Last mile delivery has become an important part of ecommerce supply chain management. But what exactly is last mile delivery, and how is it evolving to meet the increasing demands of customers?
It is not only essential for businesses to understand this final stage of the delivery process, but also adapt to the challenges it brings to stay ahead of the competition.
What is Last Mile Delivery?
Last mile delivery refers to the final step of the delivery process. This is where a product is transported from a distribution centre or warehouse to its end destination, typically a customer’s home or a retail location.
This stage is vital as it directly influences customer satisfaction, speed, and cost. Although the term “last mile” suggests a short distance, this phase can span many miles, depending on geographic and logistical factors.
Last mile delivery remains one of the most complex and costly parts of the supply chain, often accounting for 53% of total delivery expenses.
The rise of e-commerce and the demand for same-day and next-day deliveries have put huge pressure on companies to streamline their last mile logistics.
In this new environment, delivering a package on time is no longer enough; customers now expect convenience, speed, and transparency in the process.
It is essential that businesses optimise this stage to remain competitive and meet customer expectations.
How Does Last Mile Delivery Work?
At its core, last mile delivery is the phase where a package moves from a central logistics hub to the final delivery destination. This process involves several key steps:
1. Warehousing and Sorting
Before items can be delivered, they need to be sorted in a central warehouse or fulfilment centre.
These facilities are usually located near urban areas, where packages are organised by delivery route or location, ready for dispatch to customers.
2. Dispatching to Local Carriers
Once sorted, packages are assigned to local carriers. This could be a traditional courier service like Royal Mail, or it could involve on-demand delivery networks such as gig economy drivers.
Smaller businesses often partner with local couriers to increase flexibility and reduce costs.
3. Route Optimisation
Technology is essential in ensuring efficient last mile delivery. Route optimisation software determines the fastest, most fuel-efficient routes based on real-time traffic data, weather conditions, and delivery time windows.
Companies that use artificial intelligence and machine learning to fine-tune their routes can significantly lower their operational costs while improving delivery speed.
4. Delivery to the End Customer
The final stage involves the actual handover of the package to the customer. Many companies now offer features such as real-time GPS tracking and electronic proof of delivery. This usually includes a photo, to enhance transparency.
These innovations help improve customer satisfaction by providing accurate delivery times and reducing uncertainty.
Challenges in Last Mile Delivery
Despite technological advancements and innovative solutions, last mile delivery remains a complex and costly phase in the supply chain. The final step of getting goods to the customer’s doorstep poses several significant challenges.
Below are the key difficulties faced by businesses, along with actionable strategies to overcome them.
1. Urban Congestion and Traffic Delays
One of the most persistent challenges in last mile delivery, particularly in urban areas, is traffic congestion.
Delivery trucks and vans often have to navigate busy city streets, contend with roadworks, and face difficulties finding parking, which results in delayed deliveries.
In large cities like London, congestion can add hours to delivery windows, decreasing overall efficiency and frustrating customers expecting timely deliveries.
Strategies to Overcome Urban Congestion
Utilise Electric Cargo Bikes
For urban deliveries, electric cargo bikes can bypass traffic and reach customers faster by using cycle lanes and narrower streets. Companies like UPS and DHL have already adopted e-bikes for city deliveries, reducing delays and carbon emissions.
Invest in Micro-Fulfilment Centres
Establishing small, strategically located warehouses closer to city centres allows companies to shorten delivery routes, reducing the likelihood of delays caused by traffic.
By storing goods in proximity to high-demand areas, businesses can reduce travel time and improve delivery speed.
Implement Smart Route Optimisation
Leveraging advanced route optimisation software can help drivers avoid congested areas in real-time. This technology analyses current traffic patterns, road closures, and weather conditions, rerouting drivers dynamically to minimise delays.
AI-powered tools like Routific and Onfleet are making this increasingly accessible to businesses of all sizes.
Adopt Off-Peak Deliveries
Offering off-peak or night-time deliveries is another strategy to avoid peak-hour congestion. While this may require adjusting operational hours, it allows deliveries to happen when streets are less crowded, improving efficiency.
2. Failed Deliveries and Missed Customers
Failed deliveries are a significant issue in last mile logistics. When a customer is not available to receive a package, delivery drivers are often forced to make a second or even third attempt, increasing operational costs and creating inefficiencies.
