 10, 2022

Introduction to Last Mile Delivery

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 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.

What is last mile delivery?

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.

How does last mile delivery work?

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.

What is the last mile problem?

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.

Why is last mile delivery important?

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.

How much does last mile delivery cost?

Last mile delivery 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.

What are the challenges in last mile delivery logistics?

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.

Download The Last Mile Mandate

5 Ways How Technology Can Solve the Biggest Last Mile Delivery Challenges

Last mile delivery is a critical component of the e-commerce supply chain, but it can be challenging due to factors such as traffic, limited visibility, and difficulty in managing returns. Fortunately, technology is helping to solve some of these challenges and improve the efficiency and effectiveness. Here are 5 ways how technology can solve the biggest last mile delivery challenges:

  1. Real-time Tracking and Communication: Real-time tracking and communication technology enables drivers to communicate with customers and logistics companies in real-time, providing more accurate delivery estimates and increasing visibility into the delivery process. This technology can also provide customers with real-time updates on the status of their deliveries, helping to reduce missed deliveries and improve customer satisfaction.

  2. Route Optimization: Route optimization technology helps logistics companies optimize delivery routes based on factors such as traffic, distance, and delivery time windows. By using advanced algorithms, logistics companies can create the most efficient and cost-effective routes, reducing delivery times and costs and improving overall efficiency.

  3. Delivery Drones: Delivery drones are an emerging technology that can help solve the challenge of traffic congestion and reduce delivery times. By using drones, logistics companies can deliver packages directly to customers' doorsteps, bypassing traffic and reducing the need for human drivers. While this technology is still in its early stages, it has the potential to revolutionize last mile delivery in the coming years.

  4. Autonomous Vehicles: Like delivery drones, autonomous vehicles have the potential to reduce traffic congestion and improve delivery times by eliminating the need for human drivers. These vehicles can also optimize delivery routes in real-time and use advanced sensors and mapping technology to navigate city streets and avoid obstacles.

  5. Micro-fulfillment Centers: Micro-fulfillment centers are small-scale fulfillment centers located in urban areas that enable retailers and logistics companies to store inventory closer to customers. By using these centers, retailers can reduce delivery times and costs, as well as provide more flexible delivery options such as same-day or on-demand delivery.

Elements of the last mile experience

The elements of the last mile experience in the context of delivery and logistics can include:

  1. Speed and Timeliness: The promptness and efficiency of delivery, ensuring that packages arrive within the expected time frame or even faster.

  2. Communication and Transparency: Regular and proactive communication with customers regarding the status of their deliveries, providing tracking updates and notifications about any potential delays or changes.

  3. Convenience and Flexibility: Offering convenient delivery options that align with customer preferences, such as flexible time slots, alternative delivery locations (e.g., lockers or pickup points), and the ability to reschedule or redirect deliveries.

  4. Customer Service and Professionalism: Well-trained and courteous delivery personnel who provide professional service, handle customer inquiries and requests promptly, and ensure a positive interaction during the delivery process.

  5. Packaging and Product Condition: Ensuring that packages are securely and properly packaged to protect the contents during transit, minimizing the risk of damage or breakage, and delivering products in excellent condition.

  6. Returns and Exchanges: Streamlined processes for handling returns and exchanges, including clear instructions, hassle-free return options, and efficient resolution of any issues or concerns raised by customers.

  7. Accessibility and Address Accuracy: Ensuring that delivery addresses are accurate and accessible, minimizing any difficulties or delays in locating and reaching the intended destinations.

  8. Security and Safety: Implementing measures to address theft or tampering concerns, such as secure packaging, proof of delivery, and secure access to delivery locations.

  9. Sustainability and Environmental Considerations: Incorporating eco-friendly practices and delivery options, such as using electric vehicles or optimizing routes to reduce emissions and minimize the environmental impact of last mile operations. 

What companies provide reliable last mile delivery solutions?

FarEye’s Intelligent Delivery platform turns deliveries into a competitive advantage. Retail, e-commerce and third-party logistics companies use FarEye’s unique combination of orchestration, real-time visibility, and branded customer experiences to simplify complex last mile delivery logistics.

FarEye helped Gordon Food Service (GFS) make same-day delivery a competitive advantage. GFS wanted to create an omnichannel last mile strategy to grow their market share, and increase their speed and efficiency through last mile optimization. Utilizing FarEye’s solutions, GFS was able to grow their business offerings by 8.6% during broad market disruptions.

Blue Dart is South Asia's premier last mile delivery courier and integrated express package distribution company. They needed real-time web-based scheduling, assignment, auto-routing & monitoring of orders for managers, along with a mobile app for drivers to plan, deliver and update locations on routes. Using FarEye’s last mile delivery platform, Blue Dart increased its first-attempt delivery rate by 22%.

FarEye's last mile management platform allows businesses in industries such as retail, CEP and 3PLs, food and grocery, post and parcel to increase consumer loyalty and satisfaction, reduce costs and improve operational efficiencies. FarEye has 150+ customers across 30 countries and five offices globally.

Partnering with a Third-Party Logistics Provider (3PL) for Last Mile Delivery

Last-mile delivery service providers face the challenge of meeting the demands and expectations of both customers and merchants. Third-party logistics providers (3PLs) are increasingly entering the last-mile delivery arena (last mile 3PL), competing with traditional shipping carriers. These service providers leverage technology to enhance routing efficiency and rely on inventory management software and proprietary supply chain monitoring systems. These systems offer visibility to the company providing ecommerce fulfillment services and the end customer awaiting their order, ensuring real-time intelligence flows seamlessly across the supply chain. The adoption of technology solutions has enabled providers to effectively manage peak times, optimize routes, and control costs.

A third-party logistics provider, commonly referred to as a 3PL, acts as a vendor that handles order fulfillment for ecommerce companies. Typically, the 3PL stores products in warehouses strategically located to serve specific regions of customers. Upon receiving orders, the 3PL assumes responsibility for transporting products to their final destinations and completing the last mile delivery process.

Partnering with a Third-Party Logistics (3PL) company for last mile delivery offers several benefits:

  • Enhanced efficiency and expertise in last mile delivery operations.
  • Cost savings through optimized logistics and economies of scale.
  • Scalability to accommodate fluctuations in order volume and market expansion.
  • Ability to focus on core business activities while outsourcing delivery logistics.
  • Flexibility to offer diverse delivery options and adapt to changing customer demands.
  • Improved customer experience with faster, reliable delivery services.

Conclusion

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.

FAQs

What is a last mile distribution example?

A last mile distribution begins from a warehouse or distribution center. A package is picked up by a carrier, and delivered to the consumer, usually at their doorstep. Along the way, the consumer may receive SMS updates on the package’s location and time of arrival.

What is considered last mile?

In logistics, there are several legs in a product’s journey from manufacturer to consumer. The last mile is the final leg of the journey. It is the last stage where the product is delivered to the end user. The other legs of a product’s journey are the first mile and mid-mile.

Who uses last mile delivery?

Any business that needs to deliver its products to the end consumer. Industries who commonly utilize last mile delivery include retail, logistics and 3PL companies, food and grocery industries, and post and parcel companies.

Why is last mile delivery important for courier companies?

Last mile delivery courier plays a crucial role in customer satisfaction. It is the point where customers directly interact with the delivery service, and their experience during this phase significantly influences their perception of the entire delivery process. Efficient last mile delivery can lead to increased customer loyalty, positive reviews, and a competitive edge for courier companies in the market.

Komal puri

Komal Puri is a seasoned professional in the logistics and supply chain industry. As the Senior Director of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.

Komal Puri
Sr. Director of Marketing | FarEye
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