How to Optimize Delivery Operations Around Time, Money & Performance

In this post, we’ll show you how to optimize delivery operations for your business.

It will help you streamline your order fulfillment in terms of:

• Cost
• Time
• Profit
• Efficiency

So if you want to earn more money from shipping while keeping costs and efficiency in check, then you’ll enjoy this article.

Let’s begin!

What Are Last Mile Delivery Operations?

Last-mile delivery is the final stage of the delivery process. It starts at the distribution center and ends at the recipient’s address.

The main goal of a last-mile delivery operation is to deliver the order to customers as fast as possible. It is also the most significant and the most expensive and time-consuming part of the logistics and supply chain processes.

In fact, last-mile delivery costs can make up from 30% up to 55% of the total delivery cost.

How Does Home Delivery Work?

Home delivery services have developed rapidly due to advanced tools and technologies.

Companies are now able to deliver orders in a day, overnight, or even within hours.

Businesses rely on home delivery software to manage and optimize all segments of delivery, and to reduce costs and inefficiencies.

Shoppers can now order products online and select their preferred delivery methods.

After receiving the order information, the retail or manufacturing company, or their third or fourth-party logistics provider manages multiple orders, and plans the drop-off for each one.

Modern technological trends in last-mile delivery provide automated order processing from warehouse facilities through the delivery vehicle and to customer doorsteps.

This kind of automation helps to nurture efficient and cost-effective home delivery processes.

How Can You Handle Deliveries?

There are several ways any company can operate a delivery service.

For some, it’s a question of getting operations off the ground running regardless of cost.

For others, it’s a question of control, and should you outsource order fulfillment.

But whatever your choice, your business can go about handling delivery in these four ways:

#1 In-House

When a business handles delivery in-house, it means it owns, controls, and operates its own last-mile delivery process.

Businesses that use this model rely on their own staff, vehicles, structures, processes, and technology to fulfill orders and ship them to their customers.

This kind of delivery operation offers the most control over the process. It also means that companies with in-house fulfillment get to keep all of the profit for themselves.

But this type of delivery operation requires a lot of capital to get it off the ground. And even though the profit, an in-house delivery is responsible for covering its planned overhead, as well as unexpected expenses.

#2 Last Mile Carriers

When businesses decide to outsource their last-mile delivery operations, they typically use some kind of external delivery fleet to handle fulfillment.

This may include any third-party delivery service providers such as professional carriers and courier companies (like FedEx, UPS, DHL, etc.), as well as 3PL, 4PL, and 5PL companies. (But more on that in a minute)

Regardless, all external carriers are responsible for shipping products directly to customers, using their own resources such as vehicles, staff, equipment, facilities, and more.

Although a business is still responsible for managing the delivery logistics, it’s not liable for damage or loss that happens in transit.

#3 Third-Party Logistics (3PL) and Fourth-Party Logistics (4PL) Providers

Third-party logistics (3PL) companies are service providers that manage the transportation logistics for other businesses for a fee.

Their main role is to get products from the pick-up point to the customer’s doorstep (be it B2B or B2C). Their offer can include additional services like supply chain management, warehousing, order and inventory management.

Fourth-party logistics (4PL) providers are also called lead logistics companies because they take on the role of managing the entire supply chain.

Companies can outsource all segments of their operations to 4PL providers. This includes coordinating internal projects: managing order preparation, inventory, and supply networks, as well as order fulfillment and transport.

That’s why hiring a 4PL company almost seems like having a 3PL service in-house.

#4 Fulfillment Services

Fulfillment services are third-party providers that prepare and ship orders on behalf of the business that hires them. They do all of this from warehouses that are known as fulfillment centers.

Fulfillment centers serve as warehousing spaces for the inventory, and as central points for order management and shipping.

Some providers own multiple centers, which helps them to cover different areas with more efficiency and speed.

These services are great for businesses that are unable or unwilling to deal with products or delivery operations directly, as the case with dropshipping.

