Last Mile Delivery: What it is, Process, Challenges & Trends

Online shopping has revolutionised how consumers interact with businesses. Buyers increasingly choose to buy more online owing to the convenience they get. But with this comes a growing list of demands that any business must follow if they want to thrive.

At the top of the list is consumers expecting quick delivery done at a cheap fee, or even better at no charge. Yes, free and fast! So, to stay ahead of the curve, you must find ways to be efficient without hipping the costs on your customers.

What differentiates a competitive company from a struggling one is how they handle their last mile delivery. That means that for your business to successfully deliver to online consumers, you have to streamline last mile delivery.

In this post, we help you understand last mile delivery logistics, identify any probable future issues, and guide you on how you can leverage technology to the success of your business.

What is Last Mile Delivery?

Last Mile Delivery is a process of shipping the parcel from transportation hub to the final customer destination. It is the final step of shipping process that involves multiple means of transportation.

Last mile delivery determines how effective any shipping process is and that’s why companies are investing in to make the process fast and efficient. Whether it’s food delivery, e-commerce, or retail, customer demand for efficiency and speedy services is increasing by the day. As a result, this last stage of delivery services has become very costly for businesses.

What is the Last Mile Problem?

Keeping customers happy is the most important quality for any company and this can be achieved if the last mile delivery process is the best. “Best” here means fast and cost-effective shipping (and if possible, free).

The contradiction here is that while the consumers want last mile delivery to be free and fast, it remains to be the significant driving factor of cost in the whole shipping process. This stage also consumes time the most.

The reason this happens is that there are several stops along the way involving low drop sizes. In high population areas like cities, the proximity between drops may be short but made difficult by traffic congestion, lack of parking space, and incomprehensible addresses. In rural areas where there are no traffic issues, the distance between one stop and the next could be several kilometres apart.

Special conditions and lack of planning from customers is also a factor that eats into time. Some forget to show up at delivery locations, change the delivery location last minute, others offer very specific time windows for delivery drivers, among others. 

Businesses are forced to foot this cost because consumers can easily find alternative shopping places by just making a few clicks online. And the other sellers are more than willing to serve and do so effectively.

A whopping 53% of shipping costs are last mile delivery costs with businesses paying for about 25%. The problem is that this cost keeps growing because of the inefficiencies available in the supply chain.

The costs, route experiences, and inefficiencies a business incurs are what we call the “last mile problem”.

With all these in play, you as a business owner should do everything but complain. Looking for technological solutions to optimize your last mile delivery becomes the best move. It will help you save money, time and make customers happy.

Why is Last Mile Delivery So Expensive?

Last mile delivery is unlike large scale shipping and dissemination where large quantities of stuff are taken to a single location. It involves moving smaller packages (that’s part of a large consignment) to doorsteps.

That translates to last mile drivers taking intricate routes, spending a lot of time in between deliveries on the roads, and taking more time to stop and interact with the customer. For a business to do well, it must maintain a large fleet of vehicles and hire human resources depending on the service demands. Some of the cost drivers include:

Last Mile Delivery

(Fig: Last Mile Customer Expectations) Source 

Lower average speeds because of traffic situations

Small trucks and vans are designed to function at an ideal speed of 55 miles per hour for efficient fuel consumption. On average this is 6.5 MPG (miles per gallon). But deliveries in cities significantly lower the average speeds because of traffic congestions.

A vehicle will often accelerate, decelerate, and stop at rapid intervals which significantly increases fuel consumption. By the end of the day, drivers not only spend long hours on the road but also spend more on fuel and vehicle maintenance.

Many stops = idling and downtime

Last mile deliveries involve multiple stops that drop off packages to the preferred locations of the customers. The stops are more in cities because delivery points are closer to one another, there are many traffic lights, winding streets, and traffic jams.

When your trucks idle on their route to delivery for one hour, each one of them may waste 0.84 gallons per hour. In addition, you still have to pay drivers whether they are in motion or not.

