Last Mile Delivery Guide 2021 : Unblock Your Growth

Last mile delivery is the most expensive part of the supply chain. Depending on who you ask, it accounts for 40-50% of total shipping costs!

Getting orders to customers also gets more complicated as a business grows. Mistakes and delays can lead to unhappy customers and growth bottlenecks. 

So how can you lower your delivery costs and keep your delivery operations efficient as you grow? 

Route optimization is part of the answer. Route optimization uses algorithms to create shorter, more efficient last mile delivery routes. Optimized routes take less time, use less fuel and make deliveries easier to manage.

In other words, route optimization can solve both the key problems in last mile delivery: cost and complexity. 

In this article we’ll unpack some of the core concepts in last mile delivery, starting with basic definitions. If this is all new to you, you may want to read the whole thing.

1. What is last mile delivery?

The last mile is the final step of shipping, when packages are moved from a  hub or warehouse to the customer’s door. 

Sometimes the last mile is the whole journey.  For example, think of a local food prep business that hand-delivers the day’s meals. At other times, the last mile is the end of a long supply chain that spans the globe. Imagine electronics loaded into a container at a factory in Asia, destined for customers in Europe. First the container is shuttled across a series of ports on different continents by truck, train and ship. Then it's unloaded at a warehouse or distribution centre. It may even be sent to a smaller warehouse before it's eventually delivered to a customer.

How far is last mile delivery?

So how long is the last mile really? It’s not a trick question — the last mile can be as far as 30 miles in reality. We could call it the “last stage” or “last leg”, but “last mile” is the most common term (sometimes people use “final mile” as well). The thing to remember is that last mile delivery is not really about distance — it’s about the last part of the journey to the customer.  

This last mile journey could be made by car, truck, scooter, bike or on foot. There's even talk of making last mile deliveries by drone. The end goal is always the same: Get the package to the customer, quickly, efficiently, and at the lowest possible cost. 

Last mile delivery creates hard computing problems

Here's a fun fact: Finding the shortest possible route between many destinations is a famous challenge in computer science. It's called the Travelling Salesman Problem. If there’s more than one vehicle, you get an even more complicated version called Vehicle Routing Problem. If you’d like to know more about the science behind the algorithm we use at Routific, the articles linked in this paragraph are a good start.

2. What kinds of company do last mile deliveries?

Who actually does last mile deliveries? There’s a big variety:

1. Global giants like FedEx and UPS. (They sometimes outsource their last mile to other companies).
2. Smaller couriers who focus on specific countries or regions.
3. On-demand delivery companies like Instacart, Postmates, UberEats and JustEat. They specialize in very fast deliveries in hyper-local areas. 
4. Local businesses who handle their own deliveries. There are hundreds of these in every city. They include grocers, furniture and office suppliers, florists, dry cleaners, landscapers, clothing stores and more. 
5. New, tech-driven local and regional couriers and logistics companies who use modern software tools.

You can read more about the business models and strategies of last mile delivery and logistics companies in North America here.

3. How last mile delivery can hold your business back

Most of our users find us when their existing last mile delivery solutions are starting to hold them back. This can happen in a few ways:

• Many businesses start out by using spreadsheets and a tool like Google Maps to plan their deliveries manually. When they grow this starts taking too much time, leading to stress and errors.
• The business might have to hire too many drivers because their routes are inefficient.
• Late and missed deliveries lead to customer complaints.
• Some courier companies try hiring software developers to write their own routing software. That can get expensive really fast. And it’s hard to get right.

When this happens, businesses start looking for a solution to unblock the next stage of their business growth.  

4. Understanding last mile delivery challenges

So why exactly is the last mile so hard? As we mentioned above, it comes down to two things: cost and complexity. 

Here's a story to explain why last mile delivery can get so complex so fast. Imagine a farmers’ co-op that delivers a weekly box of fresh produce to customers in the city. They have a regular scheduled delivery plan, but it's never the same twice. Every week new customers join and old customers add last-minute orders. Some people pause their subscriptions, and others cancel. That means the co-op needs to revise their delivery routes every day. 

