An Industry-by-Industry Guide to Last Mile Delivery

Last mile delivery is top of mind for shippers and logistics service providers alike, as demand for fast, free shipping dominates online consumer markets. 

In the wake of the pandemic, expectations for flawless last mile delivery now extend beyond e-commerce shippers. Small retailers, large wholesalers, grocers and all businesses in between must find delivery solutions to get products into the hands of customers — fast. 

How did last mile delivery come to dominate logistics conversations and present industry-specific solutions for efficient last mile delivery? Here’s your guide.

The State of Last Mile Delivery

Last mile delivery — also known as final mile delivery — is a quickly evolving component of the transportation and logistics space, but this last leg of moving goods to the final destination address is often the most expensive and inefficient link in the fulfillment process. According to supply chain experts, last mile delivery expenses account for a quarter to over half of total transportation costs. To fully understand the state of last mile delivery, it’s important to examine several key factors contributing to last mile costs and execution: 

  • E-commerce Demand: COVID-related shutdowns caused a seismic shift in consumer shopping patterns and a dramatic increase in e-commerce spending. Shippers suddenly relied on last mile delivery providers to get their products into the hands of consumers, and parcel volumes soared. 
  • Last Mile Delivery Diversification: Existing parcel providers (USPS, UPS, FedEx, DHL and the like) were quickly overwhelmed by increased parcel volumes, which resulted in massive nationwide delays. This opened the door for third-party logistics firms (3PLs), specialized couriers and crowdsourced, gig economy delivery applications to enter the last mile market. 
  • Inflation: Rising costs are impacting delivery budgets at every level. Fuel is increasing, labor costs more and transportation rates are unpredictable — threatening to erode every shipper’s bottom line.

With last mile delivery demand expected to continue its meteoric rise, shippers of all sizes will need greater visibility and automation innovations in the areas of distribution and transportation to tackle the challenges of executing, tracking, and managing costs associated with the last mile. 

Last Mile Distribution Centers & the Rise of Micro Fulfillment Centers

As consumer reliance on e-commerce and online shopping increased, so did expectations for free, lightning-fast delivery. In fact, recent studies suggest that 62% of online shoppers expect delivery within three business days when choosing free shipping. These expectations pushed retailers to re-evaluate traditional distribution center models, which housed large amounts of inventory in massive warehouse hubs to service vast geographical regions. While these distribution centers met pre-pandemic last mile delivery needs fairly well, they failed to meet recent demand for near-immediate delivery, giving rise to micro fulfillment centers. 

Micro fulfillment centers (MFCs) are small, localized distribution centers primarily used for e-commerce and local retail pickups. MFCs are designed to improve delivery times through strategic placement in densely populated urban areas, with smaller inventory volumes of high-demand products that must be replenished regularly from regional distribution centers. MFCs typically rely on robotics and automation to improve efficiency in last mile delivery services and provide a host of other benefits for the modern shipper:

  • Closer proximity to large consumer markets allows for faster delivery and improved customer experience
  • MFCs provide a high level of customization for product-specific needs, like garment hangers or bulky, non-standardized packaging.
  • Lower on-hand inventory levels allow shippers to pivot and quickly shift resources based on changes to item popularity. 
  • MFC locations provide flexibility to service both in-store pickup and home delivery options.
  • The combination of smaller distribution space and automated processes leads to decreased operating costs

What Are the Challenges & Benefits of Last Mile Delivery?

Last mile delivery is critical to a company’s success in today’s consumer-driven market. Executing last mile delivery presents in equal parts many challenges and several invaluable benefits for the modern shipper.

Challenges in Last Mile Delivery

  • 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 delivery increases labor hours and strains logistics teams. 
  • Fragmented carrier networks: Last mile delivery providers might be large, multinational parcel services, 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. 
  • Visibility: Online shoppers expect transparency at every stage of the order process — from when they place an order to when it arrives at their door — so last mile visibility integrations are essential.
  • Returns: Returning orders due to customer dissatisfaction, failed deliveries or damaged products adds to shippers’ costs and labor needs. 