Unsuccessful deliveries

If you do chain partners and fulfilment centers, then this might not be a problem. However, if you take items to the customer’s address, then unsuccessful deliveries become part of last mile delivery. This often takes an average of 5% for most businesses. And when you fail to deliver one package, it costs you $17.75. By the end of the day, this figure adds up to a big sum that makes the losses a lot. This is why every delivery business should work on its shipping accuracy. Some of the things you can do in this case include:

  • Notifying the consumer so they expect their package to arrive at a specific time
  • To confirm the availability of the customer before sending their package
  • Accurately identify the address of the consumer
  • Providing options that can schedule time windows so everyone involved is aware

Losing track of delivery routes

A driver can easily miss out on their delivery routes when they have a lot of deliveries to make. This often happens when there are many stops and the routes are complex. When a driver racks up unnecessary miles, the company bears the additional costs.

Discounts, returns and refunds

One in every five purchases ends up in returns for most e-commerce businesses. Some customers will request refunds so you end up having used fuel, paid the driver but without selling any product. Other consumers will request a different item, which the company will have to deliver free of charge. And because we are living in a competitive business world, comes the issue of discounts to woo buyers on specific days for specific products, which may involve free delivery.

Steps in the Last Mile Delivery Process

Last mile delivery isn’t a guesswork process; it’s becoming more and more difficult for businesses to meet the high demands of customers. The following five steps are crucial for customer satisfaction and long term growth:

Step 1

Registering orders in a centralized system where both the package recipient and sender can see the status of delivery. The recipient often gets access to this system via a tracking code or number.

Step 2

The package arrives at the transportation hub waiting for the delivery personnel to pick them. The company should have put in place mechanisms for the transportation staff to get notified, pick and get the item fast to the customer.

Step 3

Sorting the orders and assigning them to specific delivery drivers depending on route, the condition of the item, and the address of the recipient. A business having dedicated personnel for specific routes saves on costs and time.

Step 4

Scanning of parcels before loading into delivery vehicles to signal the status to the sender and recipient. This step is critical because it reduces the chances of items getting lost before they reach their destination.

Step 5

Delivery is done to the corresponding address then the delivery person collects proof of delivery. The delivery driver then updates the tracking info to indicate that the package has reached the new owner.

5 Ways Technology Can Solve Your Biggest Last Mile Delivery Challenges

When it comes to shipping logistics, perfecting last mile delivery processes is the most important part of ensuring customers delight in your services. For most businesses though, improving this stage of logistics and making the process cost-effective has become a huge challenge. But it’s doable.

If you are wondering where to even start and solve your last mile delivery challenges, then we’ll 100% point you towards technology. Getting a fleet management tool is where you should begin.

Then again, out of the hundreds of such tools, which one is right for you. If you own a small delivery business and have plans of growth in future, or already have an established last mile delivery company, there’s no better fleet management tool like FarEye.

FarEye is a comprehensive last mile delivery software that’s equipped with all the required components such as analytics, route planning, dispatch, movement tracking, communication, and real time tracking of the package. This platform does most of the work that would be hectic and time consuming to do manually. Because of its nature, it’s trusted with last mile delivery businesses - both small and big.

Here’s how a comprehensive tool such as FarEye can do to your last mile delivery process:

Route planning for faster delivery

There are several variables that you need to put into account to plan your routes and optimize them. If you don’t do it right, you’ll end up with delivery delays, increased costs, and frustrations for the customer. A software that can help you do route planning comes in handy to help you become effective.

FarEye is equipped with one of the most intuitive route planning features that automatically considers time, destinations, vehicle capacity, and enroute traffic to suggest the best routes for drivers. In case there are factors along the way that could possibly affect the delivery of parcels, drivers get real time notifications so they can make proactive decisions instead of reactive ones.

