Last Mile Delivery Guide 2021 : Unblock Your Growth

November 17, 2021
delivery driver carrying boxes out of a white cargo van

Last mile delivery is notoriously the most expensive part of the supply chain, accounting for 40-50% of total shipping costs. Getting orders to customers also gets more and more difficult as a business scales — and that can lead to unhappy customers and growth bottlenecks.

Route optimization uses algorithms (ideally enhanced by machine learning) to create shorter, more efficient last mile delivery routes that take less time, use less fuel and enable a smoother, more predictable customer experience.

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

Routific - Last Mile Delivery [Blog]At Routific, most of our users find us when they start outgrowing their existing last mile delivery solutions and are looking for something that will help them through the next stage of their business growth. Some are small business owners delivering their own products; others are local or regional courier companies looking for more efficient and profitable ways to plan their routes.

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 — if you already know your way around the basics, feel free to jump ahead to one of the sections listed below:

  1. What is last mile delivery?
  2. Types of last mile delivery companies
  3. Understanding last mile delivery challenges
  4. How to reduce last mile delivery costs

 

 

1. What Is Last Mile Delivery?

The last mile delivery process is the final step of shipping, when packages are transported from a transportation hub or warehouse to the customer’s door. Sometimes the last mile is all there is — think of a local food prep business hand-delivering the day’s meals, for example. At other times, it’s the end of a long supply chain that spans the globe: an electronic gadget is loaded into a container at a factory in Asia, for example, then the container is shuttled across a series of ports on different continents by truck, train and ship until it’s eventually unloaded at a warehouse or distribution centre, then maybe sent to a smaller warehouse and eventually delivered to a customer.

How Long Is Last Mile Delivery?

So how long is the last mile really? It’s not a trick question — the last mile can be as much as 30 miles in reality. It would probably be more sensible to call it the “last stage” or “last leg”, but “last mile” is the common term in the industry (sometimes people use “final mile” as well). The thing to remember is that last mile delivery is not actually about distance — it’s about the last part of the journey from a depot 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. Whatever the delivery method, it’s about getting an individual package into the hands of an individual customer, quickly and efficiently and at the lowest possible cost. When you consider that even a small truck can easily hold dozens of packages, each of which needs to be delivered at a different address, you can begin to appreciate why the last mile gets so complicated, so fast.

💡Fun fact: The problem of how to choose the shortest possible route to get to many destinations in a row is one of the most famous challenges in computer science, called the Travelling Salesman Problem. When there’s more than one vehicle involved, you get an even more complicated variant called the Vehicle Routing Problem. If you’d like to know more about the science behind the algorithm we use at Routific, these articles are a good place to start.

 

 

2. Types of Last Mile Delivery Companies

Who actually does last mile deliveries? There’s a massive range of players involved:

  1. Global giants like FedEx and UPS, who 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 who specialize in very fast deliveries thanks to large driver networks who operate in hyper-local areas.
  4. A new wave of tech-driven local and regional couriers and logistics companies who use modern software tools to connect businesses and their customers more efficiently.
  5. Local businesses who handle their own deliveries. There are hundreds of these in every city, from grocers, food prep companies and caterers to furniture and office supply stores, florists, dry cleaners, landscapers, clothing stores, liquor stores and more.

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

 

 

3. 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.

To get a feel for why last mile delivery can get so complex so fast, think about a local farmers’ co-op that delivers a weekly box of farm-fresh, ethically sourced produce. They have a regular scheduled delivery plan, but with new customers every week, plus some old customers adding last-minute orders, pausing subscriptions while they’re away or cancelling, they need to revise their delivery routes every day. Their refrigerated trucks ensure safety and freshness, but need to be packed precisely so that the boxes are in the right order for quick unloading at each stop. They also have to stick to tight delivery windows so customers can get their deliveries indoors and into the fridge fast, and send regular ETA updates and proofs of delivery.


Fresh produce from a farm delivery arranged on a table. ("CSA Week 3" by Megan Myers is licensed under CC BY-NC-SA 2.0).

