We analyzed several companies to better understand how they approach last-mile delivery. And to help identify the values customers want from delivery.
Last-Mile Delivery: The Definitive Guide
This is a complete guide to last-mile delivery. Learn: What is last-mile delivery? How it works? How to improve your last-mile operations? +more
This is a complete guide to last-mile delivery in 2021.
So if you’re looking to build a delivery that:
Attracts more customers.
Generates more orders.
Cost less and is more efficient.
Then you’ll enjoy the actionable strategies outlined in this new guide.
Let’s get started.
What Is Last-Mile Delivery?
In delivery logistics, last-mile delivery is the final stage of the delivery process. It represents the operations involved in the movement of goods or services from a transportation hub to the final delivery destination.
The final destination is a drop-off location. Typically, it’s a personal residence (home address) or business (work address) where customers want their orders to be delivered.
How Does Last-Mile Delivery Work?
The flow of last-mile delivery relies on at least five crucial steps for it to work. These include:
#1 Processing Orders
Once a customer checks out the purchase, their order request has to be processed. It’s logged and sent to a centralized system. From there, it has to be sourced on the supply chain, prepared for transport, and scheduled for pick-up. After that, you can send the order confirmation, tracking link, and delivery info to the customer.
#2 Delivery Planning
When the order is ready for transport, the delivery planner has to assign it a route, a driver, or the most effective delivery solution. This process can be manual, automated (in case of an on-demand delivery), and a hybrid. Today, all three ways of planning deliveries use software.
#3 Dispatching Deliveries
Once all of the orders have a route, dispatchers can share the delivery schedule, order information, and the task list with drivers. The goal is to assign the most efficient route to each driver in the fleet. Efficiency depends on time to destination, stop density, priority of the order, and any driver or vehicle requirements.
#4 Picking Up and Scanning Orders
After drivers leave the transportation hub, their first task is to pick up the orders from a supply depot or warehouse. If the transportation hub serves as a depot, workers have to load the vehicles (according to the driver’s assignments). Employees have to scan the order before loading it to update the system and allow all stakeholders to track them across the last mile.
#5 Order Arrival
The order arrives at the drop-off location, and the delivery is completed and confirmed.
Of course, there are additional steps along the last-mile. These can include alerting customers about ETAs, collecting electronic proof of delivery (ePOD), customer feedback, or delivery data.
But these steps don’t apply to the last-mile delivery of every organization.
Who Uses Last-Mile Delivery?
In most cases, last-mile delivery is used to increase sales and improve customer service. It makes it more convenient and accessible for people to buy products and services from the comfort of their own homes.
Industries, where businesses implement last-mile delivery, include e-commerce, physical retail, goods distribution, food, and beverage delivery.
But also on-demand pharmacy and healthcare, grocery delivery, construction, and field services.
How Can You Operate a Last-Mile Delivery?
There are two ways companies can operate a last-mile delivery: in-house, outsourcing, and a hybrid model.
In-house last-mile delivery relies on an internal delivery operation and a private fleet. This model gives you greater freedom, flexibility, and complete control over how you operate your delivery.
Outsourcing last-mile delivery involves using a provider. Usually, this means contracting big transportation companies like UPS, FedEx, or DHL, shipping via post, or employing local couriers and third-party logistics companies (3PLs) that own and operate an external delivery fleet.
A hybrid last-mile delivery is a blend of the two previous models. You have both an internal and external delivery fleet, and you use them simultaneously to fulfill orders.
For example, you can use the in-house fleet to deliver orders to local customers. And use the external fleet to deliver your products to an international audience.
Why Is Last-Mile Delivery Important?
In the age of Amazon and COVID-19, does operating a last-mile delivery matter?
In a word: YES.
It matters because if you want to stay relevant in a post-COVID world, you HAVE TO have a delivery.
And the trick to learning how to compete with Amazon delivery isn’t to contend with them. It’s to co-exist.
And the only way to do that is to build a last-mile delivery operation of your own.
With the state of delivery in time of the coronavirus as it is, there are plenty of opportunities to get a big enough slice of the pie from an audience that’s willing to use your services.
Here are some other benefits that you can get from operating a last-mile delivery:
- Offer products or services online
- Attract more new and return customers
- Generate more sales and income
- Make it convenient for customers to shop
- Understand your customer’s needs
- Create an omnichannel supply chain
- Overcome market disruptions like COVID-19
In other words, last-mile delivery can improve nearly every element of the profitability and sustainability of your business.
This obviously includes sales volumes and customer experience. But last-mile delivery also comes into play when meeting modern business expectations:
- Online shopping and at-home delivery
- On-demand access to goods and services
- Reliable and convenient shopping
- Risk-free, contactless shopping
- Quick and easy returns
- A more enticing offer to a larger audience
- Greater exposure and brand recognition
- More income from delivery service fees
- Less overhead at physical locations
How to Build a Last-Mile Delivery Operation?
