In the world of shipping and delivery, the last mile is often the most complicated and expensive part. Last mile delivery ultimately gets goods from a distribution center or warehouse to the customer’s doorstep, and it’s become increasingly important as customers rely more and more on online shopping and the convenience of home delivery. In the coming years, the last mile industry will continue to grow and evolve, and it’s important for businesses to stay ahead of the trends in last mile delivery. Here’s what to expect in 2023 and how to keep on top of the trends that define the last mile.
But First, What’s the State of the Last Mile Market Today?
Last mile delivery is a quickly evolving sector of the transportation and logistics space, but the last leg of moving goods to the final destination address is often the most expensive and most 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.
COVID-related shutdowns caused a dramatic shift in consumer shopping patterns as more people turned to online shopping and e-commerce. In 2020, U.S. e-commerce sales hit $815 billion, a 43% increase over the previous year. While the e-commerce boom slowed as economies and storefronts reopened, it is still seeing consistent growth year over year, with U.S. 2022 sales projected to top $1 trillion for the first time.
This shift forced retailers of all sizes to embrace online sales to preserve revenue and market relevance. It also added a new layer of complexity to fulfillment, as shippers suddenly relied on last mile delivery providers to get their products into the hands of consumers.
Last Mile Delivery Diversification
Unexpected e-commerce growth put an enormous burden on existing parcel providers (USPS, UPS, FedEx, DHL and the like), who were quickly overwhelmed by increased volumes. The resulting nationwide delays created negative consumer sentiment and damaged the reputation of both parcel carriers and the retailers who relied on their services. This opened the door for third-party logistics firms (3PLs), specialized couriers, and crowdsourced gig economy delivery applications to enter the last mile market in an attempt to fill in the gaps for local delivery.
The U.S. inflation rate was at 7.11% in November 2022, down from its high of 9% in June, but rising costs are impacting delivery budgets at every level. Last mile delivery costs are proving to be unpredictable in the face of rising fuel prices and increasing labor costs, threatening to erode profits if left unchecked.
With online sales and home delivery expected to continue their meteoric rise, shippers need to be aware of the trends shaping last mile delivery.
The Last Mile Trends of 2023
Real-time shipment tracking is a critical last mile delivery trend and will continue to be an important offering in the year ahead. Consumer expectations for real-time visibility and updates have resulted in advanced technology that allows them to track shipments online or through mobile apps with the click of a button, but this technology also benefits shippers. Real-time tracking enables shippers to proactively manage exceptions as they occur, so instead of reacting to something that has already happened, they can change delivery outcomes in real time, before a customer even knows the delivery schedule was compromised.
The growing number of last mile delivery providers in the market is essential to meeting the demand for e-commerce and home delivery. However, a diversified and fragmented last mile network presents substantial operational challenges for shippers. Pricing, routing, dispatching and tracking multiple providers can be a logistical nightmare and requires valuable labor hours to manage. Solutions that integrate courier networks to secure capacity and standardize delivery processes will be an important last mile shipping trend in the year ahead.
Ongoing labor shortages in the logistics industry in 2023 will put increasing pressure on existing employees. Automating time-consuming tasks eases the strain on logistics teams, reduces immediate hiring needs, and improves overall efficiency. For example, an automated rate shopping system can achieve in minutes a task that would manually take hours — collecting rates across multiple modes and carriers, and selecting the option that best fits a shipment’s specific delivery requirements. Automated technology can also manage delivery order processing and dispatch, further freeing up time for logistics operators to focus on core business and customer service.
The global subscription e-commerce market is expected to reach $120.4 billion in 2022 and increase to over $900 billion by 2026. It is undeniably one of the fastest-growing industries and will define last mile delivery trends for years to come. Consumers are drawn to the subscription model because it delivers convenience and consistency, particularly around routine products like groceries, health supplements or household goods. Companies are attracted to recurring order models to improve forecasting and sales predictions, increase revenue and optimize delivery planning.
The standard for speedy delivery is higher than ever, with 90% of consumers viewing 2- to 3-day shipping as the baseline delivery promise. This dramatic shift in expectations can be attributed to Amazon’s expanding distribution model, which has effectively created a market for convenient e-commerce. Smaller retailers can take advantage of the speed-to-market last mile trend, as well, by choosing delivery partners that provide dynamic route optimization and real-time exception management.
The conversation about sustainable supply chains cooled at the height of the pandemic disruption, but global carbon reduction initiatives are back in full swing. With the growing demand for eco-friendly delivery options and increasing governmental pressure for environmentally friendly practices, sustainability will be an important last mile trend. Shippers should invest in sustainable last mile route optimization to reduce empty miles and carbon emissions.
Last mile data gives clarity and transparency to what is happening in the last leg of the delivery journey. Data analytics is critical to continuous improvement and is used to form predictive models that drive future decision-making. Predictive analytics allows shippers to move beyond the visibility of current issues and toward anticipation of future problems, opening the door for proactive risk mitigation. Predictive analytics will be a significant trend in last mile delivery optimization in 2023.
Micro Fulfillment Centers
Demand for faster delivery has pushed retailers to up their last mile delivery game and reevaluate traditional distribution models. Shippers increasingly turn to micro fulfillment centers (MFCs) as localized hubs for e-commerce and retail pickups. MFCs are designed to improve delivery times through strategic placement in urban centers with smaller inventory volumes of high-demand products. MFCs give shippers the speed, flexibility, and scalability they need to stay competitive in the e-commerce market and will play a major role in meeting customer expectations for same and next-day delivery.
Delivery services have shifted from a strategic afterthought to a critical pillar of business and the customer experience, and have become a product in their own right. Productization of delivery allows companies to capitalize on last mile expectations by letting customers choose when and how they want to receive their shipments — and pricing those services accordingly. For example, scheduled deliveries or pickup-in-store options can be priced lower as they give shippers more leeway to plan. In contrast, on-demand or ship-to-home options might warrant expedited charges to account for additional administrative processing. This puts the customer in charge of their order’s journey and provides shippers with more resources to execute seamless fulfillment.
As consumers have come to expect the convenience of home delivery, more and more industries are answering the call and adding the service to their offerings. This diversification often comes with new challenges and considerations, particularly for products requiring additional care and transit planning. Food and grocery delivery requires careful attention to temperature to ensure safety and quality, while the delivery of bulky products like furniture or fitness equipment may require specialized equipment or white-glove assembly. Industry specialization to address these unique delivery needs will be another last mile trend in 2023.
Stay Ahead of Last Mile Delivery Trends with OneRail
The last mile delivery is growing and evolving rapidly, so staying on top of trends that define the industry is critical to a company’s success. A reliable last mile partner can help shippers implement strategic initiatives to get ahead of the trends, improve operational efficiency and reduce costs.
With OneRail, an API-enabled last mile solutions platform, shippers can optimize a diverse multimodal carrier network to improve visibility and delivery outcomes. OneRail combines the power of advanced technology with a skilled Exceptions Assist™ team to deliver an exceptional customer experience, while simultaneously managing last mile costs. Schedule a demo with OneRail today to see how their dynamic platform keeps shippers ahead of last mile delivery trends.