How Today’s Last Mile Deliveries Should Happen
last-mile delivery Ecommerce Brand All Blogs
Apr 04, 2023
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The sausage making
In last-mile delivery, your customers are looking for consistent, on-time, hassle-free, next-day deliveries, just like Amazon provides. That’s a high bar. But unfortunately, many shippers and their carriers are using outdated approaches, failing to meet today’s customer expectations. Last-mile deliveries are complex and challenging to do right consistently. Still, as the final touchpoint with your customer, it’s also the most important. In other words, your last-mile provider can make or break your customers’ perception of your brand.
The high cost last mile
Your package may travel a thousand miles, but did you know that the last mile is the least efficient and costliest, accounting for 53% of total shipping costs? Logistics professionals understand that the last mile is the least efficient and most expensive step in delivery. It’s also the most complex. When you stop and think about it, the reasons are apparent.
Outbound packages are aggregated and loaded onto trucks in bulk in a warehouse. If you load a thousand packages onto a truck, the cost of operating the truck and paying the driver spreads across a thousand packages, and moving those packages from point A to point B is relatively straightforward.
When you get to the last mile, a new level of complexity kicks in. Your thousand packages splinter off into lots of smaller tributaries. The quantity moving with a single driver and vehicle is exponentially less. The driver and vehicle maintenance costs are spread over double-digit package counts, not hundreds or more. When the driver turns down a street to deliver a package, they can run into all kinds of challenges – finding an address or a gate, having the wrong access code, not finding an apartment, all the random things that can happen at the package level. And the cost of all that complexity factors into your last mile.
Legacy carriers – same as they ever were
Flexibility is where legacy national and regional carriers fall short. It’s not just about the things that happen while the driver is in the field; it’s the inherent unpredictability of customer demand and supply chains on a day-to-day basis.
There’s a reason why they’re called legacy carriers. They’ve been at it for decades, and their infrastructure is static and asset-heavy. The same crew of drivers showed up to work at 7:00 each morning to drive the same fleet of company-owned one-size-fits-all vehicles over basically the same hub and spoke route each day. The only things that change from day to day are the actual delivery addresses. In addition, their technology is often outdated – a recent study from SOTI found that half of the global transportation and logistics companies use outdated technology for last-mile delivery.
The legacy carrier’s model lacks the flexibility to deal efficiently with seasonal peaks or fluctuating demand. Fixed costs are high; they’ve purchased the trucks, and the drivers show up every day, regardless of demand. As a result, shippers end up paying for overhead on idle capacity. That’s not to say these carriers are bad at what they do – it’s just that what they do and how they do it is no longer what you need to differentiate yourself in today’s marketplace.
Last Mile Delivery as a Service (LM-a-a-S)
We think there’s a better way. We call it Last Mile as a Service (LMaaS) – an end-to-end service with the flexibility to adapt based on demand.
How flexible? Well, flexible enough to treat a given geography as a single route on a low-volume day or as two separate routes the next day when volume increases. For example, today, you have eighty packages going into zone A. That’s one route for one driver. Tomorrow you have one hundred and fifty packages to deliver in zone A. That gets split into two routes with two drivers. Next week you need to run a high-volume promotion because six months of supply chain delays just arrived, and you don’t have space for warehousing it all.
Now it’s a little more complex than that because your volume is aggregated with other shippers to add density and reduce carbon footprint and cost per package. But you get the idea – capacity and routing are dynamic and optimized. Every day is different. Resources are allocated based on demand. There is no idle capacity built into the cost structure. When volume density supports it, inventory can be routed to a micro hub closer to the end customer—in essence, shortening the last mile and supporting more sustainable delivery.
It’s all driven by technology, starting with a purpose-built platform that’s designed from the ground up specifically to manage last-mile logistics from the time a package gets scanned in your warehouse to the time it hits the customer’s door. Think of legacy carriers as logistics companies supported by technology, while LMaaS carriers are technology companies that bring their tech expertise to the problem of logistics. Add predictive analytics that supports capacity and resource planning days in advance, AI that learns how to predict and avoid potential exceptions, and apps and dashboards that provide real-time support to shippers, dispatchers, and drivers.
Four in five consumers say they would walk away from a brand after a bad delivery experience. That puts a heavy burden on logistics in growing your brand. Is your Last Mile carrier a catalyst for growth or an anchor holding you back?