Last-mile delivery and tracking have received much attention in the media and from investors in recent years. This shouldn’t come as a surprise, though, as the global cost of package delivery is at over $77 billion. This cost doesn’t include pickup, line-haul, or sorting. And aside from the market being large, it’s also highly dynamic. In past years, it has shown growth rates of between 7 and 10 percent in industrialized areas such as Germany or the United States, and a whopping 100 percent increase in developing countries.
The primary catalyst for driving this chance is the eCommerce industry. As consumer expectations and preferences have become increasingly important, large eCommerce organizations, as well as some start-ups, have identified last-mile services as being a key differentiator. As such, the perceived quality of the home delivery service plays an important role in the decision-making process of the customer, directly influencing the eCommerce businesses’ success or failure on the market.
In fact, nearly a quarter of consumers today are willing to pay extra for instant or same-day deliveries. This share is also likely to increase as 30% of younger consumers are willing to do the same. When it comes to their retail supply chains, eCommerce companies need to find a logistics partner that’s able to fulfill their customers’ orders and improve home delivery times.
But before we can go into that, it’s important to remember that many factors go into something seemingly as simple as last-mile logistics.
What is Last-Mile Delivery?
When we boil down to it, last-mile delivery represents the final stage of the delivery process. It’s the movement of goods from the transportation hub to the customer’s front door. The purpose of last-mile delivery is twofold. On the one hand, the aim is to deliver the goods as fast as possible, increasing customer satisfaction in the process. On the other hand, delivery and courier companies also need to minimize their fuel costs as much as possible.
Though an essential part of the entire parcel delivery service, last-mile logistics is also the least cost-effective and least efficient stage of the entire supply chain. On average, it makes up over 28% of the entire delivery cost. To balance the customer’s delivery experience and increase overall effectiveness, some third party logistics and courier companies are considering and testing more radical approaches in the form of autonomous vehicles like drones or driverless cars. Others may also look to subcontract independent drivers to save on staff and overhead.
The Challenges of Last-Mile Delivery
Today’s technology, such as artificial intelligence, has mostly changed how companies do business for the better. However, they’ve also brought on a series of new and unique challenges. The same technology that allows online shopping for customers with a simple click of a button has also increased their expectations in terms of how fast that product will be delivered. Fast and reliable order fulfillment is a key ingredient in keeping customer satisfaction and loyalty, but it also poses a significant final mile delivery challenge.
The order fulfillment process starts when the customer places an order and ends when the package arrives at their door. It’s the final leg of this journey that poses the most problems for the transportation and logistics of goods. As such, it’s also the most expensive for retailers and delivery companies.
On a real-time tracking system, the last-mile will be marked as “out for delivery.” Many of us may have often noticed a significant gap between when the order was marked as such and when it actually arrives. This time discrepancy is indicative of the inefficiency of the last-mile. There are several factors that will influence this process efficiency or lack thereof. These may include some of the following:
- The size of the third-party logistics company.
- The total number of orders picked up every day.
- The frequency with which these orders are picked up by the last mile carriers.
- The proximity of the distribution center to the delivery points.
- The location of the distribution center, be it rural or urban.
- The total number of deliveries along a particular route.
- The total number of routes.
As you can see, not every last-mile delivery challenge is under the logistics company’s direct control. Nevertheless, all of them have a direct impact on the overall process efficiency of last-mile delivery.
For instance, let’s take the size of the delivery company. Basically, the larger it is, the more daily orders it will have on any given day. By comparison, a smaller company will make pickups only several times a week. It’s also important to remember that there is a balance between the cost of last-mile delivery services and their quality. Put simply, the more you pay, the better and more efficient the entire process will be.
When it comes to inefficient routes, rural areas often pose a problem. These are typically longer and with fewer stops in between. In some cases, poor infrastructure may also pose a problem. Urban areas, though the delivery points are usually closer together, usual problems are related to traffic congestions. Route optimization should be given priority.
To make matters worse, the free shipping phenomenon is also affecting the overall costs of last-mile delivery. More and more customers are less willing to pay for this service, meaning that it falls on the retailers to foot the bill.
How to Choose the Right Last-Mile Delivery Company?
Picking a logistics partner that’s able to handle all the challenges posed by last-mile delivery will be critical for your own business. Keep in mind that, while many customers will be willing to pay extra for this service, they’ll also become increasingly frustrated if the “out for delivery” lasts longer than expected.
As far as the customer is concerned, the final leg of the journey (the last-mile) is the face of your business. The way your logistics partner handles it will have a major impact on your customer’s delivery experience, and by extension, their loyalty towards your company. In today’s instant gratification world, it doesn’t take much for people to switch brands at even the slightest inconvenience.
Don’t be fooled by cheap delivery companies. Last-mile delivery is a high-end service with a lot of hidden challenges, and it should always be treated as one. Whoever dismisses this doesn’t really take last-mile seriously. That should be seen as a clear indicator that they may not be as reliable as a last-mile logistics partners as they would make it seem at first glance.