Benefits of Last Mile Delivery

  • Customer satisfaction and loyalty: Flawless last mile delivery is critical to a positive customer experience, improving the likelihood of repeat business. Building brand loyalty is crucial in today’s highly competitive market.
  • Increased efficiency: Well-executed last mile delivery solutions simplify and automate shipping processes to ensure the best-case scenario for every shipment.
  • Exception management: Improvements to last mile visibility allow shippers to identify and manage exceptions in real time, minimizing missed or late delivery occurrences. 

High costs, fragmented carrier networks, unexpected delays and lack of visibility are common difficulties in the final mile; however, they impact different industries in different ways. Let’s take a closer look at last mile delivery in specific industries. 

Last Mile Delivery for Retailers

Retail is perhaps the most widely recognized industry to be impacted by last mile delivery demand. From big-box corporations to small local shops, retailers of all sizes have seen their business models shaken by the shift to e-commerce and online shopping. Multiple iconic, legacy brands — including Macy’s, J. Crew, JCPenney and Lord & Taylor — declared bankruptcy or shuttered operations in the wake of the pandemic, highlighting the need for agility in a changing consumer environment. 

Mastering fast and efficient last mile delivery is essential in today’s retail market. While this presents many challenges, there are several advancements in the last mile that benefit retailers and their customers. For example, localized micro fulfillment centers provide immediate improvements in delivery efficiency and cost management. The gig economy and crowdsourced applications offer access to a broader range of drivers, which can be particularly helpful in fulfilling last-minute orders. Last mile visibility solutions create a better customer experience and help shippers stay on top of delays and exceptions. 

Efficient last mile processes are absolutely critical for any retailer’s longevity and success, but some products require additional care and planning in transit. Last mile delivery solutions that are adaptable and customizable can be incredibly beneficial for specialty retailers with demanding delivery or handling requisites.

Last Mile Delivery for Food & Grocery

In addition to shifting retail shopping patterns, the pandemic dramatically impacted how consumers purchase food and grocery essentials. Online grocery orders soared from $2 billion in August 2019 to $8.8 billion by June 2020, and those orders have remained stable since, with October 2022 spending reported at $7.8 billion. What started as a necessity for consumers during lockdown has become a staple convenience, with no indication that buyers are eager to return to in-person grocery shopping. 

Online grocery service is no longer considered a luxury for consumers; it is now an expectation. Grocers and big-box stores have an enormous opportunity in this market, but there are unique considerations and challenges in last mile grocery delivery, particularly around temperature. Unlike most retail shipments, grocery deliveries often include items with multiple temperature requirements. 

Every step of an order’s journey must be taken into consideration:

  • Fulfillment: Grocery orders are often picked from shelves in advance and stored in designated onsite fulfillment stations while waiting for pickup. This leaves shippers susceptible to temperature violations if orders are not stored correctly, as well as incomplete orders if items are stored in multiple locations and not sent out with couriers at pickup. Specialized last mile technology solutions can help eliminate both risks.
  • Transportation: Once an order leaves the store or fulfillment center, managing temperature becomes extremely time-sensitive, regardless of whether it’s moving with a shipper’s dedicated fleet or a crowdsourced third-party driver. Last mile delivery tracking solutions can help grocers monitor and manage exceptions and temperature risks in real time, ensuring the best possible delivery outcome. 
  • Delivery: Of course, all the care to manage the temperature during fulfillment and transportation can be wasted if the customer is not available to accept the delivery and take over appropriately. Utilizing technology that provides accurate delivery windows when the order is placed and updates the customer of ETA changes in real time is critical to the customer experience and building repeat business. 

There are numerous best practices for grocery delivery in addition to temperature considerations, but the effort in mastering the last mile certainly pays off. 58% of users report a likelihood of using online grocery services again after a positive delivery experience. 