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The co-op has refrigerated trucks that ensure safety and freshness. But they need to be packed so that the boxes are in the right order for quick unloading at each stop. They also have to deliver at a convenient time so customers can get their deliveries into the fridge fast. Some customers have very specific instructions like "leave the box behind the red planter box." Finally, lots of their customers want regular ETA updates.

But that's not the end of the complications. Some neighborhoods are full of one-way streets, and the city is fixing up its roads so there are frequent closures. 

This was all fine when the co-op only had a few customers. But now, every new customer makes the delivery problem more difficult. The operations manager at the co-op is staying later and later each night to plan the next day's deliveries. Customers are starting to complain that their deliveries were late, or arrived on the wrong day. Deliveries cost a lot of money and time, and the co-op doesn't want to buy a new truck and hire a new driver if they can avoid it.

No wonder last mile delivery is so complicated! In some ways, moving 1,000 widgets across continents is easier than delivering a dozen eggs. 

In the next sections we'll dig a little deeper into some of these challenges to efficient, cost-effective last mile delivery.

High customer expectations

Amazon and other delivery giants have set very high consumer expectations. It’s hard for smaller companies to compete with systems that can offer same-day delivery almost anywhere. 

Good communication and the personal touch can help customers to accept longer delivery times. But some expectations are now deal-breakers. Customers want:

• Accurate delivery time estimates
• Reliable tracking information 
• Updates if anything changes
• Proof of delivery
  

All of this can help you to improve the delivery experience and meet customer expectations.

Real-world obstacles to fast delivery

You may have planned the perfect route — but the real world always gets in the way. Some of the common obstacles to easy last-mile delivery include:

• Traffic
• Roadworks
• Bad weather (rain, fog, snow, ice, wind)
• Toll roads
• Vehicle problems
• Absent drivers 
• Drivers don't like the route and do their own thing

Good last mile delivery software should take real-world conditions into account. That includes:

• Scheduling deliveries within convenient time windows.
• Taking vehicle types and capacities into account.
• Planning around driver shift times and priorities.
• Making it easy to update routes when the unexpected happens, like a blocked road or a driver being off sick. 
• Making it easy to track deliveries and communicate with drivers.
• Sending real-time updates to customers.

Unsuitable technology

Modern last-mile delivery operations depend on GPS and routing technology. Many businesses start out with DIY route planning, using free tools like Google Maps. As the business grows this can become a hindrance, taking hours every day. 

Specialist route planning and route optimization tools can unlock the road to growth. But they do need to be fast, up to date and easy to use. 

Routific’s last-mile delivery software is:

• Powerful enough to solve complex challenges, fast.
• Easy to use. 
• Easy to integrate with existing software tools using one of our APIs:
• The Platform API pulls data from point of sale and order management systems into our delivery management platform.
• The Engine API enables developers to integrate our route optimization algorithm into their existing tools.  

5. How to reduce last mile delivery costs

We’ve established that last mile delivery is expensive. But the real question is: how do you reduce those costs?

• You could charge customers a shipping fee to cover the true cost of delivery. Unfortunately, that can mean losing the sale. Nearly 30% of customers abandon their purchases if shipping costs are added to their basket. With Amazon and others offering free shipping, this is becoming a basic customer expectation. 
• You could try explaining shipping costs clearly to customers from the start, so they’re not surprised at checkout. But those costs should be as low as possible. That means you need to plan and drive the most efficient routes. 
• Ensure you’re implementing best practices for local delivery businesses.

Routific also has a few ways to help:

1. The Routific Delivery Platform is an easy-to-use web abb for businesses that make home deliveries. It includes route optimization, driver management and delivery experience tools. You can import addresses and plan optimized routes in a few minutes, then track deliveries all the way to completion.
2. Our route optimization algorithm, available via our Engine API, is for couriers and other businesses who already have an in-house delivery platform. It adds route optimization and machine learning intelligence to their existing solution. Our engine can route thousands of stops in seconds. That means a business can easily scale deliveries as it grows — without having to develop its own algorithm.

We've built Routific to be effective for businesses of any size, from small mom-and-pop shops to enterprises. No matter how complex your needs are, Routific is fast and easy to get up and running, and even more intuitive to use. We're now helping make over 5 million deliveries every month.

Interested in knowing more about how Routific can help make your last mile deliveries more profitable? Try a free trial of our delivery platform or learn more about our Engine API.