What is Last Mile?
What is last mile delivery?
Last mile delivery is an essential cog in the e-commerce machine because customers can easily find an alternative product or retailer if shipping options don’t meet their expectations. This places retailers and third-party logistics providers in a difficult position because last mile logistics costs can be substantial – over 50% of total costs. Labor costs, route optimization, fleet costs, and warehousing can add up. To offer free shipping to customers, companies may have to absorb those costs themselves or find ways to supplement the cost by setting specific order minimums.
What Are the Challenges of Last Mile Delivery?
The process of order fulfillment’s final leg sometimes involves independent shipping carriers taking the package from the warehouse and delivering it to the customer. The speed and efficiency with which this process is completed depend on several factors, including the following:
- The size of the company or third-party logistics provider
- The number of orders picked and packed each day
- The frequency with which the carrier picks up orders
- The proximity of delivery points to the warehouse or distribution center
- The location of the warehouse (ex: rural or urban)
- The number of deliveries along the route and number of routes
Each of the things on this list affects last mile delivery differently. For example, a larger company with a higher number of daily orders may have shipments picked up from the warehouse every day or even multiple times a day. In comparison, a smaller company may only have a few pickups each week.
In rural areas, delivery routes may be longer, with fewer stops spread across greater distances than routes in urban areas where delivery points are closer together. But in urban areas, there is the added challenge of traffic that may slow down the delivery process.
The challenges and costs associated with last mile delivery have only gotten worse in recent years as the popularity of e-commerce continues to rise in the United States. Another major factor that affects the cost of last mile delivery is the free shipping movement. Customers are becoming less willing to foot the bill for shipping, so retailers often end up eating delivery costs themselves.
The solution to last mile delivery challenges is not one-size-fits-all. An online retailer or third-party logistics provider may find that a combination of improved technology and analytics could be the solution to rising last mile delivery costs.
Regardless of what your fulfillment strategy is, the importance of optimizing last mile delivery is undeniable.