What is the Last Mile?
Last mile in transportation planning and supply chain management describes the last leg of a shipment’s journey from a transportation hub to a final destination. The final delivery destination can be a personal residence or, increasingly, a place of business. The focus of last mile logistics is to deliver items to the end user as fast as possible.
What is last mile delivery?
In a product’s journey from warehouse shelf, to the back of a truck, to a customer doorstep, the “last mile” of delivery is the final step of the process, the point at which the package finally arrives at the buyer’s door. In addition to being a key to customer satisfaction, last mile delivery is both the most expensive and time-consuming part of the shipping process.
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?
Think about the last time you ordered something online. Did you track the order from shipment to delivery? You may have noticed a significant gap in the time between when the order is marked “out for delivery” and when it arrives on your doorstep. This highlights one of the main problems with last mile in transportation – inefficiency.
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 delivery have only increased as e-commerce continues to boom in the United States. Another major factor 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.
MercuryGate Final Mile:
Last mile delivery is a key component of the modern supply chain, and one that cannot be overlooked. Failures will drive your customers away and to your competitors. Even worse, the diversity of regional, localized carriers and LSPs adds a certain degree of risk in managing last mile delivery.
As a result, shippers and large-scale LSPs need a way to manage last mile delivery, understand what is happening, consider how the overall market is affecting last mile delivery, and stay strategic. That all goes back to leveraging an advanced, enterprise-class TMS to maximize profitability and align your organization with the state of this particular mode.
Learn more about MercuryGate’s acquisition of Cheetah Software Systems that extends our TMS platform to deliver a final mile, parcel, and less-than-truckload (LTL) solution and an enhanced fleet management capability.