Processes in the Last Mile Delivery Operations

Regardless of how you handle delivery, your operations will be pretty much the same.

These are the processes and structures which you will optimize for efficiency.

But also the people and technology you’ll rely on to generate greater productivity.

To get the most out of your last-mile delivery.

So before you start improving them, let’s take a look at what activities make up your delivery:

Process #1: Inventory and Warehousing

Last-mile delivery begins in the warehouse. This is where you store the products and goods to protect them. (Before you sell and deliver them to customers)

This inventory is the foundation of order fulfillment. And managing it means keeping track of its movement from one point of the supply chain to another.

So inventory management helps you to maintain optimal stock levels at all times. This allows you to meet consumer demand without running out of products.

Monitoring inventory at single or multi-depot locations and warehouses also helps you to order supplies more efficiently (if you’re not a manufacturer).

Technically, this enables you to adjust order frequency. So you don’t order too many goods that will sit in your warehouse and cost you money. Or too few, so you don’t run out of goods to sell.

This is also where you’ll want to send the information about the order first after the customer requests it. So that you can prepare it for shipping.

Process #2: Picking and Packing

Order preparation starts with pick and pack.

Picking refers to retrieving items from the warehouse from the order request. And then carrying them to a packing station where workers package them for delivery (packing).

Since the warehouse shelves are usually stacked with many different products, staff should be able to pick the right products with speed and accuracy.

This is an important step in the delivery process. Any inaccuracies can cause errors, which may lead to reduced order accuracy, and raise the number of returns.

The packing process does not only consist of packing the items and moving them forward for shipping.

It also includes choosing the right materials to pack each item so they don’t get damaged in transit.

Depending on what goods you deliver, you’ll also have to consider whether to use custom packaging. To follow shipping regulations or provide a better experience for customers.

Process #3: Dispatching

Once the order is packed and ready for shipping, it’s time to dispatch drivers to pick them up.

The staff creates a packaging label, completes the invoice, prepares shipping documents, and sends it to the loading dock in the warehouse or depot.

In the meantime, the delivery manager maps delivery routes, creates pick-up and drop-off schedules, and assigns each one to the right driver.

This is basic fleet dispatching. (Regardless of whether you use an internal or external fleet)

Route planning and its efficiency depend on multiple factors like distance, order priority, vehicle capacity, vehicle requirements, and more.

Taking into account work hours, driver shifts and breaks, deadlines, estimated times of arrival, and other timeframes reduces bottlenecks at pick-up or missed delivery windows.

Process #4: Shipping and Transportation

After the whole fleet is dispatched, it can then transport orders to recipients using the most efficient delivery method.

Ideally, each order comes with its own tracking number which you share with the customer so they can keep track of their package location at any time.

Finally, the order is delivered to the customer. And the driver can collect some kind of proof of delivery to confirm a successful order fulfillment.

Process #5: Analytics and Reporting

Using delivery software that provides detailed analytics and reporting is crucial for achieving a top-notch last-mile operation.

Analyzing real-time information helps every business owner and delivery operations manager make smart and data-driven decisions.

Ideally, the data is shown in graphical forms and convenient reports that allow fast and accurate analysis.

Process #6: Returns Management

Having a returns policy in place is crucial for today’s online retailers.

Customers are more likely to make a purchase when they know there is a simple solution if anything goes wrong.

In fact, 92% of shoppers would repeat their purchase if the business offers easy returns.

Here are key points to consider when it comes to managing returns and reverse logistics:

• Make sure your returns policy is easy to find and easy to understand.
  
  
• Specify the key conditions clearly, e.g. if there is a time frame limitation in place or if the customer is supposed to pay for the shipping, they should be aware of that.
  
  
• Educate your support staff on the returns policy details so they can assist the customers.
  
  
• Always issue the refunds on time.
  
  
• Route drivers that are already in the field to pick up return orders. And immediately schedule replacements with drivers that haven’t yet left on their routes.

