By Carlton Farr, Vice President of Supply Chain Services, Radial
Last mile delivery—when a package moves from an eCommerce fulfillment center to a shipping carrier like FedEx, UPS, DHL, regional, or brand-owned carrier who delivers it to the customer—is the most visible part of the order fulfillment process to customers. It also tends to be one of the most expensive parts of fulfillment for eCommerce retailers.
With the significant increase in US parcel volume since the pandemic (it grew 6% in 2021 to 21.5 billion packages), retailers are struggling to manage new challenges, costs, and customer expectations. With faster delivery times, increased shipping costs, and new models of last mile delivery services, retailers are under pressure to shore up their customer experience in this final phase of a shopper’s journey.
Why Does Last Mile Delivery Matter So Much to the Customer Experience?
Today’s customers expect to be notified when their package ships, along with an expected delivery date. When delays or mistakes happen in the last mile delivery process, customers typically blame the retailer or brand, rather than the carrier, for a poor delivery experience. While retailers and brands usually do not have much control over the last mile delivery process, they are responsible for ensuring the customer experience is as positive as possible. That’s why some retailers, like Amazon, operate their own delivery fleets so that they can control the speed, process, and entire customer experience from end-to-end.
Last Mile Logistics Challenges
As complexity has grown across the eCommerce landscape and customer expectations for same-day or next-day delivery have risen, last mile delivery challenges have also increased. More packages to deliver means more delivery vehicles navigating routes, an increase of human error (e.g., packages delivered to the wrong location or arriving damaged), higher transportation costs, and rising environmental impact.
Store fulfillment options such as buy online, pickup in-store (BOPIS); buy online, pickup curbside (BOPAC); ship-to-store; and ship-from-store were accelerated by the pandemic. With supply chain disruptions, manufacturing delays, and other challenges still impacting the industry, retailers are having to source inventory from various locations—adding to the complexity. Local eCommerce fulfillment and delivery, autonomous vehicles, and a shortage of delivery drivers are also factors. Common challenges include:
- More complex routes. Delivery locations vary widely for a delivery route depending on whether it’s an urban or rural location. In rural areas, customers may be spread out over many miles with just a few packages to deliver. In urban areas, traffic congestion and delays may interfere with multiple stops in closer proximity. These lead to inefficiencies and higher costs.
- Delivery errors. Packages get damaged, misdelivered to the wrong address, or stolen by porch pirates. While not the fault of carriers, customers tend to blame them when package theft occurs.
- Undeliverable packages. When customers and businesses are not available to accept signed deliveries, a second delivery attempt must be made, which doubles the cost of the last mile.
- Returns. Reverse logistics doubles the cost of delivery as well, but across the entire order process. Packages that are delivered and then returned must be redelivered to the brick-and-mortar store or eCommerce fulfillment center.
- Environmental factors. Transportation firms, courier companies, and third-party logistics providers are under pressure to reduce pollution, emissions, and traffic congestion—and to generally be proactive when it comes to sustainability. More efficient vehicles, better automation, and improved efficiencies are all part of reducing the impact of these issues.
5 Trends and Strategies to Optimize Last Mile Delivery
Last mile delivery can be one of the most inefficient parts of the entire supply chain, according to 59% of US transportation and logistics companies. Improving efficiency while also boosting customer experience can be challenging, but there are some trends and strategies eCommerce retailers can leverage to help guarantee fast delivery to a customer’s doorstep, improve brand loyalty, and improve resiliency against unexpected disruption.
Here are five strategies to optimize last mile delivery:
- Promote store fulfillment options. The pandemic made store fulfillment options popular with customers. Options such as BOPIS and BOPAC eliminate last mile delivery costs by having customers complete their online shopping and pick up their orders at the store. Orders are fulfilled from in-store inventory. Other options include ship-to-store, where customers order online and then products are delivered to the store from a fulfillment center to be picked up by the customer.
- Use crowdsourced delivery. Similar to an Uber business model, crowdsourced delivery is part of the gig economy, where retailers contract with private citizens who use their own transportation to deliver packages to customers. This option can be efficient for localized delivery and same-day or even two-hour delivery in urban areas and can lower transportation costs significantly. However, it comes with tradeoffs, as crowdsourced delivery lacks the infrastructure, technology, training, and security standards that professional fulfillment and shipping providers offer.
- Improve route planning. Logistics technology solutions use artificial intelligence (AI) that can calculate delivery route options for the highest level of efficiency while providing transparency into the entire eCommerce fulfillment process—including the last mile. These software solutions provide real-time tracking and alerts and offer a comprehensive view of all the factors that impact route optimization.
- Automate delivery notification. Requiring customer confirmation for proof of delivery (POD) helps retailers prove delivery was made. However, there is a fine line to walk with customer experience as most customers do not want to have to be present for packages to be delivered—or be disrupted if they are home. POD also slows down delivery times. Major carriers are opting for automated delivery status notifications once packages have been delivered to ensure customers are notified their package has arrived. This delivery notification can serve as POD as it is electronically transmitted.
- Partner with an order fulfillment partner. Retailers typically contract with major shippers and third-party logistics providers. Some own their own transportation fleets. However, many retailers find that partnering with a well-established eCommerce fulfillment partner can simplify their order management process and improve their last mile delivery process and costs. Many experienced fulfillment providers, like Radial, also offer their own transportation management services and are skilled at negotiating contracts with major carriers. Using a fulfillment partner improves efficiency, reduces transportation costs, increases delivery speeds, and enables eCommerce retailers to focus on their core business and other aspects of the customer experience.
Improving last mile delivery is a continuous process, but eCommerce retailers that focus on optimizing their operations to boost efficiency, decrease costs, innovate delivery models, and partner with industry experts can keep customers happy and loyal even when external challenges surface.
Learn more about Radial’s last mile optimization services to see how you can differentiate your business from your competitors by optimizing the entire eCommerce fulfillment and delivery process.