The Last Mile is a blessing and a curse for many delivery service providers. It continues to present massive opportunities for revenue, but delivering goods to end consumers is unavoidably complex and dynamic. With eCommerce orders continuing to grow at the rate of over 23% YoY, businesses will need to move in tandem with customers’ requests while evaluating their approach to deliveries at the same time.
Read on as we break down the last mile challenges and how you can overcome them with a smarter, more reliable route plan.
What is last mile delivery?
The last leg of the delivery journey before a good reaches its final destination, is referred to as the “last mile” or “final mile.” It’s a critical moment for any buyer, as it’s the last touch point a customer has with a brand.
What are the challenges the last mile presents?
Challenge #1 – Cost
Last mile deliveries pose a hefty cost to business owners, especially as most customers assume and expect to escape the cost of shipping as they checkout. With the last mile accounting for over half of total delivery costs, businesses need to realize and consider the financial burden they’re taking on.
Once an order is placed, expectations are set and the clock starts ticking for you to fulfill the order as promised. It’s important to evaluate your route planning strategy to optimize towards efficiency or else you could be heading in the wrong direction.
Share of Delivery Costs, by Part of Journey
Source: Honeywell, 2016
What factors add to last mile delivery costs?
- Time-windows: the period of time a delivery is expected or planned to arrive at its destination
- Delivery turnaround time: the time between when an order is placed to when it’s delivered
- Load and unload time: the expected time it takes to load and/or unload vehicles with goods
- Parking: the amount of time expected for drivers to park in a lot, parking deck, or loading zone
- Rescheduling: when a delivery is missed by the end-customer (Traffic, road congestion, etc.)
If you haven’t caught on to the trend, time has the biggest impact on your costs. To get a better understanding on the true cost of last mile deliveries, you’ll want to breakdown how your operation allocates its time to learn where you’re succeeding and where there’s room to improve
Not sure where to start? Take a look at this last mile cost breakdown calculated by economist, Andrew Bitby. Based on his research and calculation, you can assume that somewhere between 33% to 66% of delivery costs lie in the time spent at the customer’s location.
|People Involved||Time (Hours)||Volume Moved (cu ft)||Assumption||Person-hours/cu ft||% Total|
|Loading at Premises||2||.5||100||.01||32%|
|Truck to Warehouse||2||1||1000||1 TEU Truck||.002||6%|
|Truck to Port||1||3||1000||1 TEU Truck||.003||10%|
|Shipping||15||312||5000000||5000 TEU Ship||.000936||3%|
|Truck from Port||1||3||1000||1 TEU Truck||.003||10%|
|Truck from Warehouse||2||1||1000||1 TEU Truck||.002||6%|
|Unloading at Premises||2||.5||100||.01||32%|
|Total for 100 cu ft||3.0936||hours|
Challenge #2 – Customer expectations are a priority
With 74% of customers citing free delivery as a top factor to purchasing, delivery costs are now dismissed in order to improve the customer experience. Companies like Nordstrom and Amazon leverage delivery as a service and made it their competitive advantage. They’ve essentially forced all businesses to extend the same courtesy.
What are some of the expectations consumers have today in relation to delivery?
- 66% want lightning fast deliveries
- 57% request ETA updates
- 54% will wait only 2 days
- 50% want more convenience
- 48% like when returns are easy
Challenge #3 – The Last Mile is Impossible to Control
While you can have a solid plan in place, a great infrastructure, and employ a productive and accountable workforce – there are challenges you’ll face everyday that throw a wrench in your plan.
Customers can always pose a threat to your delivery routes. Whether they are unhappy with the delivery, are extra chatty, or need to reschedule – this can hold up your driver’s entire route. While you train your team to make sure the customer is satisfied they are also instructed to follow a complete workflow before leaving. Interacting with customers can present several challenges – and therefore it’s important to predict time at site when pre-planning your schedules.
In addition to customers, you’ll also experience: traffic jams, accidents, road closures, seasonality. There’s not getting around these outside factors, except having the ability to dynamically plan in real-time!
Last Mile Solution: Leverage your plan efficiency while keeping customers happy
Grouping orders together
- By grouping orders together based on proximity rules in your route planning software, you’ll make sure that deliveries in neighborhoods, apartment buildings, or business complexes can be served by one driver.
Targeting densely populated areas
- Route Density: Route density is a beautiful thing. It means that within your region, territory, or service area – you’re scheduling orders near each other. The closer your stops are together on a route, the more efficient your route proves to be.
With increased route density, you can benefit by:
- Reduce miles driven
- Limit idle time
- Plan more time with customers
- Reduce windshield time
- Lower fuel costs
Map out your current customer base and see if you can group orders together. Determine if you should limit or expand service areas depending on volume of business.
Leverage a mixed fleet
- Depending on your business model and areas served, you may want to invest in different modes of transportation. With the rise of eBike popularity, there are benefits to businesses as well. Including, less fuel consumption, ability to cut through alleys or parks, less maintenance costs, and are comparable to vans with drops/stop.
Plan vehicles and drivers’ schedules to capacity
- Plan routes based on driver availability and vehicle load/weight capacity. This will ensure you’re running an efficient day – and as a result your drivers will be more productive and accountable.
Review key performance metrics
- On-time delivery rate
- Planned vs. actual
- Unapproved idle time
- Deviations from the plan
How Route Planning Software Can Help Your Last Mile Delivery Business
- Reduce costs
- Dynamically plan
- Account for multiple time-windows
- Plan best resource
- Provide transparency to customers