How to Optimize Delivery Operations: Time Efficiency

Delivering goods to customers isn’t cheap anymore.

With Amazon, it’s harder than ever to remain competitive in the market.

With free delivery, customers expect you to cover all of the costs.

With fast shipping options, it’s twice as expensive to fulfill orders.

So what do you do?

You optimize.

But there is more than one asset you can focus on.

And we start with time. After all:

“Time is more valuable than money. You can get more money, but you cannot get more time.” - Jim Rohn

So how can you optimize your delivery for time?

Here’s what you need to know:

Step #1: Choose the Right Delivery Management System

Technology is key for any optimization.

And finding the right delivery management software that works with all of your systems is the crucial first step for successful delivery optimization.

That’s because delivery software helps you to:

• Automate all of your operations and planning
• Centralize how you manage all of your delivery operations
• Raise visibility over people and processes in the last mile
• Continuously optimize operations based on accurate data

Using the various capabilities of the software enables you to digitally transform your delivery which cuts the time to complete day-to-day tasks.

This gives you more to focus on other parts of your business, like using delivery tactics to grow and scale your operations.

And these time-saving benefits target the entire delivery process: from planning through dispatching to execution.

Some functionalities that every company will benefit from to save time:

• Route optimization
• Real-time tracking
• Direct integrations (especially if the business is partnered with a 3PL)
• Analytics and reporting

Step #2: Automate Dispatch

Running on-demand delivery services without automated dispatching is too time-consuming nowadays.

Companies should strive to send out orders as fast as possible and save valuable time they could invest in other business operations.

With automated dispatch, businesses can automatically assign orders to the drivers that could reach the recipients in the fastest possible way.

Delivery management software does this through the use of delivery driver apps.

Both the dashboard and app are connected. This means that once you assign tasks to drivers on the dashboard they’re immediately updated to the app.

Once there, drivers can access them on-the-go and start completing them without talking to dispatchers.

Step #3: Automate Shipping

Automated shipping processes enable faster delivery and better delivery performance with more delivery operations control.

All the time-consuming actions such as picking and packing can be automated.

This helps businesses minimize manual work and improve order accuracy.

With automated shipping operations, you can grow your production and finalize more orders in less time.

How to Optimize Delivery Operations: Cost Effectiveness

Delivery is expensive.

In fact, we recently did a breakdown of transportation costs associated with shipping.

We found that transportation accounts for 50.3% of all logistical spending.

That’s just one fraction of your total operational expenditure. But one that accounts on average for 10.4% of overall revenue.

With the average cost per delivery at $10.1, you need to optimize delivery to cut costs.

This can help you to avoid one of the biggest challenges in last-mile delivery. One that prevents you to grow your business:

“Do not save what is left after spending, but spend what is left after saving.” - Warren Buffett

And when it comes to optimizing delivery for cost, here’s what you need to know:

Step #1: Resource Planning

Based on their order volume, businesses can use modern software to plan their resource distribution.

Technologies can help companies allocate the right resources based on vehicle availability, location accessibility, and other criteria.

A well-planned resource allocation paired with route scheduling and fleet optimization can significantly reduce the operating costs of delivery.

Step #2: Reducing Fuel Consumption

Rising fuel costs reduce profits.

So businesses need to optimize fuel consumption in order to avoid skyrocketing their overall delivery costs.

Modern fleet management systems keep track of driver’s performance and vehicle condition.

After the route planning is done, the system can notify the driver about the mileage.

Advanced route optimization tools offer real-time tracking of the drivers and their routes.

They also provide the drivers with route information in advance. This enables them to make adjustments on time and keep the delivery time and fuel consumption under control.

Step #3: Warehousing Space Planning

Being careless with warehousing space can eat up a large portion of your company’s budget.

Overstocking the facility, or paying for extra space that ends up being unused are two different problems that lead to unnecessary costs.

