What is Last Mile Delivery?

Last mile, or final mile — the terms are used interchangeably throughout the shipping logistics industry — is the last step in the process of delivering goods

Last mile delivery is an oft-used term in shipping and logistics. But exactly what is last mile delivery? And why is it important? What challenges are encountered during this crucial shipping stage? One Rail covers these and other relevant topics in the sections below.

What is Last Mile Delivery and Why Is It Important?

Often, this is the movement of goods from a delivery hub or business to the customer’s residence. The last mile is considered the most important step within the supply chain, for both the customer and the shipper. It also happens to be the most expensive. The efficiency of the last mile is crucial. With every exception or delay that occurs along the way, customer satisfaction is on the line.

How Does Last Mile Delivery Work?

We’ve covered what exactly is last mile delivery, but how does it work? Last mile delivery involves the final step of the logistics process: the journey of the product from the warehouse or distribution hub to its final destination — that is, the customer’s doorstep. How it works is that in this last leg of the journey, the package is typically combined with other packages that are to be delivered in the same vicinity, along the route. Hence this final transportation of the shipment may involve multiple stops along the way before it reaches the final destination.

Depending on the region, the last mile delivery process may vary. For instance, in rural areas, a route may have few delivery points far apart from each other. In urban areas, there may be several stops with proximity along a particular route. In the latter setting, traffic typically plays an important role in how fast the package arrives on the customer’s doorstep.

Consumer Demand for Convenience and Safety

After gaining an understanding of what is last mile delivery, it’s time to examine how the pandemic has impacted this crucial aspect regarding customer deliveries. The Covid-related rise in E-Commerce has complicated efficiency in last mile logistics. The demand for E-Commerce, previously at an average annual increase of 14.4%, hit an all-time high in 2020, coming in at 21.3%. Social distancing measures due to Covid-19 pushed many consumers to shift their purchase habits to online channels to fulfill their shopping needs.

Since spring 2020, many consumers have adapted to the value of convenience E-Commerce provides. Online shopping not only saves time, but also brings a level of safety to consumers concerned about setting foot in brick-and-mortar stores.

This increase in E-Commerce demand strains the supply chain, as many shippers struggle with their ability to scale and keep up with demand. Seeking out solutions like third-party logistics firms (3PLs) or delivery orchestration platforms allow shippers to scale demands.

Once we enter the post-Covid world, it’s highly likely that these newly adopted shopping habits will be here to stay. Supply chain management companies will also need to adapt, by implementing practices to fulfill customer demands in this hyper-competitive environment.

Consumer Expectations for Fast SLAs

On-demand shipping is no longer a nice option — it’s an expectation.  Consumers want cheap, fast, even free shipping. Every time. What’s now known as the Amazon Effect has caused a visceral disruption in the retail market. Having simplified the convenience of E-Commerce, Amazon customers can purchase an item and get it delivered the same day with a click of a button. Gone are the days where the only way to obtain free shipping was by reaching a purchase milestone.

According to a 2020 eMarketer survey, 79.8% of consumers stated their reason for using Amazon was due to “fast and free shipping.”

In the shipping logistics industry, delivery speeds are known as service-level agreements (SLAs), and the prices are predetermined between the shipper and the carriers. So when a consumer shopping for new shoes chooses next-day shipping, that expectation level is set — and it is high. Think 11, on a scale of 1 to 10.

As expectations rise, so does the demand for multiple service offerings. There’s same day, two-day, ground, and even what is known as hot shot delivery. Hot shot delivery, also known as hot shot trucking is a service level often carried out by independent contractors that use their own pickup trucks. Hot shot drivers specialize in time senstive less-than-a-truck-load (LTL) deliveries.

Consumers’ shipping expectations are impossible to. Retailers must expand their SLAs to maintain a competitive edge.

Additional Challenges of Last Mile Delivery

We’ve understood what is last mile delivery, but what are the additional challenges faced during this final and important part of the shipping process?

Here’s the low down: As supply chain management professionals attempt to balance customer satisfaction while maintaining a lean operation, the challenges of last mile delivery around cost is a huge factor. According to the trade publication Supply Chain Dive, an estimated 28% of a product’s total transportation cost happens during last mile fulfillment. That cost can be broken down into four parts: warehousing, delivery, technology and fulfillment. Of these four, delivery is the highest. From fuel to labor costs, the price of delivery quickly adds up — and remains on the rise.

