We are living in times when lightning speed delivery has become a new norm. The latest technology advancements have alleviated the consumer expectations to the all-time high. If we only talk about ecommerce in the last two years, then its growth has increased the B2B last mile demand by about 33%. Similarly, B2C businesses have also experienced a rise of 67%.
While the consumers are enjoying this fast-paced service, the logistics and supply-chain companies are constantly feeling the heat to manage and make these increased volumes of last mile deliveries practical and profitable.
The overall efficiency of deliveries suffers when it comes to the management of the massive volumes of last mile deliveries. That’s precisely the reason why around 25% of the companies have named delivery efficiency as their greatest last mile delivery challenge.
Efficient management is not the only thing that takes the toll. The last mile delivery is also known to be a huge contributor when it comes to the overall cost. Last mile contributes a massive 41% of the overall logistics cost. Its contribution increases to 53% when it comes to the overall shipping cost. If we convert this percentage into amount, then we get the average last mile delivery cost as $10.10 USD for each delivery.
If your last mile delivery is not optimized then its increasing costs can have an adverse effect on the business. According to a study, it can cause a potential decline in profits by 26% in just a span of three years.
What drives the last mile delivery costs?
Shipping cost
When it comes to delivery, the customer expectations continue to change over time and the businesses need to be flexible enough to adapt to it.
According to a survey of 323 logistics companies, around 57% of companies stated that their customers demand the same day delivery. Such a high demand of same-day delivery puts enormous pressure on the logistics businesses to optimize their last-mile delivery. And this optimization often increases the overall costs.
To make the matter worse, customers also expect the companies to bear the shipping cost. Today an estimated 61% of customers are likely to cancel their order if there’s no free shipping available. Similarly, 93% of the customers are motivated to make more purchases so that they can qualify for the free shipping option.
Due to such high demands from the customers, the companies are compelled to cover the shipping costs by reducing their profit margins.
Inefficiency & complexity of last-mile delivery
The last mile delivery process can be highly inefficient and complex. For example, the delivery points in a rural area can be spread several miles apart with fewer items to be dropped off at each delivery point.
Similarly, the delivery points in an urban area can be located close to each other. However, that benefit can be easily canceled out by congestion and traffic delays.
With the growth of ecommerce, the volume of deliveries has gone up at an exponential rate. This has caused an increase in the inefficiencies and complexities of the last mile delivery operations.
Failed deliveries
Same-day shipping has enhanced customer experience by many notches. However, there’s still a scope of improvement in it. For example, the customer hardly knows the exact time at which the delivery person would knock on their door. So, many times, the delivery person reaches when there’s no customer at home. Such instances fall in the category of failed deliveries.
A failed delivery is simply a disaster for the company as a lot of time, energy, and resources are wasted over it. This ultimately results in increased delivery costs.
How to reduce last mile delivery costs?
We saw various factors that cause an increase in the last mile delivery costs. For all the factors mentioned above, there’s a single solution – Last-mile delivery software.
A last mile delivery system consists of advanced features that solve all the last mile delivery problems by streamlining all its operations and thus making it your last mile delivery swift, optimized, and most importantly cost-efficient.
Let’s see how?
Auto-dispatching
Uber is the world’s largest taxi-hailing company which is known to provide taxi services within a few minutes in over 60 countries. Uber uses special algorithms that match the ride-requests to the most suitable drivers. Retailers and logistics companies can also use such algorithms for request allocation once they have created batches.
The auto-dispatch technology present in the last mile delivery solution helps them to allocate or assign new orders to the right driver, at the right place, and at the right time.
Constantly optimize your delivery routes
The cost of the delivery is directly proportional to the distance between the two drop points. Thus, it becomes essential to optimize the multi-stop route such that the time required to make all the deliveries as minimum as possible.
The last mile delivery logistics software comes with route optimization feature that establishes optimized routes after considering several factors such as:
- Time
- Location
- Driver capacity
- Distance
- Traffic
Even when the new deliveries come, you can simply re-assign by changing the delivery routes along with notifying the drivers in real-time about the same.
In many advanced logistics delivery solutions, there is also an option to chat with drivers directly from the application. This feature is useful as it helps the admin to easily identify and understand the source of delay.
Read More: Last mile delivery challenges and benefits for eCommerce.
Verified deliveries
With the help of last mile delivery technology, you can obtain the proof of delivery. This will give you a clear record of when the driver delivered the shipment, who was the person to sign for them, and where exactly they were dropped.
With a mobile application of a robust last mile delivery system, the drivers can collect vital information such as barcodes, photos, signatures, and notes within a matter of seconds.
The information collected above can be easily accessed later thus providing you with vital insights that can help you to identify hurdles, verify deliveries, and make operations streamlined.
Offer real-time updates to your customers
You can take the customer experience to another level by offering them with real-time updates about their package. In today’s age, customers want to be informed. They want to know exactly what is happening, especially when it comes to the deliveries.
With the help of a last mile delivery and logistics solutions, the admin can offer automatic status updates to its customers. Customers can receive notifications whenever their delivery has been packed or shipped. They also get to know about the estimated time of arrival of their package. Moreover, customers can also view the real-time location of their delivery person.
Apart from enhancing customer experience and transparency, this can also help in reducing your last mile delivery costs. It’s because if the customer is well aware of when and where his package is going to arrive, he is more likely to be present for receiving the package. This means a significant reduction in the number of failed deliveries.
Offer more delivery options
Offering your customers with multiple delivery options not only increases customer experience but also reduces your last mile delivery costs. Now, you must be thinking how?
Let’s suppose, your customer is buying a product online and he has only one option available which is of same-day delivery. Now, many of you might think that what could go wrong with this right?
Well, same-day delivery is not always beneficial. Suppose, your customer is leaving home early and would return only at late night, in such case, the same-day delivery won’t make any sense to him. However, he would still order it and your delivery person would rush to complete delivery for a recipient who’s not even there. This causes a waste of time, money, and energy.
More than 73% of consumers prefer convenient time slots than faster delivery. Below are some of the other elements that customers would like to include in their delivery experience.
Thus with more delivery options, your customers can easily choose their most preferred delivery alternative which ultimately reduces repeat deliveries.
Real-time reports and analytics
An advanced real time delivery tracking management software provides you with crucial real-time data that helps you to make insight-driven business decisions. With this you can view data like:
- Distance covered
- Average time per task
- Miles per task
- Idle time
- No. of tasks completed
- No. of successful deliveries
- No. of failed deliveries
These data are presented in a graphical form which helps you to analyze better. Not only this, the last mile delivery software’s reports and analytics also show you the performance of various drivers. You can view the analytics of each driver. You can also view this data by day, week, month, or hour of the day.
Read More: What will the Route Optimization Software Market size be in 2025?
With reports and analytics, you can find answers to many questions such as:
- What changes can you make to the driver’s route to avoid heavy traffic?
- Which are my best and worst-performing drivers?
- Miles per task
- Is there a certain day on which the deliveries are made faster/slower?
- Is there a particular hour, when deliveries are the slowest/fastest.
The last mile delivery system also allows you to export these reports for further study.
Conclusion
The last mile phase of the supply chain and logistics business is the costliest of all. If any business manages to keep a tap on it then it is bound to achieve success. In this article, we discussed the various factors which contribute to the last mile delivery costs. We also discussed different ways as to how you can overcome them.
If you own a logistics or supply chain business, then you must get your business an advanced and robust last mile delivery system that can drastically cut your last mile costs and make your business profitable.