Save time and money through automated dispatching

The best part about having a platform like FarEye for your last mile delivery is that you can completely automate assignments to drivers. Setting up automated dispatches means less manual work on your side which significantly saves time and labour charges. The time you’d use on this work can be used to optimize other areas of your delivery channels. Also, human errors are reduced to enable efficiency of allocating your resources.

Proof of delivery within the platform

If you are looking to bolster confidence in the consumers of your last mile delivery services, then technology has to be part of your processes. More than 56% of customers are interested in the transparency of these services.

Proof of delivery is part of transparency and is the documentation that proves the driver actually delivered the package. With the FarEye software, the recipient can sign to indicate they got their parcel or the driver can take a photo of their delivery. Besides signatures and photos, this software also supports barcode and notes.

Create reports for accountability purposes

Analytics is an important part of any last mile delivery business but not if you can’t come up with great reports. Reporting helps find weaknesses and issues as well as opportunities to improve the entire delivery process.

With FarEye, you’ll be in control of all the important metrics including distances travelled, customer feedback, on time and success rates. You can filter and export the data to access as much or as little information as you need and customize it according to your needs. With all this in your hands, it’s easy to hold individuals accountable and reward those that deserve it depending on their performance.

Improve customer relations

While offering your customers a tracking number is good, making the extra effort to communicate with the recipient is better. Customer satisfaction in last mile delivery requires you to increase visibility and communicate openly.

FarEye facilitates communication between the driver and the customers. By a press of a button within the app, they can call and talk with the driver and get notifications via SMS how far their parcel has come.

7 Trends That Will Continue to Shape (and Change) Last Mile Delivery in 2021

Perfecting last mile delivery to meet the needs of the customers is a gradual process. You have to keep testing and executing to get there. Here are the trends you need to keep up with.

On-demand order fulfillment

Consumers that indulge in online shopping continually demand order fulfillment on the same day they shop. If you are in the food industry, then this means a few hours if not minutes. This means there’s less time to plan, making it hard for most technology to keep pace with.

Improved tracking

More than ever, last mile delivery businesses need to improve the traceability of packages. This is essential for both the customer and seller to track and ensure the package doesn’t get lost along the way.

When you use software like FarEye, you get to enjoy a GPS feature that shows the location and the distance before the package reaches the destination. Proof of delivery is an added advantage because the customer signs to confirm receipt or the driver takes photographic evidence of delivery. With such evidence disputes are reduced making the process flawless for both the last mile carriers and customers.

In-house last mile delivery

Most online shops are investing in their own in-house delivery services instead of hiring an independent delivery service provider. Amazon is an example. That way, they have more control on the experience they offer their customers, cut costs, and save time. Most do this by offering to deliver late in the evenings and over the weekend.

Micro transportation hubs

E-commerce sites now invest in micro warehouring in different locations, which makes it easier to make same day deliveries. The e-commerce giant, Amazon leverages this trend to deliver their products in as little as two hours, which others should emulate.

Doorstep delivery upsells

Collecting customer purchase data has made it possible for businesses to upsell related items to them. For example, a business may send their driver with tooth brushes if you’ve been buying toothpaste from them for the past few months. There are many upsell opportunities for businesses as long as they understand their customers.

Smart technology

It’s not uncommon for buyers to order goods with a limited shelf life like fish and flowers online. Such products need special conditions if they are to reach customers in the right conditions. Businesses dealing with these products must invest in smart technology to control humidity levels, temperature, and the quality of air in the warehouse and the trucks as well.

Drones and robots

It won’t be long before we can see drones and robots serve humans. This will help businesses get rid of labour costs, increase efficiency, and do so without a break.

Final Thoughts on Last Mile Delivery

Hopefully, we have answered all your questions about last mile delivery and encouraged you to invest in technology to optimize your operations. Just remember that whether you have a small or big last mile delivery operation, you have an invaluable opportunity to adapt to the needs of the customers. Come up with a plan, test, and execute to bring working solutions for everyone involved.


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