6 ways to reduce last mile delivery costs

August 21, 2020

Lowering costs is always top of mind for efficient businesses. Generally, the lower your costs for anything operational, the more value you can provide to your customer in terms of time and attention. This is especially important for delivery businesses.

Last mile delivery logistics can cost a small business big time. We put together a pretty thorough breakdown of the last mile problem here. But here's a quick summary: last mile delivery is basically all of the little things associated with getting a product from the closest hub or warehouse to its final destination, which include both businesses and private homes. 

Reducing the cost of last mile delivery is of utmost importance when it comes to your bottom line. It can also ensure an excellent delivery experience for all those involved: you, the business owner; your fleet manager; your delivery drivers; and your customers.

Routific’s team has nearly a decade of experience with last mile delivery. We’ve worked with hundreds delivery business owners and fleet managers, interviewing them to better understand their best practices and uncover the best tactics to lower those costs. Those tactics include:

  1. Planning
  2. Improved route planning and mapping
  3. Ability to spec vehicles effectively
  4. Training drivers to be more efficient
  5. Automating manual processes
  6. Investing in communication

Let’s dive into each of these in a bit more detail.

How to lower delivery costs through proper planning

Lowering last mile delivery costs starts with proper planning. Every second you can save has a compounding effect over time, resulting in a much lower cost.

For example, you can plan out the placement of products within a warehouse to encourage an efficient workflow. One example is setting up packages so they are ready to be received and packed in delivery vans by your drivers. This is something that Greenhouse Juice has seen a great deal of success with. Their logistics manager, Brian Zaffuto, explained their process in a few steps:

  1. Produce organic beverages every morning.
  2. Staging team organizes orders and stacks the products in a sequence that matches the driver’s route for the day.
  3. Drivers pack the juice orders into vans in the order they need to be emptied out.
  4. Drivers make deliveries overnight and into the next morning.
  5. Rinse and repeat!

The less confusion and friction there is during this step of the process, the quicker products get out the door. And when it comes to lowering delivery costs, speed is important.

Using route planning to lower delivery costs

Planning optimized delivery routes is one of the best ways to lower your delivery costs.

Objectively speaking, driving extra miles can cost you in fuel and it can delay delivery times — everyone can agree on this. Our opinion is that using a routing solution can help ensure your drivers are taking the most efficient route possible between multiple stops, saving your business fuel and time. 

Routing algorithms can do a lot of complex mathematics that's really hard for humans to compute. For example, routing algorithms can take into account various work constraints – like delivery-time windows, the capacity of delivery trucks, and even driver speeds – and factor that into a route solution that minimizes driving time and fuel spend.

6 ways to reduce last mile delivery costs

Peter Levitt of IDSAutoshred sent us this helpful summary after he started using Routific’s routing solution to help lower delivery costs.

“Look at the spreadsheet below. All I did was look at three months (Aug to Oct) of how the former owner performed (2015) and compared it with me (2016).

 

2015

2016

Delta

Service Calls

838

940

10.851%

Gas

11.563

8,867

-30.405%

You can see I have more transactions, which should have resulted in more gas as I’m driving more miles, correct? Yet, look at my fuel spend. Bottom line: my volume of business is up 11%, my fuel spend is down 30%. These are not subjective hypotheticals. This is the raw data. And it says your solution cut my unit price by 25%. Who knew?”

Pick the right vehicles to achieve low cost shipping for small business

Invest the time to find the right vehicles for your fleet and your specific needs. Are your delivery trucks constantly over capacity? Are your drivers making multiple trips to finish delivering everything for the day?

Start answering these questions to identify whether or not you have the right vehicles for your team. 

You might think that having a bigger vehicle makes the most sense because it gives you room to scale. But it could also be costing you. For example, vehicles that are too big for the areas in which they are delivering will waste time finding parking or may have to take alternative routes to avoid narrow streets or bridges with low clearance.

For more about managing a small fleet, check out our beginner’s guide here.

Training drivers to be more efficient can lower last mile delivery cost

In general, happy employees work more efficiently. This is certainly the case with your delivery fleet as well. In the past, we’ve taken a look at how to lower your delivery fleet turnover, by improving their working conditions and your approach to managing them effectively. Lowering turnover, lowers costs.

You can lower delivery costs by training your drivers to be more efficient and effective with their driving. Efficient driving practices like reducing idling, driving the speed limit, and staying on schedule can help your team avoid wasting time and effort. 

Assessing a workforce’s willingness to be trained is also an important factor to consider when thinking about driver costs. Some businesses even make sure to get this type of training in during the interview and onboarding process. Here’s our friend Peter Levitt again:

“We incorporate Routific into the late stages of our interview and onboarding practices when bringing on new drivers. It’s almost a prerequisite,” explained Peter. “We want to make sure that the team we hire can work effectively with the solutions we have in place. It makes for a smoother experience.”

Automating manual processes

Being more involved in the final mile of the delivery process can give you visibility into the levers you can pull to ultimately lower costs — and possibly even grow your business in the process.

Automation can help streamline many processes in your business. For example, setting up an online shop with an e-commerce platform will give you tools to manage payments, keep track of inventory, and even send out automated email campaigns to your customers. If your fleet is a bit more complex, IoT-connected sensors can help you track assets, monitor driver performance, and improve fleet performance. And when you convert your manual route planning into an automated process, you’re able to focus your efforts on scaling up your delivery business.Reduce last mile delivery costs

When COVID19 hit, Hand Up Toronto ramped up their grocery delivery to families stuck at home. They used Routific to scale up their volunteer fleet so it could make more than 7,000 home deliveries:

“The route planning is all very automatic,” said Vivian Chow, Operations Lead at Hand Up. “We plug in our addresses, and our driver information, and Routific will work on figuring out the best routes. At this scale, we need software to do the heavy lifting and route optimization. Our team now has the time to work on reducing redundancies, optimizing our work flows, and improving internal processes. We have a growth mentality to make things better every single week.”

Investing in communication

Having clear lines of communication is always important in business. It helps you stay on the same page, avoid misunderstandings — and they can save you some time and money as well.

From a customer perspective, keeping progress visible and communicating with your customers will help keep them happy and reduce the phone calls asking where their goods are. Tess Atkins, CEO of Bear’s Blooms, places a high priority on communication with her customers.

“We use customer notifications to automatically send an email to customers telling them when their deliveries will arrive,” explained Tess. “And we often have the ability to leave them on the front porch, for example. Letting our customers know that bit of information is key to a good customer experience.” 

How to reduce last mile delivery costs

From a driver’s perspective, you can reduce tons of stressful back and forth by making sure you have tracking and proof of delivery options embedded into your communication systems. This can help to protect your business from problems related to late or lost packages. This is something that the Greenhouse team also experiences.

“Having the ability to take pictures of our deliveries is a game-changer,” said Brian. With this type of communication between drivers and dispatchers, problems can get solved on the fly. 

Conclusion

When it comes to tackling the last mile problem, there are certain things that are just out of your hands. We don’t control the economy or the traffic lights; we can’t predict accidents, extreme weather, or a global pandemic. 

But there are plenty of things you can control or influence. You have a great opportunity to lower delivery costs by managing your last mile better today than you did yesterday.

Start looking at your own operations and see if there are ways to make minor improvements in each of these categories. Every little bit counts.

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