6 mins

Tips for last mile delivery and logistics

What is last mile delivery? How does it work? Click to find out tips for last mile delivery & logistics challenges and optimizations.

Last mile delivery driver takes a package from the delivery van
July 22, 2022

Last mile delivery is all about transporting the item from the fulfillment center to the customer, and demand for this service is booming. 

The last mile delivery process makes up more than fifty percent of the shipping cost of a product

The cost however, can have a negative impact on the profitability of e-commerce businesses and poses a great opportunity to achieve cost-savings.

The value of same-day delivery and last mile logistics in North America alone is estimated to reach over fifty billion dollars by 2022. Customer expectations around communication, order tracking, and delivery times are also increasing.

No matter your fulfillment strategy, you cannot deny the importance of optimizing last mile delivery logistics.

To optimize the last step from the distribution center or facility to your customer, it is vital to fully understand how it works, and why it is so important. 

What is last mile delivery?

Last mile delivery is defined as the transportation of a package from a fulfillment center to the final destination. The final destination of the package can be the doorstep of the customer or a retail store.

A last mile carrier aims to deliver the item to the final destination as cost effectively and quickly as possible. Many last mile carriers have a fleet of vehicles to deliver their products.

The last mile is one of the most critical steps in the delivery process, especially if transporters want to keep up with the ever-increasing consumer demand for fast shipping. 

This is the most expensive part of the journey, and is essential as customers can easily select other products if the shipping does not meet their requirements. Fulfillment centers, fleet costs, route optimization and labor costs can be substantial and drive up the cost.

There is a way for customers not to carry the cost of last mile delivery, and that is for companies to bear the costs themselves. Some set specific order limits to make up for this cost.

How does last mile delivery work?

The last mile delivery service process starts after the customer places a confirmed order with the e-commerce provider or retailer online and pays for it.

The typical process includes the following steps.

Step #1

In this step orders enter the centralized system of the e-commerce provider or retailer digitally. The sender and recipient can monitor the status of the requests and orders by means of a tracking number at this stage.

Step #2

The order arrives at the transportation hub to await pick up for delivery to its final destination.

This is where speed and efficiency are vital to ensure that the order gets from the transportation hub to the final destination as fast as possible. 

Step #3

The orders are assigned to carriers based on the address and routes. The sorting and assignment process of orders and packages needs to be strategic.

This is essential if companies want to optimize cost-efficient last mile delivery logistics solutions.

Step #4

Orders are scanned prior to loading them into the delivery vehicles. The tracking status of the order gets updated for the sender and recipient. This step also reduces the risk of losing any packages in transit.

Step #5

Finally, the order arrives at its final destination. The end recipient receives the package, and the delivery personnel updates the tracking information to confirm that the delivery has been completed. The proof of delivery is now available.

These steps sound simple enough, but last mile delivery can have its complications. The many moving parts of the last-mile delivery ecosystem and the quality of the process depend on external and internal factors.

Businesses are turning to modern last mile delivery solution options to ensure a seamless execution.

Delivery worker knocking on end customer's door

Why is last mile delivery important?

It is essential to have a super-efficient and economical last mile delivery business model due to its importance in achieving customer satisfaction and retaining customer loyalty.  

Customers who do not get their deliveries as fast as they would like may turn to a competitor’s shop that will deliver quicker.

These days two-day shipping is thought of as the norm. This is partly due to Amazon offering their advanced last mile delivery technology. It is also considered normal to market free and fast shipping as part of the customer-centric marketing strategy for e-commerce businesses.

Delivery is a key touchpoint between your brand and customer, making the last mile process extremely important. It hugely impacts your customers experience, the perception of your brand, and ultimately your profitability.

What is the last mile delivery challenge?

In short, the challenge with last mile delivery is the balance between customer experience and cost.

To give customers a memorable and pleasant last-mile delivery experience, e-commerce brands must navigate various challenges like shipping costs, order fulfillment speed, and order tracking.

Competing in the same market with retail giants such as Amazon, merchants must make substantial investments in infrastructure, technology, and personnel. This infrastructure will enable them to ship orders quickly to keep customers delighted. These investment costs can be large, and the upkeep can add up, cutting into gross profit margins. 

So, while customers prefer fast and free shipping, e-commerce businesses often find last mile delivery to be the most time-consuming and expensive part of the shipping process. In fact, up to fifty three percent of the total shipment cost is for last-mile shipping, and about twenty five percent has to be paid by the company for delivery efficiency. The rest of the cost is made up of paying for various customer demands and margins. 