Delivering farm-fresh produce to the customer’s table is complex
("CSA Week 3" by Megan Myers is licensed under CC BY-NC-SA 2.0)

Now add in one-way streets and road closures, quirky delivery requests and all the many ways things are different from one day to another, and you begin to understand why last mile delivery is so fraught. In many ways, moving a container full of 1,000 widgets across continents is much simpler and more predictable than delivering a dozen eggs to a customer’s home.

Let’s delve a little deeper into some of these challenges to efficient, cost-effective last mile delivery, and how we at Routific can help our users to meet them:

High customer expectations

The standards set by Amazon and other delivery giants have set consumer expectations for last mile delivery sky-high. It’s very difficult for smaller retailers and courier companies to compete with the market power and logistics infrastructure that can offer same-day delivery in many cities around the world.  

Good communication and the personal touch can go a long way in getting people to accept longer delivery times, but some customer expectations can’t be messed with. They want accurate delivery window estimates, reliable tracking information and frequent updates, and proof of delivery.

How we help: Routific helps retailers and couriers to improve the delivery experience and meet customer expectations by providing:

Obstacles to fast delivery

Last mile delivery happens incredibly slowly compared to the rest of the journey, thanks to many real-world complications that get in the way. Traffic congestion, construction work, bad weather, toll roads, vehicle trouble, driver habits and preferences, driver absences -- any of these could throw route planning into disarray.  

How we help: Our last mile delivery software takes real-world conditions into account and builds in room to cope with the unexpected. That includes:

  • Scheduling deliveries within convenient, predictable time windows.
  • Accounting for vehicle types and capacities in route planning.
  • Taking into account driver shift times and priorities.
  • Making it easy to update delivery plans when unplanned problems happen, like a driver being off sick or a road being blocked.
  • Making it easy to communicate with drivers.
  • Sending real-time updates to customers.

Unsuitable technology

Modern last-mile delivery operations would be next to impossible without GPS and routing technology. Many businesses start out planning their routes with a DIY solution using free tools like Google Maps, but as the business grows this becomes a real bottleneck, taking hours every day and holding back growth.

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

How we help: 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 the existing delivery management platforms.  

 

 

4. How to Reduce Last Mile Delivery Costs

We’ve established that last mile delivery is expensive — but the real question is, how does a business reduce those costs?

One option is to charge customers the true cost of delivering their purchase in the form of a shipping fee — but that can cause them to reconsider. Nearly 30% of customers abandon their purchases when there are added shipping costs. With Amazon and many others offering free shipping, this is becoming a baseline customer expectation, even if it’s not realistic or sustainable in the long term.

You can alleviate the problem by explaining shipping costs clearly to customers from the start, so they’re not surprised at checkout. Those costs should, however, be as low as you can reasonably get them — which means planning and driving the most efficient routes possible.

How we help: Routific offers several ways to help organizations prune their last mile delivery costs:

  1. Our core route optimization algorithm, available via our Engine API, helps couriers and other businesses who already have an in-house delivery platform to power it up with route optimization and machine learning intelligence. Our engine is capable of routing thousands of stops in seconds, so a business can easily scale deliveries as it grows — without having to develop and maintain its own algorithm.
  2. The Routific Delivery Platform combines route optimization, driver management and delivery experience tools into an easy-to-use web app that enables users to import addresses and plan optimized routes in just minutes, then track those deliveries all the way to completion.

With Routific our customers can:

  • Reduce the number of miles driven.
  • Cut down fuel consumption.
  • Minimize vehicle wear and tear.
  • Reduce driver hours and overtime.
  • Reduce the number of vehicles on the road.

Routific powers over 5 million deliveries every month, and is built to be effective for businesses of any size, from small mom-and-pop shops all the way through 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 invite you to view a free demo of our delivery platform and learn more about our Routific Engine API to see how Routific can help you profitably scale your last mile delivery operations.

Pam Sykes

Written by Pam Sykes

Pam Sykes is the Lead Content Strategist at Routific, a delivery management & route optimization solution that helps local businesses and last mile companies scale up deliveries.