Last Mile Delivery for Product Manufacturers

Manufacturers of bulky products like furniture, mattresses and fitness equipment face unique circumstances in last mile delivery because many companies rely on their own assets and fleets to deliver products in established markets. Expanding delivery radii or moving into new regions is subject to asset and labor availability, both of which can be challenging and costly amid current shortages.  

Outsourcing delivery to third-party carriers is a popular and convenient option for manufacturers as they scale operations, but this comes with different challenges. Third-party carriers may lack the knowledge and experience to execute oversized, bulky or white-glove deliveries, and often implement massive surcharges for such services. This can lead to inconsistent service levels and inflated delivery prices, and negatively impact customer satisfaction. 

Manufacturers can significantly benefit from utilizing a fulfillment partner to negotiate rates, manage courier service levels, and provide real-time last mile visibility to shipments. This allows shippers to focus on managing exceptions and providing world-class customer service, instead of micro-managing third-party carriers. 

Last Mile Delivery for Wholesale Distributors

Where there’s growth in retail, there’s also growth in the wholesale market. Final mile delivery is increasingly important for wholesalers to keep retail stores, grocers and e-commerce fulfillment centers stocked, so high-demand products make it to the end customer. A last mile delivery platform offers numerous benefits for wholesale distributors, including faster fulfillment times, a diversified and cost-effective carrier base, and extensive data analytics to drive better decision-making. Advanced automation platforms integrate with existing warehouse management systems to simplify wholesale operations and improve delivery efficiency — a win-win for wholesalers and their customers. 

Last Mile Delivery for Healthcare Networks

Healthcare networks require last mile delivery that is precise, secure, and reliable because when lives are on the line, every minute counts. 

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 the last mile. Partnering with a last mile technology solution that provides real-time shipment visibility and exception management assistance can give healthcare networks peace of mind that their life-saving cargo will arrive when needed.

Four Steps to Effective Last Mile Delivery

Despite its unique challenges to various industry verticals, effective last mile delivery hinges on four critical steps.

1. Process Automation

Manual processes are inefficient, create intense labor pressure and cut into profits. Automating operational tasks — like delivery order management and capacity procurement — gives shippers more time to focus on managing exceptions, improving customer service and growing the business. Automation technology also helps companies grow and scale quickly without additional labor resources.  

2. Route Optimization

Efficient last mile delivery requires a multimodal approach — matching each shipment with the right mode and service level to hit on-time delivery. API-driven last mile platforms deliver optimized route planning through a network of vetted and trusted carriers. Shippers can rest easy knowing even their most complex and time-sensitive shipments are in good hands. 

3. Exception Management

When it comes to last mile delivery, shippers should expect the unexpected — and be ready to act quickly. Advanced visibility solutions identify exceptions in real time, enabling shippers to take proactive steps to mitigate risk and avoid missed deliveries

4. Customer Experience

At the heart of effective last mile delivery is customer experience. Today’s customers demand speed, accuracy and visibility in the last mile, putting enormous pressure on shippers and retailers to get it right. Advanced last mile delivery tracking systems give customers peace of mind that their deliveries are on track and on time, building confidence and brand loyalty over time.

Partner with OneRail for Industry-Specific Last Mile Delivery Solutions

When brands can’t deliver goods intact and on time, they break their promise to their customers — hurting loyalty, sales growth and net operating income. Manufacturers, wholesale distributors, big box and specialty retailers, and medical/pharma companies must tackle their unique last mile challenges in a volatile marketplace besieged by soaring e-commerce demands and relentless inflationary pressures. 

Now more than ever, they need a reliable partner to help them implement a technology-driven approach that streamlines last mile deliveries.

OneRail’s last mile delivery and fulfillment network is proven to be 99% on-time and reliable so that brands can exceed expectations, increasing customer loyalty and repeat sales. Request a demo today to see how OneRail can simplify your last mile deliveries.

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