With the pressure to offer free and fast shipping to consumers, delivery costs are being absorbed by the shipper. These expedited, on-demand deliveries quickly inflate the initial delivery cost, impeding the ability to maintain a lean and profitable operation.

Another common challenge in last mile fulfillment is the inability to scale delivery demands. Many shippers have struggled to match their consumers’ delivery demands. Last fall, the combination of peak holiday shopping and Covid-19 led many shippers to experience a high volume of delays. Many of them simply could not match demand.

Live Package Tracking App | OneRail
A delivery orchestration app goes way beyond GPS to provide real-time analytics.

Having a platform that allows shippers to move and scale demand is crucial for success in last mile shipping logistics. Instead of managing many disparate shipping systems and/or individual couriers — and essentially putting SLAs at risk — the OneRail delivery orchestration platform, for example, allows brands across retail, manufacturing, grocery, and healthcare to avoid putting all their eggs all in one proverbial shipping basket.

Having a fast, intuitive platform that can search an exclusive delivery network to intelligently match the best courier for the job goes a long way in reducing costs, saving time and ensuring end-customer satisfaction. OneRail’s national delivery network is 8.2 million and growing.

Effective Exception Management Leads to Customer Loyalty

What is last mile delivery and how does it impact customer satisfaction? Given that it’s the last stage in shipping and logistics — and involves the transportation of the product from the hub to the consumer’s residence or workplace — any bottleneck or glitch in last mile delivery can significantly impact customer satisfaction. It’s safe to say that with every exception or delay in last mile delivery, customer satisfaction is on the line.

On average, the top three reasons for delivery exceptions are traffic and weather delays, failed delivery attempts, and incorrect addresses. For shippers, impeccable exception management is critical. A survey revealed that 70% of customers stated they would not make another purchase due to a negative experience.

In supply chain management, collaboration and visibility are two sides of the same coin. With a centralized approach, technology coupled with an expert dispatch and customer experience team can spell the difference between merely mitigating a problem and creating a positive customer experience that ensures he or she will remain a loyal customer.

Final mile failures are inevitable. For process improvement, and to keep customers happy, try this proactive approach when exceptions occur:

  • Over-communicate, especially when there is an issue

    Customer experience managers should contact both the shipper and the end-customer with updates that may impact a timely delivery. Providing communication to both parties builds trust and loyalty.

  • Resolve before impact

    If an exception occurs, be sure to get the delivery back on track as quickly as possible. An experienced dispatch and customer experience team will collaborate with shippers, couriers, and customers to create workflow priorities on actionable exceptions to resolve issues. If the delivery arrives on time then the exception never existed, right?

  • Eliminate the root cause

    Many shipping logistics companies throw a ton of money at technology to solve last mile challenges. But the human element must be part of that equation too, because having real people watching over every delivery makes a world of difference when exceptions occur. Choose a platform that combines artificial intelligence to pull and analyze data from disparate, disconnected with human operators who can predict exceptions and devise solutions based on that data. The end result will lead to satisfied end-customers and automated workflows.

The Importance of Last Mile Visibility

Providing end-to-end visibility provides all parties with a wealth of information — and information is power. Thanks to delivery checkpoints, packages are tracked and updated at every point, offering both the shipper and the end-customer real-time data that provides valuable insight.

For shippers, the ability to access real-time analytics allows them to see every aspect of a delivery, along with exceptions data. When they communicate that with their customers, they see a significant reduction in what’s known as WISMO calls (Where Is My Order?).  For customers, accessing their estimated delivery date and any updates relating to their package helps them plan ahead and delivers peace of mind — the value of which cannot be overstated. Informed customers not only equal satisfied customers, they equal return customers.

Proof of delivery is an easy and effective way to provide visibility. Documenting a delivery — whether through a signature or a photo — adds another layer of visibility for all parties. Customers can see exactly where their delivery was left, and shippers get time-stamped evidence of the completed delivery. Providing visibility from dispatch to delivery substantially benefits a customer’s level of satisfaction and is necessary for final mile success.

Hopefully our article covering what is last mile delivery and how to improve it was helpful to you. One Rail is dedicated to providing its customers and partners with a sustainable competitive edge by creating a flexible, predictable and responsive supply chain solution. Contact us to learn more!

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