In some cases, packages may be left in insecure locations, leading to theft or damage, further diminishing customer satisfaction.
Strategies to Minimise Failed Deliveries
Offer Delivery Windows and Appointment Scheduling
Allowing customers to choose specific delivery windows will ensure that someone will be available to receive the package.
This will reduce the likelihood of missed deliveries. This added layer of convenience also improves customer satisfaction and loyalty.
Introduce Secure Drop-Off Points and Lockers
Delivery lockers or designated collection points, often located in supermarkets, train stations, or local shops, give customers the flexibility to pick up packages at their convenience.
Companies like Amazon (Amazon Lockers) have popularised this approach, which reduces the need for multiple delivery attempts.
Use Real-Time Tracking and Notifications
Offering real-time tracking and delivery updates can help ensure customers are aware of exactly when their packages will arrive.
Sending notifications via SMS or app alerts allows customers to make necessary arrangements, improving the success rate of first-time deliveries.
Implement Proof-of-Delivery Systems
To mitigate the risk of theft or disputes over deliveries, many companies are now using proof-of-delivery (POD) systems.
This can involve taking photos of the delivered item at the doorstep or requiring an electronic signature, ensuring a clear record of the delivery.
3. High Operational Costs
Last mile delivery is known for being the most expensive part of the logistics process. These high costs stem from the need for individualised deliveries, fluctuating fuel prices, the management of drivers, and the complexity of urban and rural routes.
Companies that offer free or low-cost shipping also absorb these expenses, which can eat into profit margins.
Strategies to Reduce Operational Costs
Batch Deliveries and Consolidation
Combining multiple deliveries to a single geographic area can reduce fuel costs and driver time. Delivery management software can help group orders by location, reducing the number of trips required.
Some companies offer discounts for customers willing to select “green delivery slots” where deliveries are consolidated to minimise environmental impact and costs.
Optimising Fleet Management
For companies managing their own fleets, leveraging fleet management software that monitors vehicle usage, fuel consumption, and driver behaviour can help cut operational expenses.
Predictive maintenance can also prevent costly breakdowns that could disrupt deliveries.
Use Alternative Delivery Vehicles
Electric vehicles (EVs) and cargo bikes, which have lower fuel and maintenance costs, are becoming more viable for short-range, high-frequency deliveries.
As more cities offer EV incentives and charging infrastructure, businesses that adopt electric delivery vehicles can benefit from lower running costs and potential tax breaks.
4. Complex Rural Deliveries
While urban deliveries face traffic issues, rural deliveries pose different challenges. Deliveries to remote or sparsely populated areas require longer travel times, often for a single package, increasing per-delivery costs.
Additionally, some rural regions may lack precise addresses, reliable roads, or easy access, further complicating the process.
Strategies for Efficient Rural Deliveries
Collaborate with Local Couriers
Partnering with local or regional delivery companies that are familiar with the area’s logistics can reduce costs and improve delivery times.
Local carriers often have a better understanding of the road conditions and customer preferences, allowing for smoother operations in rural regions.
Utilise Parcel Lockers or Pick-Up Points
In rural areas, establishing centralised pick-up points can significantly cut delivery costs. Instead of delivering to individual addresses spread over large distances, couriers can drop multiple packages at one secure location for collection.
This method reduces the travel distance per delivery and is convenient for customers who live far from major distribution hubs.
5. Meeting Sustainability Goals
With growing awareness of climate change, sustainability is now a major consideration for many consumers. Companies that rely on last mile delivery face pressure to reduce their environmental impact.
Delivery vehicles contribute to pollution, and the frequent trips required for individual package deliveries lead to a significant carbon footprint.
Strategies for Sustainable Last Mile Delivery:
Invest in Electric Vehicles (EVs)
Many logistics companies are beginning to invest in electric delivery vans and trucks to reduce emissions.
In cities with congestion charges or low-emission zones, using EVs can lower operational costs and improve a company’s environmental credentials. For example, both Amazon and DPD have made significant investments in electric delivery fleets.
Carbon Offsetting and Green Delivery Options
Offering customers the choice of carbon-neutral shipping, where businesses offset emissions by funding renewable energy projects or reforestation, is an increasingly popular option.
Some customers are willing to pay extra for greener options, which can help offset the additional costs of sustainable delivery methods.
Encouraging Eco-Friendly Delivery Slots
Businesses can incentivise customers to choose environmentally friendly delivery slots by offering discounts for grouped deliveries in the same area.