(If you already have a last-mile delivery in place, you can skip to the next part of the article.
But if you don’t, then you’ll enjoy this)
To be clear:
Building a good last-mile delivery takes time. It also requires a fair bit of skill and training in logistics.
But delivery is a service. As such, it’s part of your business and follows the same rules and principles as your other operations.
Here are four crucial steps you’ll need to follow to build your delivery:
Step #1: Evaluate Your Business
First thing’s first, you have to evaluate your business and decide whether you actually need a delivery. It’s easy to forget that not every business or industry relies on delivery.
Even with COVID-19, many businesses don’t offer delivery. Instead, they opt for services such as Click & Collect which allow customers to shop in person while complying with guidelines.
So before you charge head-first into last-mile delivery, take a second to review your business.
Evaluate the bottom line, how much profit the company currently generates, and whether those numbers align with your overall strategy and business goals.
This will help you take a more strategic approach to build the last-mile delivery. Especially when making key decisions about the organization of your operations.
Step #2: Decide the Direction of Your Delivery
Here you develop the strategy your delivery will take. And there are three main decisions you’ll need to make to build a last-mile delivery:
#1 Decide on the Offer
The offer is the core of your last-mile delivery. It’s the service you’ll provide to your customers. So it’s important to know what you’ll offer before you build a delivery around it.
Here it’s important to answer two questions:
- What kind of delivery do your customers want and need?
- What kind of delivery options are realistic for you to provide?
When considering your customers, make sure to include different options besides standard delivery. This will depend on the type of business you own, but may include:
- Fast delivery (one or two-hour delivery, same-day delivery, next-day delivery)
- Affordable delivery (longer waiting periods at a lower cost than other options)
- Premium delivery (short waiting periods and white-glove delivery at a cost)
- Free delivery (for premium customers, with loyalty programs, or free for all)
But make sure you don’t offer all of them, as this may lead to choice overload (according to the psychology of choice).
When it comes to how realistic these options are for your business, this will depend primarily on the amount of operational and capital expenditure (Opex vs. Capex) your business can support.
But it can also include:
- Accessibility to the supply chain
- The existing structures you own
- Availability of a qualified workforce
- The competitiveness of the area
And that brings us to the next decision:
#2 Decide on the Delivery Location
The next big decision you’ll have to make is the location of your last-mile. Specifically, the geographical area your delivery operations will cover.
To do this, you’ll have to consider several factors:
Local Delivery vs Extended Delivery
You’ll have to decide whether your delivery will cover the local last mile (3-5km), or you can immediately support and provide regional, nationwide, or even international delivery.
Delivery in Urban Areas vs Rural Delivery
Delivering products and services is quite different in urban and rural settings. In cities, you have easier access to customers, but also more competition and higher costs.
In rural areas, people have fewer choices, which makes them more likely to use your services. But drop-off zones are also more remote, which raises operational costs, especially in terms of fuel consumption.
Competitiveness of the Delivery Area
You’ll have to evaluate how many companies in your industry offer a delivery service. If there is a lot of competition, it may be hard to attract customers.
You’ll have to entice them with a better or more affordable offer, or faster fulfillment. All of which can raise operating expenditure.
Where you source products may be a decisive factor when choosing the location your delivery will cover.
If the distance between you and your suppliers is too wide, it will take too much time to source inventory. You’ll either have to find new suppliers or adjust how much and how often you order supplies.
#3 Decide on the Type of Operation
Deciding whether you’ll build an in-house fleet or outsource fulfillment to a third party will also determine the direction of your last-mile delivery.
Developing a delivery operation in-house requires a lot of capital investment. You’ll have to:
- Find and rent space (the office, transportation hub, depots)
- Hire staff (logistics managers, drivers, dispatchers, customer support)
- Buy or lease vehicles for your delivery fleet (cars, vans, trucks)
- Cover overhead (utilities, payroll, fuel, and maintenance costs of the delivery fleet)
But for all the money you spend on building an internal delivery, you receive full autonomy and control over operations. You’ll get to keep 100% of the profit, which you can reinvest or create better offers to generate even more revenue.
If, on the other hand, you decide to outsource your delivery operations to a third-party provider, you’ll pay a service fee.
In most cases, that means giving up a percentage of income or transferring the cost of delivery to the customer.
You’ll also have less control over the delivery process, but you’ll be able to implement it much faster with an established external fleet.
Step #3: Set Up the Delivery
Setting up the delivery operation will greatly depend on your decision-making. And it will be as difficult or as easy to implement it, as the time, money, and energy you aim to invest in your last-mile delivery.
Step #4: Market to Customers
After you’ve implemented the delivery, it’s time to market the new service to your customers.
You can do this in a number of ways, from word of mouth, through traditional marketing (flyers, billboards, and ads on television and radio), to ads on social media and Google.