Careful inventory planning and smart management of fluctuating orders will help you use the warehousing space effectively.

Smooth movement of products in and out of the warehouse can save both money and time. The less inventory space you need, the lower your overhead costs will be.

How to Optimize Delivery Operations: Increasing Productivity

When it’s all said and done, optimization is all about raising the efficiency of your delivery.

The more efficiently you complete various activities, the more orders you’ll fulfill.

“Focus on being productive instead of busy.” - Tim Ferriss

And here’s how you can do exactly that:

Step #1: Route Optimization

Route optimization refers to the process of choosing the most efficient route while keeping the largest possible number of delivery stops.

With well-organized routes, businesses can dispatch delivery plans in a matter of seconds.

Factors that affect route selection are delivery urgency, fuel costs, vehicle capacity, driver productivity, and more.

Using route planning software can help companies automate their route optimization.

For example, it can automatically shift deliveries to other vehicles in case of a breakdown.

With route management software, businesses can easily map the fastest paths, saving time and increasing overall efficiency.

Step #2: Using Real-Time Data to Spot Inefficiencies

Data analysis can help you discover inconsistencies in the last-mile delivery processes.

Keeping track of key performance indicators in delivery logistics can lead to significant improvements in efficiency.

The data can be gathered at individual or time level, and analyzed and segmented by month, day, or even hour.

It will help you find answers to questions like:

• Are there hours of the day when deliveries are slower?
• Are there days in a week when delivery times are faster?
• Why are some drivers more efficient than others?

Creating reports and doing detailed analysis will help you identify inefficiencies, improve the quality of operations and even cut costs.

Step #3: Detailed Inventory Tracking and Management

Inventory management is one of the core components of a successful delivery operation.

If inventory tracking was incorrect and the requested items are out of stock, the delivery is delayed before it is even attempted.

Using inventory management software will give you advanced insights into inventory levels, allow you to manage SKUs, identify fast-selling items, and more.

In fact, 43% of small businesses either use manual inventory tracking or do not track inventory at all.

With modern tools, inventory tracking does not end when the packets are loaded into delivery trucks. They add visibility throughout the end of the delivery process.

How to Optimize Delivery Operations: Increasing Sales

Efficiency breeds productivity.

And the more time and money you’ll have to reinvest back into your business.

Which you can use to generate more profit.

That’s because:

“Profit is what happens when you do everything else right.” - Yvon Chouinard

And if you want to increase order volumes, here’s what you need to do:

Step #1: Improving Customer Engagement

Today’s customers are quite demanding when it comes to transparency and the status of their orders.

They expect to be in control of timing and delivery location whenever possible.

When businesses enable the shoppers to choose the delivery time window themselves, they reduce the risk of failed deliveries.

Moreover, offering customers real-time updates via SMS, e-mail, or in-app notifications will boost their engagement and satisfaction, which helps customer retention and increases repeat purchases.

An incredible 93% of online shoppers prefer to stay informed during delivery times.

Step #2: Offer Same-Day Delivery

Nowadays customers expect to have the products delivered almost immediately after they order them.

Adding same-day delivery to your offering will bring more sales from satisfied customers.

In fact, 49% of shoppers are more likely to make a purchase if the option of same-day delivery is available.

Offering same-delivery is not a simple task and it requires great organization and use of modern technology.

Using delivery management software will allow you to offer faster deliveries, at a lower cost. It will also help you eliminate unnecessary actions and cut excess costs.

Step #3: Set the Right Expectations

Setting realistic expectations can help you maintain a great reputation and keep your customers happy at the same time.

One way to do that is to keep a simple shipping policy on the website.

It should include information like estimated shipping costs and delivery timeframes for different delivery options.

An easy-to-understand returns policy is another way you can set the expectation right.

Also, make sure your fulfillment staff knows how to handle fragile items or any other type of products that require special care.

Ready to Start Optimizing Your Delivery Operations?

If you want to go beyond this, we can help you even more.