The Last Mile Delivery: Challenges and Opportunities

Consumer demands around seamless last mile delivery continue to grow. In this QAD Precision Report, we look at challenges and opportunities in the final mile.

Getting the last mile right is one of the biggest challenges facing online retailers — and the delivery companies who work with them. The Supply Chain Last Mile Report 2020 found that controlling logistics costs and achieving on-time delivery were the two biggest challenges in last mile delivery.

Last mile delivery is expensive. Frost & Sullivan forecasts that global logistics spend will reach $10.6 trillion in 2020. Transportation costs are 70 percent of this figure, and the last mile accounts for 40 percent of overall logistics costs. 

The biggest driver of parcel market growth is e-commerce, particularly online shopping. This was true even before the global coronavirus pandemic shut down non-essential retail around much of the world. (For more information on this, see How Covid-19 is Shaping E-Commerce).

Customer expectations for quicker and cheaper deliveries means that the last mile can be a key differentiator for retailers. Delivery options — and the reputation of a retailer’s delivery service — impact consumer buying behavior. Around half of all online shoppers will abandon a purchase if they are unhappy with the delivery choices. 

Getting the last mile right is critical for retailers — especially those selling products that are not exclusive to them. When shoppers can get the same items elsewhere, but with more attractive shipping options, that’s where they go.

The Future is (Almost) Now

What might the most successful last mile delivery providers offer in the future? Ground vehicles with lockers — essentially roving Pick-Up/Drop-Off (PUDO) facilities — are one answer. Bots are another. Unsurprisingly, Amazon has made significant investments here with its Scout autonomous bot.

Drones and other autonomous vehicles are another. Having said that, upgrading to a fleet of autonomous-delivery vehicles would be costly. That’s of course if regulations allow for self-driving delivery cars and consumer sentiment keep pace with these technologies.

Automation could also increase efficiency. The cost, number and availability of employees all impact last mile delivery. Warehouse robots, delivery drones and driverless cars can work 24/7.

It will be a few years before self-driving vehicles and drone deliveries become widespread. Electric vehicles, on the other hand, may soon be standard. 

All the global carriers have been greening their fleets. These include e-cargo bikes, electric vehicles, and hybrid trucks. Most last mile deliveries take place in urban areas. Adding electric vehicles to their fleets will allow carriers to address the impact e-commerce makes on noise and air pollution. 

Home Deliveries Are Not Always Customer-Friendly

Most online shoppers want home delivery — or at least the option of it. Home deliveries are supposed to be easy and convenient. But that’s not always the case. Most deliveries occur during business hours — the very same time customers are at work, collecting and ferrying children, or running errands.

Leaving a delivery on a porch is not ideal. Weather damage and “porch pirates” who follow delivery vans and steal packages are both risks. In addition to these issues, delivery drivers may not be able to gain access to apartment complexes to drop packages unless the customer is home. Finding ways around these factors can be challenging. 

PUDO, Buy Online Pick-Up In-Store (BOPIS) facilities and curbside pick-up options are part of the solution. But this requires a willingness on the part of the customer to make a trip. For some, this negates a large part of the convenience expected from the online shopping model.

Technology can also be leveraged here. Better track-and-trace software will allow delivery companies to offer consumers accurate delivery windows. In addition, systems that offer consumers the flexibility to re-route deliveries while they are in-transit could address some of these issues.

We are likely to see a future where products ordered on a smart device no longer require customers to enter their location details. Instead the retailer will simply confirm your current location, provide a time estimate and bring your order to you.

Robots vs Butlers — The Importance of White Glove Services

In the future, drones and autonomous vehicles may help online shoppers get their purchases quicker. However, completely driverless carrier fleets are unlikely. Shoppers are increasingly buying furniture and home appliances online. As a result, many require “white glove” last mile delivery services to assemble or install these purchases. 

As customers become more demanding, retailers who offer valued-added delivery options are likely to win their business. Low cost and fast deliveries may be generally expected, but consumers are also willing to pay extra for assembly and installation. Offering these services can make or break an online sale.

White glove delivery may also increase consumer confidence in making large purchases online. If you are buying, for example, a washing machine, a retailer who is willing to make sure it is correctly installed seems a safer bet than one who is only prepared to drop it at the front door.

The Last Mile is a Key Differentiator

For online shoppers, delivery is their experience with your brand. Because of this, the last mile is the one your customers remember. Consumers blame the retailer, not the carrier, for poor delivery performance. 

Over three quarters of consumers view the delivery experience as a true test of how much a retailer values them. Furthermore, 39 percent of consumers who have had a bad delivery experience will take their business elsewhere next time.

Retailers already need to offer a variety of delivery services. Technology and consumer spending habits will almost certainly mean that their current offerings will need to expand. 

For some retailers, drone deliveries may be the answer. For others, white glove services could be key. To ensure that they stay on top of changing customer expectations, retailers will need a multi carrier shipping strategy.

Carriers continue to make significant investment in their services too. That may be autonomous vehicles, track-and-trace technology, expanding their fleets or staff numbers, white glove services or a combination of the above.

Retailers using multi carrier shipping are able to leverage the investments and upgrades different carriers make and offer these extra services to their customers. They also ensure that their carrier transportation network can meet their delivery promise, even if one carrier is experiencing a delay or outage.

Conversely, those using a single carrier may find themselves unable to meet customer expectations. Delivery service is a major deciding factor for consumers — and customers demands are changing. A multi carrier strategy allows retailers to future-proof the last mile by ensuring they can respond quickly as customer demands change and new technologies become available.

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About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision, a division of QAD Inc., provides industry-leading global trade compliance, and multi carrier transportation execution solutions from a single, integrated platform. An ISO-certified company, QAD Precision assists companies to streamline their import, export and transportation operations, optimize deliveries, and increase logistics ROI. QAD Precision’s scalable and extensible solution easily integrates with existing ERP and WMS solutions. Industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carrier services and manage millions of global trade and shipping transactions every day. For more information about QAD Precision, visit www.qadprecision.com.