Advanced Last-Mile Delivery Strategies
Focus on Customer Experience
Delivery is a customer-centric service. The success of your last-mile delivery depends a lot on customer satisfaction.
You must focus 50% of your efforts on building a quality experience for your customers with every completed delivery.
You can do this in a number of ways. And we’ve already mentioned some of them like creating a solid offer with multiple delivery options.
But the best way to raise the delivery experience to a higher level is to align it with the expectations of your customer.
How can you do this?
In most cases, it’s all about listening to what your customers have to say and giving them what they want.
And what do customers want from a quality delivery experience?
First, they want convenience.
According to a recent study, convenience was among the top three things people wanted to experience when they do business with a brand.
You can do this by streamlining the order and fulfillment process.
For example, you can make it easier for customers to choose how they want you to deliver their orders on your website.
But you can also add extra features. You can let customers select the time and date of the drop-off, and make it easier for them to receive their orders.
The second thing your customers want is speed. This is also important if you want to compete with Amazon delivery and other retail giants.
According to McKinsey, providing same-day delivery and other faster fulfillment options allows customers to get:
“…The convenience of online shopping with the immediacy of shopping at a physical store.”
But for all its importance of delivery during COVID-19, customers still don’t see it as an essential service. And most of them don’t want to pay for it.
So if you want to raise customer experience, you’ll have to provide more affordable delivery options and even free delivery.
Gig Economy and Crowdsourcing
Crowdsourcing and the gig economy aren’t new concepts. They’ve been around for years.
You’re certainly familiar with companies like Airbnb and Uber, and their business models.
Now, thanks to Amazon Flex and Postmates, crowdsourced delivery has become one of the emerging last-mile delivery trends, as well.
According to Business Insider:
“Crowdsourced delivery leverages networks of local, non-professional couriers to deliver packages to customers’ doors.”
For small businesses, this is good news.
Companies can use crowdsourcing to quickly assemble a disparate delivery force. Based on a few factors like cost, availability, and location.
This can significantly reduce the capital requirements of building a last-mile delivery. But it also drastically lowers the cost per delivery and other key metrics in delivery logistics.
And this can be the difference between having a delivery or walking away from the idea altogether.
Using Urban Warehouses
There’s a real need to rethink the traditional structure of the supply chain. At the same time, logistics experts are looking to make them more robust.
This drive to change has been caused by recent disruptors of last-mile delivery. Specifically:
- The expansion of e-commerce
- The rise of fast fulfillment
- The outbreak of COVID-19
And the biggest problem that we see is in the urban setting. Here, it’s more difficult to raise the rate of fulfillment.
One solution to the problem that companies are exploring is urban warehousing.
The idea is simple enough: bring fulfillment centers closer to the consumer to cut delivery time.
Using urban warehouses has the potential to make supply chains more efficient. It cuts the time it takes to source deliveries and speeds up the pick-up process. So, there’s less waste along the final mile, as well.
It also enables companies to manage multiple depot locations from a centralized location. But it also improves work-life balance for staff by bringing the workplace closer to home, which raises retention of key employees.
Using Physical Stores as Depots
A major problem with urban warehousing is the lack of space in cities. Without enough space, property value is high, and renting out a facility is expensive.
This might not be a problem for retail giants like Amazon, Walmart, IKEA, Apple, and Target. But for a small business with a limited budget, it’s almost impossible.
One workaround is to repurpose existing resources. SMBs can turn their physical stores into depot locations with a dual purpose:
In the front, the store will remain as a point of sale. At the back, companies can use storage as an urban warehouse where it stocks inventory, loads, and unloads vehicles with supplies and orders.
Some retailers like Target are already using this method of urban warehousing. In fact, today the company fulfills 30% of its online orders from stores that function as depots.
Adopt Last-Mile Delivery Software
Automation is key for modern last-mile delivery. In fact, there isn’t a company out there that doesn’t deploy some kind of solution to automate its delivery operations.
And the last-mile delivery market is full of software solutions that allow you to digitally manage every part of the delivery process:
- Supply chain management
- Sourcing and tracking inventory
- Receiving order request
- Planning routes and schedules
- Dispatching drivers
- Managing and monitoring fleets
- Collecting proof of delivery
- Managing customer relationships
- Handling reverse logistics
These last-mile delivery software solutions include:
- End-to-end solutions (delivery management software)
- Route planning and route optimization software
- CRM and order management systems
- Inventory and warehouse management tools
The biggest advantage of contemporary last-mile delivery software is that most are cloud-based SaaS solutions.
That means many tools that you can use are affordable, scalable, and flexible.
It also means that you can use APIs to integrate them into one centralized system. Which you can use from a single transportation hub to manage the entire last mile.
If you’re looking for last-mile delivery software, there are a few things you need to consider.
And we can help you with that.