Governmental stay-at-home orders during the pandemic motivated most consumers to increase their online buying behavior — making residences a destination of choice for their purchases. The staff at ShipChain explains, “Final Mile, also commonly referred to as Last Mile, refers to the very last leg of any shipment’s journey: from the transportation hub to the end-user. A lot of times, this is a customer, and their location is a residential address.”[1] Shelagh Dolan (@ShelaghDolan) adds, “As consumers increasingly turn to e-commerce for all their shopping needs, speedy fulfillment isn’t just a ‘nice to have’ — it’s the expectation of every online shopping experience.”[2] The final mile is extremely important for retailers because it is the last touchpoint consumers have with them and the last chance to make a good impression — even if delivery is made by a third party. Consumers don’t often think about supply chain operations. They just know they order something and, if everything goes right, it is delivered on time in good condition.
The ShipChain staff observes, “The reason that Final Mile is in some ways, the most important aspect of any shipment, is because it ties in the buyer. Ultimately, all businesses are extremely concerned with customer retention and loyalty. So if something goes wrong in the Final Mile segment of delivery, there’s no hiding it from the customer, which can damage profitability in the long run.” Retail and e-commerce expert Anna Bourland adds, “[Consumers] know a delivery disaster when it happens and it’s unlikely they’ll trust a brand that doesn’t deliver enough to ever come back. 83% of customers will not return after just one poor delivery experience, which all teams within the organization should care about — not just supply chain.”[3] Although retailers with omnichannel strategies in place are grateful for any business during the pandemic, they also know last mile logistics can be complicated and expensive.
The last mile is costly
Kevin Jessop (@KevinAJessop), head of marketing strategy for Cerasis, writes, “It appears new technology developments and advanced systems continue to push the boundaries of efficiency in logistics, but last mile savings remain elusive. And, last mile cost control is becoming more difficult for both urban and rural deliveries to consumers and business.”[4] How costly is the last mile? Kristi Montgomery, Vice President of Innovation at Kenco, reports, “The last mile is historically inefficient and can account for 40 percent to 50 percent of a company’s logistics costs.”[5] The reasons last mile deliveries are so expensive, she notes, is because they involve continuously changing routes, rising fuel costs, and delivering individual items to distinct locations. As a result, she writes, “It’s increasingly important for companies to remain on top of innovative solutions that address delivery concerns, specifically as it relates to the last mile.”
Even before the pandemic hit, retailers were looking for alternatives to expensive home delivery. Vijay Narayanan Natarajan, a Senior Research Analyst at Frost & Sullivan, notes, “Spiraling last-mile delivery costs and changing customer demands are causing retailers to rethink their strategies and look toward new business models such as click-and-collect, locker boxes, on-demand, and autonomous solutions”[5] Fortunately, consumers bought into click-and-collect models during the pandemic and retailers are hoping this behavior continues. Even if click-and-collect or other package delivery options remain popular, home deliveries will continue to rise. As a result, Jason Vanover insists, “C-suite executives need to start rethinking their final mile logistics strategies now to stay afloat.”[7]
The way ahead
Vanover writes, “Final mile experiences will make or break all delivery logistics. Since the final mile is where the customer and carrier meet, it is an opportunity to build the best experience possible. Delivery is also subject to factors beyond your control, such as weather, traffic, and other issues.” He insists better visibility can help deal with some of these factors. Jessop suggests companies take the following six steps to redefine and improve last mile operations:
1. Take advantage of the Gig Economy. Jessop writes, “The Gig Economy is also known as the crowdsourcing of last mile delivery to non-traditional drivers, such as those working for DoorDash or Uber. These Gig workers could help your company move more freight in urban areas, so your more experienced drivers can tackle the needs of rural areas or vice versa.” The one cautionary note I would add about this recommendation is that cities are taking a closer look at how non-traditional drivers are increasing urban traffic congestion and may end up regulating these gig economy services.
2. Integrate your order fulfillment systems with the TMS. According to Jessop, “Integrating the WMS, YMS, OMS, or any other order fulfillment system with the TMS is crucial to understanding and maintaining control over last mile spend.”
3. Use big data analytics to better understand last mile cost control. As companies make more of their operations and processes digital, the amount of data available to analyze will increase dramatically. Jessop notes, “Analytics provide additional insights into what is and is not going right in your operation — leading to more opportunities to improve the final mile.”
4. Automate redundant processes. The amount of e-commerce engaged in by consumers is increasing and automation is becoming a “must have.” Jessop writes, “Any mention of automation immediately carries the implication for use of drones and robotics in last mile cost control. However, robotics — while still under testing — are not yet ready for the full deployment. So, keep them in mind, but do not dedicate your whole strategy to the use of robotics in the final mile.”
5. Improve visibility. Jessop writes, “Use telematics to track all last mile movements, leveraging the full power of the Internet of Things (IoT) and connected technology to gain end-to-end visibility in the final mile.”
6. Consider using parcel last mile delivery services. According to Jessop, “Outsourcing is an excellent way to increase volume without adding additional stress on logistics management.” Just remember, the delivery provider is your last chance to impress your customer. As Montgomery notes, “From customer satisfaction to transportation cost savings, the final leg represents a chance for organizations to win over customer perception as much as it does for order fulfillment.”
In the years ahead, Montgomery notes, “Emerging technologies and ecosystems, such as blockchain, self-driving trucks and the sharing economy, will have a future impact on further enhancing the customer experience and last-mile delivery.”
Footnotes
[1] Staff, “Why Final Mile Logistics Matter So Much,” ShipChain, 20 January 2020.
[2] Shelagh Dolan, “The challenges of last mile delivery logistics & the technology solutions cutting costs,” Business Insider, 10 May 2018.
[3] Anna Bourland, “The Changing Faces Of Last Mile Customer Experience,” Convey, 24 May 2019.
[4] Kevin Jessop, “Last Mile Cost Control: The Supply Chain’s Inevitable 2020 Problem,” Cerasis Blog, 1 June 2020.
[5] Kristi Montgomery, “Addressing the Challenges and Opportunities in Last-Mile Delivery,” Food Logistics, 19 May 2018.
[6] Jason Vanover, “Delivery Logistics: Why Final Mile Is Where It Comes to a Head,” Cerasis Blog, 12 May 2020.
[7] Ibid.
