What is last mile delivery? The definitive guide

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.

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.

Last mile delivery can be a complex process, as it involves navigating various challenges such as traffic, limited visibility, and managing returns. However, advancements in technology and new delivery methods, such as drones and autonomous vehicles, are helping to improve last mile delivery and make it more efficient and cost-effective.

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.

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 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.

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 in last mile delivery:

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: Missed deliveries are a common challenge in last mile delivery, which can lead to additional costs for logistics companies and frustration for customers.
4. Managing Returns: Returns management is a complex process in last mile delivery, 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: Last mile delivery can be costly, particularly in urban areas where traffic and other challenges can increase delivery times and costs.
7. Unpredictable Demand: Last mile delivery can be challenging to manage due to unpredictable demand patterns, leading to inefficient use of resources and additional costs.
8. Security and Theft: Last mile delivery packages are at risk of theft and damage, which can result in significant financial losses for logistics companies and frustration for customers.
9. Environmental Impact: Last mile delivery can have a significant environmental impact due to emissions from delivery vehicles and packaging waste.
10. Limited Access: Last mile delivery can be challenging in remote and rural areas where access to roads and other infrastructure may be limited, leading to increased delivery times and costs.

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 of last mile delivery. Here are 5 ways how technology can solve the biggest last mile delivery challenges:

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.

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.

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.

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.

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.

In conclusion, technology is helping to solve some of the biggest last mile delivery challenges and revolutionize the way packages are delivered to customers. By using real-time tracking and communication, route optimization, delivery drones, autonomous vehicles, and micro-fulfillment centers, logistics companies can improve delivery times, reduce costs, and provide a better overall experience for customers.

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 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.

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 last mile delivery, 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.