Meeting Customer Expectations by Optimizing Last Mile Delivery
Retail Tech Insights | Saturday, December 02, 2023
The last mile's inefficiencies, compounded by the rise of e-commerce, have made it a priority to implement new technologies like crowdsourcing and automation.
FREMONT, CA: The surge in e-commerce has transformed consumer expectations, making swift fulfillment and distribution not merely attractive features but essential aspects of the online shopping experience. Businesses are racing to innovate new technologies and experimental supply chain models to meet these demands and counter the Amazon Prime threat. Their goal is to boost parcel volume, expedite deliveries, and ensure customer satisfaction while striving to reduce costs. However, one of the most significant challenges they face in terms of cost and complexity is last-mile delivery, particularly for same-day delivery.
A product's last mile is between the warehouse shelf and the customer's doorstep. This last leg of the shipping process is the most expensive and time-consuming, yet it's pivotal for overall customer satisfaction. If you've ever tracked a package online and felt frustrated as it seemed to be "out for delivery" for an eternity, you've experienced firsthand the inefficiency of the last mile. This inefficiency arises from the numerous stops with low drop sizes typically involved in the final leg of a shipment. While the transportation cost for the package remains constant, the time taken to complete this last part of the journey is significantly longer. Consequently, delivery companies must either increase their workforce or expand their vehicle fleets to meet the demand, substantially increasing delivery costs.
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In rural areas, delivery points along a given route may be several miles apart, with only one or two packages delivered at each stop. In cities, the situation could be better; the proximity of stops is offset by the constant delays caused by traffic congestion. The continuous rise of e-commerce in US retail sales has exacerbated the costs and inefficiencies of the last-mile problem. This growth has dramatically increased the number of parcels delivered daily, raising customer expectations for rapid and free delivery.
Last-mile delivery costs represent a substantial portion of the shipping cost, accounting for more than 50 percent. As the expectation for free shipping becomes more widespread, customers are increasingly unwilling to pay delivery fees. Consequently, retailers and logistics partners are forced to absorb these costs, making last-mile delivery the primary focus for implementing new technologies and process improvements.
The emergence of the gig economy has familiarized consumers with crowdsourcing local services through digital platforms. Location-based crowdsourcing enables users to use mobile apps to request rides, book accommodations, order food, hire services, and schedule deliveries. The crowdsourcing model has been well-established in transportation, hospitality, and food delivery for some time, and retailers are now exploring its potential to alleviate last-mile delivery challenges. Consumers, retailers, logistics providers, and consumers can find and connect directly with local, non-professional couriers who use their vehicles to deliver goods in the crowdsourcing economy. This approach enables companies to deliver online orders more swiftly and allows customers to receive their items at their preferred time and location. It also eliminates the need for multiple delivery attempts, as customers are likelier to be home during the delivery window.
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