E-commerce is booming, having grown from $598 billion in revenue in 2019 to an estimated $839 billion in 2020. Driven in the past year by the COVID-19 pandemic, it’s a trend that is not likely to go anywhere anytime soon. Estimates in early 2020, pre-pandemic, had the global growth in last-mile delivery as high as 78% by 2030.
The growth in e-commerce is part of what is driving the need for fast, efficient, and cheap (read: free) delivery of goods to the customer.
The purchasing life cycle is a pretty simple one. Once a consumer or business orders a good, the order is fulfilled, and then it’s either taken to a transportation hub, or the business delivers the goods itself. While simple in theory, there are many potential areas where something can go wrong, and this is especially the case for the so-called last mile of the process.
What is Last-Mile Delivery?
What, exactly, is “last mile” delivery? It’s the part at the very end, where goods are taken from a business warehouse or hub to be delivered to a final destination. The final destination may be a business selling those goods or a consumer.
The “last mile” typically includes an approximately 30-mile delivery radius. Last-mile delivery vehicles can be anything from sedans to pickup trucks to a growing number of specially designed cargo vans and medium-duty trucks.
So, how does last-mile delivery work? As soon as a consumer buys something, the delivery clock starts ticking. Your business receives the order and packages up the items for shipment. Once the shipment is packaged, if you are delivering the product yourself, the last-mile has officially begun - getting the goods from your business to the customer.
While many businesses are obviously in the delivery business, some companies may not even realize they are involved in the last-mile business. Answer these quick questions to see why the “last mile” likely matters to your business:
- Do you have a product that needs to get to a customer, and do you utilize a parcel delivery or other service to get the product to your customer?
- Do you deliver your product or goods directly to your customer?
If you answered yes to either, then you rely on an efficient last-mile process, regardless of whether or not your business does it itself.
Why is last mile delivery important?
This costly component of the purchase life cycle is a major yet often misunderstood part of commerce, one that can make or break your business. The last-mile has the potential to cost unnecessary revenue and a lack of efficiency can result in a quick loss of customers. But, like many fiscally impactful components of operating a business, a savvy business owner can win big when armed with the right information.
The last mile is often well-suited to the use of electric vehicles, due to the low mileage and potentially high levels of idling that may be required. There is a growing number of vehicle options built specifically for this business need. Workhorse is one such automaker: it recently recurred an order of more than 6,300 units of its all-electric parcel delivery vehicle.
What is the last mile delivery problem?
The current e-commerce boom means delivery companies – and not just the big guys, but anyone who delivers a product or good – are seeing record business. While this is excellent news any time, let alone during a pandemic, it brings with it a set of challenges that can significantly impact your bottom line.
These are the challenges currently impacting the last mile the most:
- The Expense. How much does last-mile delivery cost? As noted, the last mile is often the most expensive component of delivering goods. Just looking at the shipping portion of the product ordering cycle, studies estimate that the last mile is approximately 53% of the total cost of shipping. This implies that any cost savings in this area is hugely beneficial. To help, take a look at all aspects of your last-mile process and look for areas to improve and make more efficient. One potential option is to outsource your delivery needs to a courier or other third party.
- Competition. Not only does your business need to compete with similar businesses when it comes to delivering orders, but now it also has to compete with giants like Amazon and Walmart. Businesses like these have the economy of scale to offer free, expedited shipping at a fraction of the cost that small businesses incur. What can you do? This is where the customer experience is essential. If you can’t compete with the cost of shipping, make sure you can compete with transparency. Utilize a program that allows the customer insight into their delivery, and keep your delivery promises. Set and handle delivery expectations well and be courteous with your customer service: you’ll stand out from the big box stores.
- Location. Deliveries can be made anywhere, from major box stores to small businesses, and direct to a customer’s home. This means multiple location-related challenges, including small streets with tight turns and limited parking, no-idle zones, and longer stretches to more rural areas for home deliveries. What can you do? Take a good look at the vehicles you are utilizing for your deliveries (or the vehicles your courier service is using) and make sure they are the right vehicles for the job. Overloading a vehicle wastes fuel and increases wear and tear, while consistently underloading a vehicle means you probably could have bought a smaller unit to do the same job. Neither option is efficient.
- More Orders. While more orders seem like they could only be a good thing, more deliveries must now be made, resulting in more stops to be planned. This is an area of business where speed and efficiency really matter. Manually planning routes that change day-to-day – or even hour-by-hour, depending on delivery promises – is a never-ending task. Delivery delays due to wrong addresses, road construction, traffic, or driver error are problems that can be solved before they occur. Consider a more efficient digital route planning program, not only to save driver and operator time, but to also reduce fuel expense and overall vehicle wear and tear.
Smart & Efficient Solutions
The number of challenges in the last-mile arena may seem daunting to even a seasoned professional, but the good news is that there are also a growing number of solutions to help.
External delivery solutions can help take the pressure off your business, while technology solutions can help you build up your own last-mile delivery fleet.
Local businesses can outsource last-mile delivery needs to a courier or third-party provider. These options include the major last-mile providers such as USPS, FedEx, and UPS, as well as Postmates or UberEats for food-related items. For in-town deliveries, consider supporting a local courier service.
Important factors to consider when choosing a last-mile delivery service include:
- Transparency. Consumers want to know exactly where their items are and when they will be delivered. The ability to answer the question, “where is my order now” is essential for any business operating within the last mile.
- Cost AND Efficiency. Third-party providers will vary in cost. But if the least expensive option is likely to damage or delay your deliveries, the cost to your brand and reputation will quickly overshadow any savings.
- Capability. What type of delivery vehicle will you need for your products? Will you need refrigeration for food items, for example? How big is your product? Will you require a larger vehicle to transport the item? How heavy is it? Will specialized equipment be needed to load and unload it?
- Build Your Own In-House Delivery Fleet
Businesses can also take full control of the last mile by building their own delivery fleet. Investing in technology including delivery management and route optimization software, such as that offered by Routific, can ensure you have full insight into and the ability to better manage your last-mile costs.
Important factors to consider when choosing last-mile delivery software include:
- Ability to change and adjust. Business today is constantly evolving, and the ability to offer quick delivery options is essential to compete with bigger stores. This means delivery businesses must change routes quickly and easily and communicate those changes with the driver. A solution that can help you adjust as needed is essential.
- Transparency and communication. Consumers today expect more information about where their orders are than ever before. Being able to provide your customers with that information will go a long way toward the overall customer experience. Live GPS tracking (for delivery management/routing programs) is a major feature to look for.
- Full and detailed analytics. A successful fleet constantly reviews its operation and looks for ways to improve. Analytics and data is essential to this process.
- App integration. The ability to integrate with the programs you currently use will reduce the burden on yourself and your staff when implementing any new solution.
As a small business, you can rely on others, or you can build up your own small business fleet to take complete control of the last mile and all related expenses.
This is an opportunity for small businesses to grow in the last-mile arena, and taking charge of this big business expense is possible.
For more information on how you can take control of your growing last-mile delivery business, check out Routific and try our no obligation, free 7-day trial.