Last-mile delivery is the final leg of a product’s journey before it reaches the customer. Since it’s an important touchpoint, delighting the customer during this moment can build long term brand loyalty. Yet companies that manage deliveries are also aware of the challenges of last-mile delivery. Widespread customer dissatisfaction means opportunities are vast for reliable, innovative new players. As the cost of labour increases, technology will alleviate many obstacles.
The challenges of last-mile delivery
Last-mile delivery is the most important yet least efficient leg of the supply chain. Even Amazon struggles with last-mile complexity. They fulfil up to 35 orders per second. Amazon are exploring different business models to streamline delivery and generate profit.
McKinsey has researched the future of last-mile delivery, revealing the myriad challenges and opportunities available in the next ten years.
The last leg of a product’s journey to the customer is complex. Yet it contributes up to 28% of the total delivery cost.
The challenges of last-mile delivery include:
Traffic in metropolitan areas, poorly designed roads, lack of signage and long journeys in remote areas add time and cost, increasing unit cost.
Fuel price increases
Fuel prices, combined with poor infrastructure, increase delivery costs. Route optimisers can save fuel and time by charting the shortest route to the delivery location.
Driver management technology
Businesses can allocate drivers to bookings dynamically using technology. This increases accuracy, efficiency and the success rate of delivery.
Delivering a single package per delivery translates into higher fuel costs.
Type of goods
Managing delivery types such as perishables, toxic substances or flammable items add complexity to deliveries. Delivery times must be managed carefully.
The time and cost of administrative tasks in e-commerce are high due to customer variables such as:
- Incorrect address
- Difficult to find locations
- Lack of parking
- No one is available at home
- Change of mind
- Customer no longer requires the order
- Likelihood of returns
These variables add time and cost to an already complex, high cost exercise.
Why does it matter?
Creating a loyal customer base is critical to any company’s success. Leaders like Uber have raised consumer expectations for same day delivery as well as real-time tracking. Delivering to customer expectations builds brand loyalty and advocacy.
Four ways technology can streamline last-mile delivery
1. Customer proximity
Traditional logistic networks usually have few facilities. Increasing the proximity of your distribution centre to customers by using lockers can reduce time and save money. Focus on highest concentration locations to save money in fuel.
2. Customer communication
Update the customer with timely communication. This can ensure the customer is home for first time delivery.
- Acknowledge receipt of their order.
- Provide an estimated delivery time.
- Inform them when the driver starts or is about to reach them.
3. Real-time updates
Provide real-time updates to customers concerning their order. The last leg of the complex logistics run is most critical. When things go wrong, customers want to know so they can plan ahead.
4. Optimisation techniques
Route optimisation considers multiple variables, then generates the optimal route for drivers. These algorithms ensure drivers complete deliveries in the least amount of time. Business rules can manage:
- Driver availability.
- Location proximity.
- Delivery windows.
- Traffic conditions.
- Local regulations.
- Minimum and maximum order load.
- Weight capacity.
Technology can assist companies to optimise last-mile delivery and drive more profit. Time equals money and managing your driver workforce on roads is complicated. Keeping track of every driver in the field along with their deliveries is easy with a system that automates most of the tasks, ensuring your customers receive the goods they ordered when they want them.
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