Increased e-commerce sales during the pandemic brought last mile logistics into the limelight. The “last mile” is an umbrella term under which all of the processes involved in the delivery of ordered goods to the consumer rest. The staff at GlobalTranz notes, “Last mile logistics is among the most misunderstood parts of transportation networks. On the surface, last-mile may not seem very important, but it can make up 28 percent of a shipment’s total cost. In addition, growth in e-commerce is radicalizing how shippers view last mile logistics.”[1] For all practical purposes, the last mile begins when products arrive at the warehouse, which has sparked great interest warehouse space.
Real estate journalist Will Parker (@_willparker_) reports, “The last mile in the e-commerce delivery process looks like a windfall for real-estate owners. … An increase in online shopping has furthered the trend, creating greater demand for warehouses to hold ordered items. Retailers especially covet space near highly populated areas where online orders can be loaded onto trucks and vans for local delivery to their final destinations. Retailers face a scarcity of final-stage warehouses near major cities; and as more companies promise same-day or even two-hour arrivals, such space is rising in demand and value.”[2] Although inflation has cooled the hot warehouse market a bit, last mile logistics remains an important area of focus for most retailers.
Last Mile Innovation
As the GlobalTranz staff pointed out, the last mile can be expensive. For that reason, retailers continue to look for innovative ways to reduce costs. At the same time, retailers seek to please customers. Chris Cunnane (@ccunnane), a senior analyst with the ARC Advisory Group, notes, “Online retailers need to work hard to please e-commerce customers in this advanced digital age. The customer’s expectation is that products [will be] delivered accurately and quickly, at a low price, and in perfect condition.”[3] These two competing goals — cost reduction and customer satisfaction — result in a creative tension that fosters some interesting ideas.
The GlobalTranz staff notes, “Urban delivery may be difficult with navigating traffic and parking regulations.” Large metropolitan areas are increasingly regulating how, when, and where last mile deliveries can be made. To address this challenge, Switzerland is developing an autonomous underground cargo system. Technology writer Loz Blain (@Loz_Blain) explains, “The idea is to develop a fully autonomous, zero-emissions transport system for small cargo loads that can take some strain off a road system that’s projected to be smashed with nearly 40 percent more traffic in 30 years’ time.”[4] The Swiss vision will take some time to become a reality. Blain notes, “[The] first 10-stop, 70-km (43-mile) series of underground tunnels [are] scheduled to begin taking cargo in 2031.” The following video provides an overview of the project.
The Swiss project is not the only last mile innovation in the works. Ivan Ariza (@iariza), co-founder and CEO of Cargamos, explains, “Entrepreneurs and startups have set their sights on minimizing the burden on the supply chain, especially in the last mile. By developing and deploying technological innovations such as IoT-enabled devices and artificial intelligence, these innovators have managed to ease the pressure on businesses, reduce costs, and increase efficiency.”[5] He notes that several new business models have emerged in recent years. He writes, “[To help last mile operations, innovators have developed] concepts such as dark stores, gray stores, or drop shipping to make the delivery process more dynamic. Other solutions, like click-and-collect, are intended to shift part of the delivery weight back to customers. Either way, cutting-edge analytical systems provide retailers and customers with transparency, and allow for smarter decisions when it comes to last-mile delivery.”
Ariza believes improvements in last mile delivery begin with a better understanding of demand. He explains, “The supply cycle for the last mile begins with demand, and this is also where most of the pain points lie. Fluctuations in the market, unsold products rotting on the shelves and manufacturer delays all affect stock levels, resulting in losses of millions of dollars each year. As a result, many [companies] are embracing big data and artificial intelligence to gain insights into demand trends, seasonal fluctuations and order sourcing.” AI can also be used to optimize warehouse operations and route planning. As Robert J. Bowman, managing editor of SupplyChainBrain, observes, “When it comes to fulfilling e-commerce orders, the shortest distance between two points is often the toughest to traverse. The problem is figuring out how to navigate the so-called last mile: that final, crucial stage of getting product to an impatient and demanding consumer.”[6]
Like Ariza, Bowman believes technology will play a crucial role in improving last mile processes. Derek Wittenberg, managing director of Progress Partners, told Bowman, “The technology exists today, but it’s not yet used widely. We’re still years away from it being broadly adopted. … Digitization — the technology buzzword of the moment — promises to have a particular impact on last-mile logistics. … All related assets, including vehicles, containers and the products themselves, can be made visible in real time. And that makes it possible to build accurate schedules of the people required to get the job done. The last-mile landscape of the future will incorporate not just retailers and their customers, but also the third parties that make it possible to get product to the customer’s door.”