That said, what are some of the other criterias to base your decision when it comes to a reliable last-mile delivery company?
Any perspective logistics company will need to be capable of providing you with the specific service that will meet your needs – in this case, last-mile delivery. Keep in mind that, just because they are capable in one area of the supply chain, that doesn’t mean that they are the same in others. They should also be able to satisfy both your short and long-term requirements.
Therefore, never take the company at face value and aim to dig a little deeper.
- What last mile carriers are the most widely used in your sector or handle your specific range of products?
- What are their weaknesses, and could you depend on them for remote deliveries?
- Does that carrier provide automatic information, allowing you to communicate with your client?
- Do they supply signature receipt choices and other similar features?
If a certain provider claims to do everything, but you require only certain services, make sure they’re able to deliver. Don’t settle for someone who does everything but, ultimately, doesn’t master anything.
Another thing that you need to keep in mind is their sustainability. For a partnership to flourish over the long-term, you will need someone who can cope with any possible emergencies or urgent needs. A financially sustainable business will always be a sound choice.
Check their payment history and financial report over the past several years. Aim for someone that’s always looking to invest in new equipment, technologies, facilities, and human resources. Ask for their business expansion plan.
Many tend to neglect safety procedures in their place of work, and there’s no denying that you will have to pay attention to the safety procedures of your future logistics partner. A fire in their warehouses or fulfillment centers, for example, can easily result in a considerable loss for your own company. An accident or a vehicle breakdown caused by faulty equipment can lead to a missed delivery and an angry customer. Customer expectations should never be neglected.
Check their safety awareness and procedures, and make sure they have a sound safety management program put in place. A professional logistics company will always put safety standards at the center of their operation.
This will include things like regular employee training, daily equipment, and vehicle safety checks, regular audits, as well as company-wide safety policies that are in line with OSHA safety rules and regulations. A logistics company that takes its safety seriously is also more likely to ensure that your packages will make it to their final destination without any damage.
In today’s digital world, transparency plays a key role in every step of the sales cycle. Detailed product pages, clear shipping, and return policies, and last-mile real-time tracking are industry standards.
You will need to find a logistics partner that will work with your standards of operation, offering the services mentioned above. Some may even go a step further and provide voice and document Proof-of-Delivery (POD) as well as survey technology that will allow you to monitor performance.
Never forget that last-mile delivery will usually require “white glove” services. If you want to stand out as a high quality and customer-oriented business, the traditional “just leave on the porch” (JLOP) delivery model won’t cut it. Even worse, it increases the risk of loss or missed deliveries.
You’ll also need to make sure that your delivery partner operates the same. This will frequently include additional first and final mile capabilities such as product staging, for example. This is when the delivery company unpacks the items before transit, making sure they are in showroom condition.
Other similar services include things like in-room delivery, assembly or disassembly, as well as the removal of packing materials. Make sure your delivery partner has experience handling your type of products.
Supply Chain Systems Integration
Also, look for a logistics provider that uses integrated instead of disparate systems. Such connected systems in supply chain management will make for a seamless data transmission between platforms, such as a warehouse management system (WMS), inventory management, transport management system (TMS), and the e-commerce platform. This will work to increase the harmony of the entire process, minimizing or eliminating disruptions or any missed or late deliveries.
Last-Mile Program Management Automation
Aside from systems integration, final mile management will also benefit greatly by leveraging automated resources. These will include but are not limited to, the transport management system, which can further simplify and standardize all operations from start to finish. You should look for a last-mile delivery company that has a state-of-the-art management program capable of automating as many processes as possible.
Flexible Delivery Options
Flexibility is key to ensuring customer satisfaction. But flexibility doesn’t always translate into speed. Aside from same-day deliveries, you can also offer customized time and date deliveries, or a variety of delivery options to increase that experience.
It’s also an option for your logistics provider to use their brick-and-mortar locations as a way of incentivizing a “buy online and pick up in-store” (BOPIS) practice. This will also help reduce the overall shipping and fuel costs and speed up fulfillment practices.
Advanced Analytics Capabilities
Advanced analytics software will leverage cloud-based algorithms, automation, and machine learning, allowing logistics companies to gain new and better insights into their performance. This technology will not only help delivery companies get a better understanding of their final mile program’s performance, but it can also uncover any weak points where their delivery models fall short. As such, look for companies that use advanced analytics software as this is indicative of a company looking to improve and optimize their processes.
The Value-Added Partner
At CRST STI, we are specialized in last-mile delivery, and we are fully aware of the exact costs and challenges that go with it. We never downplay the possibly troublesome supply chain hurdles and will remain committed to your success. We are also fully aware that there’s no one-size-fits-all successful last-mile delivery strategy, with each of our clients having individual needs and requirements. We will help you increase efficiency every step of the way. As such, we will work on providing you with consistent, top-notch guidance for optimizing your final mile logistics strategy. Ready to learn more about our final mile delivery services? Contact CRST STI today!!