There are many challenges facing last mile delivery operations that make it very expensive. These challenges include:

  • Limited visibility
  • Ensuring on-time delivery
  • Optimizing the route
  • Installation
  • Assembly
  • The need for skillful unpacking

It is important to understand these challenges to ensure that cost optimization is not done at the cost of efficiency while optimizing the last mile delivery process.

Limited visibility

The challenge starts mostly with the order management system not being linked with the delivery service provider system or the vehicle navigation and delivery tracking systems.

This makes it impossible for the logistics manager to track or trace a vehicle at a specific time or see the status of items in real time.

Poor logistical visibility, in turn, creates a host of other issues such as delays, inaccurate delivery time projections, route diversions, extra fuel consumption, and does not give customers clarity about their expected delivery.

Ensuring on-time delivery

Many customers are prepared to pay extra for faster and on-time delivery. The challenge comes with keeping up with last mile deliveries to meet these expectations.

This additional pressure for on-time delivery also comes with vehicle capacity challenges as it becomes less easy to utilize the entire vehicle space. Scheduled deliveries are usually for smaller parcels, and the delivery date is predetermined.

Therefore, there is no window to wait for additional orders. This time pressure can increase costs and slow down delivery turn-around-time as trucks are not used to capacity and will have to do multiple trips instead.

Optimizing the route

Traditional route planning uses manual calculation processes, and it is challenging to incorporate all factors influencing route productivity. These factors include heavy traffic, strict parking regulations, congested areas, sudden road closures, accidental diversions and narrow roads especially in urban areas.

Additionally, research in China and the US indicates that consumers prefer their delivery to be carbon-neutral.  Route optimization and tracking creates an opportunity for marketing this delivery option.

Installation, assembly and skillful unpacking

Many items require skillful unpacking and various degrees of assembly upon delivery. Some even require skilled technicians for their installation.

This poses a challenge to ensure that the product that the customer uses is just as the merchant sold and promised it would be. 

There are many challenges facing last mile delivery companies, and understanding them gives us a glimpse into the creation of potential solutions.

End customer receives two packages

Ways to overcome last mile delivery challenges

There are some solutions to the problems posed by last mile delivery. These systems allow logistics companies to achieve efficiencies and optimize the delivery process.

Some of these efficiencies include:

Last mile delivery route optimization

The process of last mile delivery route optimization involves identifying the most time- and cost-efficient manner to handle deliveries.

The system takes the manual elements out of dynamic routing and automatically includes optimization factors such as urgency, traffic congestion, weather conditions, and one-way windows. It also forecasts delivery times.

The system sends SMS alerts in real-time in case there are unnecessary diversions, prolonged stoppages and vehicle idling to trigger re-routing. This increases route productivity, vehicle capacity and decreases fuel consumption, and delivery times.

Proper route planning that considers all the variables can ensure that products reach their customers on time and as cost-effective as possible.

Auto dispatching

A last mile delivery solution is a category of software tools that can do the route planning and allocates the number of deliveries per driver. This reduces inefficiencies and keeps the final mile costs as low as possible.

The dispatch automation feature saves time, cost and optimizes the amount of drivers needed.

End-to-end control with delivery management software

Using last mile delivery management software gives you visibility from when the customer places the order and every step of the process thereafter.

The location of vehicles is tracked in real-time, and customers can receive accurate expected delivery times. This level of control also reduces the odds of failed deliveries, and calls from customers to query their package location.

Proof of delivery

Proof of delivery is vital for greater transparency to the entire system of last mile services and needs to be customer friendly. Lately, this step is integrated with a mobile app to ensure ease of use and instant updates.

Online proof of delivery processes reduces manual errors, helps archive data, makes it easy to audit processes and analyze customer feedback.

Improving customer experience

Focusing on the customer experience is vital to compete in a highly competitive market.

Customers want transparency and full visibility of the status of their orders. They want to be able to communicate easily and freely, even with the driver if needed. Offer customers various formats such as SMS notifications.

As much as control and costs are vital to the company, these elements must be designed keeping customer experience in mind. Make sure to understand and resolve your customer’s pain points to keep them returning.  

three delivery trucks are loaded at a 3PL warehouse

Delivery made simple with Hive

Hive takes care of the e-commerce fulfillment of D2C brands as the operational brain so merchants can focus on other aspects of their business, such as selling.

Hive offers a simple and highly effective solution to delivery. We connect, store, pack and deliver to meet all merchant and customer requirements and grow their business.

Our holistic solution guarantees a seamless process across channels, borders and services, from procurement to returns. We offer the end-customer experience the merchant and customer desires at an affordable price.

Sound interesting? Request a quote now.