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Challenges and Opportunities of Last mile Delivery

Shilpi Chhabra 24th May 2021

Introduction

In this article we will read that what are the last mile delivery challenges and opportunities. Over the last couple of years, eCommerce has grown into a $3.88 trillion global market. According to a report by Accenture, eCommerce sales are expected to reach $4.48 trillion by the end of 2021.

As the market keeps growing, we are observing drastic changes in the buyers’ needs and expectations, especially in the shipping and logistics department. Earlier, an estimated delivery time of 5-6 days was considered normal, but now if companies take the same time for delivery, shoppers are likely to cancel the order as they know that other companies might deliver the same product within a few hours. 

To fulfil the growing need for seamless, immediate delivery, retailers are looking for fast, flexible last mile delivery solutions. To understand this, we first need to know what last mile delivery means and what are the major last mile problems.

What is Last mile Delivery?

Last mile delivery is the delivery step that takes place from the warehouse to the customer’s doorstep. The primary motive of last mile delivery is to deliver the package quickly. 

61% of logistics companies agree that last mile delivery is the most ineffective process in the entire delivery chain. So, let’s review some important factors which affect last mile delivery.

Common Challenges in Last mile Delivery

Lack of Transparency

Buyers want to know the exact location of their product and the expected delivery time. As a result, visibility is the most significant prerequisite to develop credibility. 

Most businesses offer track IDs of the package that showcase the delivery status of the product. But in a tech driven world, people aren’t pleased with tracking codes. They want to check every step of the last mile process even if the delivery is on the same day. 

High Delivery Cost

Providing a great delivery experience while remaining profitable is a challenge for retailers and logistic companies. In fact, 28% of the delivery cost comes from the last mile part alone. One of the main reasons is a lack of infrastructure to deliver products on time. Additionally, failed delivery attempts, long routes, driver salary, and fleet operations significantly impact the delivery cost.

Unpredictable Elements

When it comes to last mile delivery, we can only predict one thing – it is unpredictable. Traffic, weather conditions, and flat tyres are some last mile problems that are beyond human control.

The only thing logistics companies can do is seamless communications and create a plan B to deliver products quickly.

Inadequate Route Planning

For a beginner, route planning is confusing and mentally draining. It depends on several factors like fuel efficiency and environmental regulations. 

Inefficient route planning is the major reason for late deliveries. To overcome this hurdle, logistics companies can use route optimization software to enhance efficiency. 

Great Last mile Delivery Opportunities 

Drones and Delivery Bots

Numerous logistic companies are looking to perform last mile delivery with robotic devices like drones and self-driving automobiles. Ecommerce giant Amazon has already invested $530 million in the self-driving car company Aurora. However, companies need to take permission from government authorities before they start using them.

Increase in Urban Warehouses

As the concept of same day delivery is increasing rapidly, eCommerce companies need to start building warehouses in metropolitan cities. It is vital to have warehouses in the cities for immediate delivery of products. This not only reduces the delivery time but also simplifies the work of delivery agents.

Smart Technology for Tracking

Logistics companies are using technologies like LI (Location Intelligence) to improve the process of last mile delivery. Features like real time tracking, enhanced visibility, route optimization, and fleet management are some features of this technology.

The LI technology tracks the movement of shipment, which keeps the users informed about the delivery status. Retailers can leverage this technology by observing weather conditions and route optimization to deliver the package in premium conditions. This technology helps eCommerce companies overcome the hurdle of last mile delivery challenges.

Faster Fulfilment

Amazon brought about this revolution in the eCommerce industry of delivering products within two days. However, most eCommerce companies aren’t able to match the delivery speed of Amazon. But still, it has become significant for companies to deliver products quickly. Fast delivery is the need of the hour. According to Accenture, 66% of millennial buyers want eCommerce sites to deliver products within one hour in metropolitan cities. 

Insourcing Deliveries

Ecommerce companies are using their own delivery vehicles rather than outsourcing transport to a logistics company. They handle everything internally, depending on their fleet of vehicles. Firms have also started using trucks for local delivery for fast last mile delivery. But outsourcing is still what most small and mid-scale eCommerce companies opt for as it is cost-effective.

Drivers Turning Into Salespeople

Retailers need to explore a new way of marketing. By analysing big data, they can only predict the customers’ behaviour towards a certain product. The delivery agents can do word-of-mouth publicity of the brands and can also work as sales executives and help boost company sales.

Real time Inventory Visibility

To precisely accept, fulfil, and complete orders across different delivery options, retailers need real time inventory visibility across the entire store and supply chain process. Companies need to be accurate with inventory location to enhance planning, complete order quickly, and reduce errors in the entire supply chain.

Seamless Inventory Deployment 

To reduce the delivery time and maximise product availability, retailers are working on intelligent algorithms for automation processes and offer inventory management in real time. If retailers have visible inventory, they can make changes across all channels whenever they want.

Environmental Strategy

Companies must work with multiple logistics companies to offer a great delivery experience to customers. However, an eCommerce business can be a significant cause of carbon emissions. With customers being more aware of environmental issues, last mile solutions need to involve electric vehicles for pollution control.

By using EVs, companies are reducing carbon emissions and working in a more environment-friendly manner.

Last mile Delivery Operations During Covid-19

Despite the restrictions imposed by the government, the Covid-19 pandemic has boosted the growth of the eCommerce industry. Based on a report by Adobe Analytics, eCommerce sales witnessed an upsurge of 55% in the first seven months of the year 2020, with total online spending of $434.5 billion.

The reason behind this is contactless delivery. 40% of American shoppers opted for contactless delivery for safety purposes. Most eCommerce companies made digital payment compulsory for contactless delivery. Contactless delivery was one of the biggest last mile delivery challenges of 2020. But companies are doing it to offer protection to delivery agents and customers.

Going forward, we can expect immense growth of the eCommerce market with advanced and efficient last mile delivery.

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