Last Mile Delivery: How to keep costs down
“Last mile” is the final frontier of logistics and an absolute necessity. However, it is burdensome to supply chains due to higher costs involved. The last mile element of the delivery model currently accounts for up to 55% of total shipment costs.
Traffic congestion in urban areas and the distance in remote areas both add time and cost, negatively impacting the costs. The problem is compounded by practical issues such as invalid or incorrect address details, hard-to-find locations, customers not being home to accept delivery, buyer remorse – the purchaser no longer wanting the delivery, lack of nearby parking and many other hurdles.
All these issues add cost, time and inconvenience to what is an already marginal activity. Solving this calls for more futuristic approaches, e.g. drones, electric or self-driving cars, to make last-mile delivery more palatable for those involved.
Several aspects of last mile operations factor into the steps businesses can take to keep costs down without compromising the customer experience.
Many major retailers are choosing small local warehousing right in the heart of densely populated areas instead of larger, more traditional warehouses in surrounding suburban areas. This new hyper-local focus puts last-mile logistics directly in the spotlight. Smaller hubs mean better delivery speeds, but they also present challenges when it comes to managing and moving stock between hubs, as well as getting inventory into the fulfillment flow efficiently. For example, Amazon created 58 Amazon Prime Now hubs in the US last year to fulfill same-day instant deliveries.
The number of individual SKUs, packaging needs, order fulfillment time, and amount of orders are at the heart of any retail delivery operation. Packaging will play a bigger role than ever in ensuring product integrity and an ideal customer experience no matter whose hands touch each order first, third or last.
3. Increasing Visibility
Better GPS technology and smarter warehouse management mean unmatched visibility for consumers tracking their goods while in transit. Today, many retailers are going beyond IoT tracking checkpoints by adding GPS probes directly on packages, especially for time or temperature sensitive goods. It uses this data to customize everything from packaging to loading and fulfillment for better delivery optimization, which is likely to revolutionize the way we shop for groceries in the years to come.
Automation, in forms ranging from delivery drones to smart warehousing technology, will revolutionize the way people send and receive goods. We are already seeing warehouses being automated by leaps and bounds.
The need for supply chain visibility and adaptability to customers’ continuously increasing and changing needs has a huge impact on costs. While we can see a lot of headlines about how robots, drones, and self-driving cars will reshape the delivery industry, they’re still a few years away from becoming a feasible resource for most retailers. However, there’s currently a huge wave of tech innovation in the supply chain which is empowering retailers with software solutions that can be implemented immediately and are focused on tracking, managing and optimizing the last mile – and retailers must take advantage of these to remain relevant and profitable.
Some logistics experts are choosing to diversify their supply chain locally, to cut excess volatility out of their flow. Others are looking to the gig economy to allow for more flexibility in the last mile, taking on additional labor as demand increases.
The future of distribution is here. As traditional retail looks for ways to compete with e-commerce giants, 3PL experts will likely see an increased focus on consumer-facing delivery services. Current models are having difficulty keeping up with demand, which presents a unique opportunity for companies who understand how to fill in this rapidly changing business ecosystem.