Online shopping created a world of opportunity for retailers. Suddenly, their client base wasn’t limited to a strict geographical boundary — anyone with internet access could find a retail site and make purchases, as long as they were willing to pay for shipping.
The same dynamic also held true for consumers, who suddenly had endless companies vying for their business. “Free shipping” quickly became a differentiator for online shoppers, with behemoth e-commerce sites leading the way and putting pressure on other retailers to keep up. The pandemic and a home-bound consumer audience only increased demand for fast, free, perfectly-executed delivery services, pushing retailers to focus on last mile logistics and operations.
This article explores the challenges and costs of last mile logistics, and presents steps for optimizing last mile operations with data and automation technology.
Which Industries Are Seeing a Rise in Last Mile Logistics Needs & Solutions?
Last mile logistics refers to the final leg of the delivery process from a distribution or fulfillment center to the end customer. Depending on the industry, commodity or geographical region, last mile delivery can range from a few blocks to 50 or 100 miles, and usually involves a courier, small package or parcel service. The last mile impacts various industries differently, but these industries are seeing significant increases in last mile logistics needs.
- Retail: Representing the most prominent industry impacted by the rise of e-commerce and demand for last mile service, retailers are attempting to master last mile delivery and increase efficiencies through micro fulfillment centers and diverse courier networks, with a keen focus on minimizing last mile operational costs.
- Food & Grocery: Online grocery orders soared during the pandemic, and have since remained a staple convenience for consumers. There are several unique considerations for food and grocery last mile logistics, including temperature regulation and food safety.
- Specialty Products: Bulky products like furniture, mattresses and fitness equipment present specific challenges and require innovative last mile logistics solutions. Knowledgeable and experienced fulfillment partners provide solutions that help specialty manufacturers scale and expand their business.
- Wholesale Distributors: Where there’s growth in retail sales, there’s also growth in the wholesale market. Last mile logistics are increasingly crucial for wholesalers to keep retail stores, grocers and e-commerce fulfillment centers stocked, so high-demand products make it to end customers.
- Healthcare: Doctors and patients depend on the timely delivery of medical equipment, vaccines, medications and even human organs, so there is very little room for error in medical last mile logistics. Partnering with a last mile technology solution that provides real-time shipment visibility and exception management assistance gives healthcare networks peace of mind that their life-saving cargo will arrive on time.
What Are the Challenges in Last Mile Logistics Operations?
Last mile delivery is critical in today’s consumer-driven market, yet it presents numerous challenges for logistics and operations teams.
- High Costs: Last mile delivery costs for retailers are expected to hit over $55 billion by 2025 — up from $30 billion in 2018. As consumer demand for free shipping increases, shippers must identify ways to minimize these costs.
- Operational Inefficiency: Due to its sheer complexity, last mile logistics increases labor hours and puts immense pressure on operations teams. Complex route planning, fragmented carrier management, and manual tracking processes are time-consuming and inefficient, so identifying process automation opportunities is critical.
- Fragmented Carrier Networks: Last mile delivery providers might be large, multinational parcel services; owned fleets; local courier providers; or crowdsourced gig drivers. While many shippers rely on a combination of these services to get products to their customers’ doors, gaining visibility and continuity across a fragmented network is difficult.
- Supply Chain Visibility: Beyond just where an order is, operations teams need real-time information on open orders, inventory levels, fleet and courier availability, and more to maintain supply chain visibility for all stakeholders.
What Are the Costs of Ineffective Last Mile Logistics Operations?
Despite the many challenges for last mile delivery and operations, the costs of poorly executed last mile services are incredibly detrimental to both profitability and brand loyalty.
Missed Delivery and Redelivery
Failed deliveries, rerouted deliveries and redeliveries result in additional shipping costs and erode profits. A recent survey of 300 e-commerce businesses reported an 8% failure rate for first-time deliveries out of more than 140,000 online orders. With an average failed delivery cost of $17.20, this cost the businesses a combined $193,000. These additional costs are particularly damaging for small businesses with low profit margins, and can be exacerbated by inflationary market conditions.