This reduces the number of delivery trips and emissions. Companies like Ocado in the UK already offer a “green slot” option that groups deliveries by neighbourhood.
Leverage Data for Sustainability Optimisation
Data-driven decision-making can help logistics companies optimise their fleet operations for lower emissions.
Predictive analytics can improve route planning, reduce idling, and ensure that vehicles are running at optimal efficiency, thus reducing overall carbon emissions.
How Customer Demands are Reshaping Last Mile Delivery
Customer expectations are rapidly changing, and the impact is most keenly felt in the world of last mile delivery.
From speed and convenience to sustainability, modern consumers are increasingly demanding better, faster, and more personalised delivery experiences.
This shift is forcing companies to rethink their logistics strategies and innovate to keep up with growing demands.
The Push for Faster Delivery: Same-Day and Next-Day Expectations
It’s no secret that consumers want their items delivered as quickly as possible.
The popularity of services like Amazon Prime has normalised next-day, and even same-day delivery, creating an expectation that businesses of all sizes now feel the pressure to meet.
However, while faster deliveries can enhance customer satisfaction, they also bring significant challenges.
Achieving same-day delivery requires companies to invest in infrastructure, such as strategically located fulfilment centres and expanded delivery networks.
Smaller businesses may struggle to meet these demands, as the operational costs can be steep. Nevertheless, implementing dynamic scheduling and leveraging local carriers can help mitigate these issues.
Flexibility and Convenience: Empowering the Consumer
Today’s customers not only want fast delivery, but they also desire flexibility. Offering delivery options that fit their busy schedules is critical to winning customer loyalty.
Features such as evening or weekend delivery, and allowing customers to select specific delivery windows, provide greater convenience.
Another popular solution is delivery lockers or pick-up points, where customers can collect their items at their leisure. This minimises the chances of missed deliveries and gives customers more control over the process.
The Sustainability Factor: Eco-Friendly Deliveries
Environmental consciousness is increasingly becoming a priority for many consumers, and this has had a significant impact on last mile delivery practices.
A growing number of customers now consider sustainability when making purchasing decisions, and companies are responding by offering greener delivery options.
Initiatives like electric vehicle fleets, bike couriers, and carbon-neutral shipping are becoming common, especially in eco-conscious markets.
In addition, some retailers offer ‘green delivery slots’, which group deliveries by geographic area to reduce carbon emissions. While these slots may not provide the fastest option, they cater to environmentally conscious consumers willing to wait a bit longer for a more sustainable service.
Transparency and Real-Time Tracking: Building Trust
Transparency is becoming an essential component of customer service in last mile delivery. In a world where people are accustomed to instant information, customers want to know exactly where their packages are and when they will arrive.
Real-time tracking tools, which allow customers to follow the journey of their package from warehouse to doorstep, have become a critical part of the delivery experience.
Many companies now offer mobile apps, GPS tracking, and push notifications that provide updates on delivery status.
This level of transparency not only enhances the customer experience but also builds trust in the brand. Customers feel reassured that their delivery is being handled with care.
FAQs
How does last mile delivery impact customer satisfaction?
Last mile delivery is crucial to customer satisfaction, as it represents the final interaction between the company and the consumer. Delays or issues in this phase can negatively impact the customer’s perception of the entire shopping experience.
Why is last mile delivery so expensive?
Last mile delivery is the most expensive part of the supply chain due to the individualised nature of deliveries, traffic congestion, and the high cost of redelivery attempts when packages cannot be delivered on the first try.
What role does technology play in optimising last mile delivery?
Technology is key in optimising last mile delivery, particularly through route optimisation software, real-time tracking, and automated systems that streamline the delivery process.
How are customer expectations changing the logistics industry?
Customer expectations for faster, more flexible, and sustainable delivery options are pushing logistics companies to innovate and find new ways to improve their delivery services, from crowdsourced networks to green shipping solutions.
What are micro-fulfilment centres?
Micro-fulfilment centres are small-scale warehouses located near urban areas that allow businesses to shorten delivery times by keeping popular products closer to the end customer.
How is sustainability affecting last mile delivery?
Sustainability concerns are driving companies to adopt greener delivery methods, such as electric vehicles, carbon-neutral shipping options, and ‘green’ delivery windows that reduce carbon emissions.