As mentioned earlier, last mile logistics concerns are not restricted to retailers and their customers. Local governments are also concerned about the congestion caused by increased deliveries as well as the pollution delivery vehicles can cause. Daniel Sokolovsky, founder of AxleHire, suggests five ways last mile logistics can become more sustainable.[7] They are:
1) Leverage dynamic routing. Sokolovsky explains, “Legacy shippers have fixed routes their drivers travel the same day, no matter who is receiving packages or how many are on their trucks. Last-mile logistics companies that can aggregate packages can create denser delivery routes (more packages delivered in fewer vehicles), dynamically changing their delivery routes based on demand. Dynamic routing can significantly reduce thousands of wasted miles.”
2) Employ local sortation. “A sortation center,” Sokolovsky writes, “is the last step in the logistics delivery chain, where packages containing completed customer orders are sorted and then routed based on zip code and address. … Locating sortation centers nearer to the end customers makes sense as it results in faster delivery times due to less mileage covered.”
3) Use mobile hubs. According to Sokolovsky, “Because customer demand is constantly changing based on seasonality and other factors, flexibility and scale are vital to creating sustainable last-mile delivery solutions. A mobile hub, such as a truck or container placed closer to end customers, enables faster deliveries with less gas consumption and fewer drivers on the road.”
4) Utilize real-time tracking. Sokolovsky writes, “Real-time tracking and communications via app or SMS with the end-customer and the shipping company can reduce back and forth when there are delivery issues. For instance, with perishables, good customer communication is essential. If perishables cannot be delivered to an end-customer promptly, the waste becomes more than just fuel; it also becomes the product itself.”
5) Operate more electric vehicles. Sokolovsky explains, “As the e-commerce boom continues, that means more cars and trucks on the road. Prioritizing or incentivizing drivers with lower or zero-emission vehicles as part of a last-mile strategy is a no-brainer for creating a more sustainable supply chain.” Executives at Walmart agree. The company recently purchased 4,500 Canoo electric delivery vehicles to be used for last mile deliveries in support of its growing e-commerce business.[8] Companies are also employing battery-powered drones in some areas to make deliveries more sustainable.
Concluding Thoughts
Bowman concludes, “E-tailers and their logistics partners are expected to execute flawlessly on deliveries to homes, offices, stores and lockboxes in urban, suburban and rural settings alike. With the relentless growth of e-commerce volumes, that becomes increasingly difficult to do.” That is exactly why you can expect to see continued innovations in all last mile logistics areas from demand planning, to warehouse operations, to delivery.
Footnotes
[1] Staff, “What Is Last Mile Logistics & Why Are More Shippers Looking at This Transportation Function?” GlobalTranz, 19 September 2017.
[2] Will Parker, “Pandemic Delivery Boom Fuels Demand for ‘Last Mile’ Space,” The Wall Street Journal, 30 November 2021.
[3] Chris Cunnane, “The Importance Of Last Mile Optimization,” Logistics Viewpoints, 12 August 2021.
[4] Loz Blain, “Switzerland’s autonomous underground cargo system aims for 2031 debut,” New Atlas, 13 July 2022.
[5] Ivan Ariza, “Innovators Continue to Shape the Last Mile. What’s Next?” SupplyChainBrain, 6 July 2022.
[6] Robert J. Bowman, “Technology Steps Up to Help Navigate the Last Mile,” SupplyChainBrain, 7 February 2022.
[7] Daniel Sokolovsky, “Five Ways to Achieve a Greener Last Mile,” SupplyChainBrain, 6 September 2021.
[8] Staff, “Walmart To Purchase 4,500 Canoo Electric Delivery Vehicles To Be Used for Last Mile Deliveries in Support of Its Growing eCommerce Business,” Walmart, 12 July 2022.