Customer Retention
Today’s consumers expect high-quality, on-time delivery service with low shipping costs. While delivery options and providers are not typically key purchase criteria, a poorly executed or late delivery significantly impacts a customer’s decision to make future purchases with the same company. Over half (57%) of consumers across all demographics report they would switch to another retailer after an unsatisfactory delivery experience.
4 Steps for Optimizing Last Mile Logistics Operations
1. Centralize Data
Regardless of how many channels last mile delivery data is coming from, retailers and shippers must be able to aggregate and standardize the information. Consolidating data from internal systems and external providers into a single, centralized system is the only way to fully understand the minute factors impacting delivery outcomes.
2. Use Data to Inform Decision-Making
All the data in the world means nothing if it is not used to improve processes. Data analytics should pinpoint weak links in last mile logistics and guide shippers in making the correct adjustments.
3. Automate
Real-time data is the cornerstone of last mile logistics for both consumers and operations teams, but manual processes alone cannot support real-time updates. Automating manual tasks like delivery order processing minimizes time spent tracking details in emails and spreadsheets, allowing teams to focus on core business and revenue-generating activities. Automation is critical to managing costs and driving efficiencies in today’s fast-moving, on-demand market.
4. Choose the Right Technology
Shippers that want to take control of last mile operations must utilize technologies that automate and connect every step of the process. Technology solutions should eliminate time-consuming manual tasks like price negotiations, route planning and tracking while delivering advanced data analytics to drive optimized last mile logistics.
The Benefits of Technology to Support Last Mile Logistics
With so much at stake in last mile delivery, increasing operational efficiencies with technology is essential. Technology provides last mile delivery and logistics solutions to optimize processes across several vital avenues.
Automated Rate Shopping
Researching, negotiating, and confirming rates with last mile carriers is a substantial burden for operations teams and can delay time-critical orders. Technology that predicts market rates and negotiates on the retailer’s behalf saves time and keeps last mile delivery costs in check. OneRail’s rate shopping software, for example, reduces delivery fulfillment costs by 40-70% and increases delivery speed by as much as 35%.
Multimodal Route Optimization
Complex supply chains require multiple modes of transportation to move goods efficiently, but managing multimodal networks can be challenging, particularly in the last mile. Technology that delivers one point of contact between courier, parcel, LTL and FTL providers simplifies last mile operations and ensures the best transportation solution for every shipment. OneRail’s cloud-based decision engine matches shipments to couriers based on a complex set of rules to guarantee that every delivery is optimized and cost-effective.
Exceptions Management
When it comes to last mile logistics, real-time exceptions management is critical, so next-business-day emails and chatbots don’t cut it. Technology can fill the gaps in last mile risk management with smart, real-time exception identification, but often it takes a live human to escalate and solve issues immediately. OneRail’s Exceptions Assist™ is a dedicated team of logistics experts who watches over every delivery to proactively identify and resolve problems before the customer even knows there is an issue.
End-to-End Visibility
Visibility is essential to supply chain and last mile operations, particularly as consumer demand for real-time shipment updates increases. To keep customers happy, shippers need to provide more than just an order’s location; they need the ability to change delivery outcomes in real-time. OneRail’s advanced technology delivers accurate tracking, proactive risk alerts and the OneRail Driver mobile app to communicate status updates and reroute information in real-time.
Actionable Data
Last mile operations require good data that drives revenue, increases efficiencies and informs decision-making. OneRail integrates with Microsoft Power BI to give shippers access to meaningful data on each delivery, predicting outcomes and forecasting future delivery needs and network coverage.
Optimize Last Mile Logistics with OneRail
In today’s highly competitive e-commerce market, seamless last mile delivery is essential to meeting consumer expectations, building brand loyalty and increasing revenue. Technology solutions automate processes and centralize data to enable proactive exceptions management that helps online retailers stay competitive and improve the customer experience. OneRail is the technology-first last mile delivery and logistics solution that gives shippers the tools they need to optimize last mile operations. Schedule a demo with OneRail today to learn more about their dynamic platform.
