Last mile delivery is the movement of goods from a transportation hub to their final destination – typically a customer’s home address. With e-commerce sales totaling US$2.3trn worldwide, consumer demand for online purchases of food, entertainment and beauty products in particular are driving growth forward.
This costly last-mile process demands up to 53% of shipping costs, with inefficiency meaning couriers have to make multiple stops of low quantities. Despite these challenges, even the smallest of retailers must now compete with the high standards set by global companies such as Amazon, who have made next-day delivery the norm and same-day delivery viable.
When it comes to last-mile solutions, and which could be right for your business, they are as varied as the deliveries they expedite. Here are a few of the options you should be considering.
Some businesses are distributing stock across small regional warehouses, selecting the most popular and often seasonal items to hold here in order to shorten the last mile. According to Roy Hughes, EVP Network Operations Europe, DHL Express, several 'power cities', such as New York and Beijing, are "facilitating and driving this localization trend" and should be your key focus to begin with.
While SMEs cannot necessarily afford to occupy their own warehouses, companies such as Darkstore are allowing e-commerce brands to store their inventory in leftover storage facilities. This opportunity could then equip your business to provide same-day delivery for nearby customers.
Localization has in turn raised the demand for freight services, transporting goods to consumers on the day they order them. This is where crowdsourcing companies like America's Deliv or Asia’s Go-Jek step in. Extending beyond taxi and food drop-offs, these new crowdsourcing apps partner with local pre-qualified drivers who can choose to pick up a pending delivery from your business and transport it to the customer – who schedules it on demand. This allows retailers to guarantee their end consumer will be home when the delivery arrives, streamlining the process and eliminating the cost of second or third attempts. It also avoids having to leave parcels outside and subject to potential weather damage or theft – which could in turn harm your business’s reputation.
Other on-demand options include service points and storage lockers, able to accept a delivery on behalf of your customer and pushing the move towards urban localization. DHL’s Packstation, which was launched back in 2001, offers a network of automated all-day booths across more than 3,500 locations in Germany alone. Amazon Locker provides a similar service, currently operating across more than 50 cities.
The crowdsourcing solution is still not ideal for transporting more expensive, bulkier packages, which is when you will probably want to use a more established shipper. However, such deliveries present their own issues, with trucks having to find a suitable unloading spot or navigate smaller inner-city roads. As out-of-route miles account for 3-10% of a driver’s total mileage, inefficient route planning can add a hidden cost to already expensive services.
Such issues therefore necessitate better route planning. However, DHL eCommerce management found that, in some markets, couriers were spending nearly an hour planning their routes manually only to have them disrupted by weather delays or traffic. The process has now been streamlined through the use of geo-map reading, able to update routes in real time and improve last mile productivity by 20-40%. As these new technologies continue to play an expanding role in improving the last mile, Mei Yee Pang, Head of Innovation, Asia Pacific DHL Customer Solutions and Innovation, reiterated that it is vital now to be taking “a data driven approach in servicing customers.”
Aiming to omit all room for error, some companies are even exploring alternative delivery methods such as drones and bots. DHL successfully a ran a three-month test of their Parcelopter in the Bavarian community of Reit im Winkl. Here, users need merely insert their parcel into the allotted Skyport to initiate automatic shipment, enabling easy shipping to areas with poorly developed infrastructure or those blocked by natural barriers, such as water and mountains.
Conversely, ground-based autonomous vehicles can act as secure mobile delivery lockers, following a set delivery route to your door. Customers are notified when it arrives and they can then retrieve their clothes, couch or curry from within the container. Following such last-mile innovations, McKinsey predicts a “world where autonomous vehicles deliver 80% of parcels.” This is backed up by research that suggests that, far from industry skepticism surrounding consumer uptake of the new technology, 60% are in favor of or indifferent to drone delivery.
While these new solutions may come with an initial hefty price tag, 23% of consumers are willing to pay significant premiums for same-day delivery, rising to 30% among younger consumers. As this demographic transitions into becoming the dominant consumer spending group, a delay in receiving a package of just 12 hours can become an important differentiator in saturated markets – and one you’ll want to avoid. Businesses should therefore make gradual adjustments when looking to cater more towards these higher expectations, balancing cost with quality considerations for the future.
While the general move is towards localized, digitized fulfillment to improve the last mile, this industry is continually developing and moving forward. When asked to predict what logistics would look like in fifteen years, Lee Spratt, CEO of DHL eCommerce Americas, stressed the importance of “being more agile in adjusting to market trends, maintaining an openness towards learning and reinvention, and promoting a newfound flexibility as a baseline for the transport industry.”