Learn how outbound logistics affect last-mile delivery, and how optimizing them is essential for efficient supply chain management.
13 Upcoming Trends in Last-Mile Delivery
We take a look at the future and the thirteen trends in last-mile delivery. And how they'll transform your operations in the years to come.
Today, we take a look at the future. And the thirteen upcoming trends in last-mile delivery.
We’ve all witnessed the madness of 2020. For better or worse, there’s no denying that a lot of things have changed.
Combine it with the tectonic shifts that were already happening, and the age of disruption is truly here.
Yes, it’s terrifying. But it’s also exciting.
The arriving tide is redefining the last mile. And that’s the only sure thing about the future of last-mile delivery.
But there are hints at what might happen. So, it’s worth taking a second to explore them. And get a better understanding of the last-mile delivery trends that will take place in the next couple of years.
Let’s dive right in.
What is a last-mile delivery?
As the name implies, last-mile delivery is the final stage in the fulfilment process. It’s the transportation of a purchase from a store or supply chain hub to the customer’s home or office address.
And while the term is new, the concept isn’t. (In case you were wondering when did last-mile delivery become popular)
But these days it’s on everyone’s mind. And for a good reason.
The state of delivery in time of the coronavirus had turned things on its head. Add to that the growing popularity of eCommerce and online retail, and the significance of last-mile delivery logistics is unparalleled.
So, what’s going on?
How is last-mile delivery changing?
In the last ten years, a lot of changes happened in last-mile delivery. And this year, things went into overdrive.
It’s hard to single out all of them. But we chose three disruptors that we believe are causing these changes:
- The adoption of technology
- Changing consumer trends
- The COVID-19 pandemic
And it’s worth taking a closer look at all three to get a better feel for the current landscape.
Technology and last-mile delivery
Like in all other facets of business, technology is a critical disruptor in last-mile delivery, as well.
From online shopping and eCommerce to cloud computing, AI and IoT, technology has changed delivery both inside and outside of the business.
On the one hand, the internet, smartphones, and apps had changed the way people shop. And what they expect from your business. (But more on that later)
On the other hand, technology like delivery management software has reshaped how companies organize the last mile.
For starters, many are adopting a cloud-first approach to delivery logistics. A surge of SaaS solutions has made it easier to manage operations across the entire supply chain.
From how teams communicate to how drivers collect proof of delivery, and more, these systems are automating the entire delivery process.
At the same time, emerging technologies are starting to appear. For example, some companies are using Artificial Intelligence (AI) to collect customer data.
But if you take a look at the Gartner Hype Cycle, we’re still a long way away from a productive adoption of AI:
Still, this isn’t stopping companies from using new tech stacks in their day-to-day activities. Nor will it stop the changes brought on by technology.
Consumer trends of last-mile delivery
In the last few years, what consumers expect from delivery had also changed.
Thanks to technology, more people shop online than ever before. In fact, right now, one in five products are sold online. And that’s almost three times more than just five years ago:
So, customers want convenience when they shop.
But that means delivery is no longer an option for companies. A business in 2020 that has an online store has to have a last-mile delivery set up to support it.
All you have to do is take a look at Amazon and other retail giants to see the success of eCommerce and on-demand home delivery.
But even that is no longer enough. Customers also want to choose how you deliver their orders.
Thanks to Amazon, consumers want more options when it comes to the speed and cost of delivery.
Customers don’t want to wait a week to receive their purchase. They want it to get it as soon as possible, and at no cost to them.
So, if you want to know how to compete with Amazon delivery, you’ll have to start thinking about these new consumer trends.
COVID-19 and last-mile delivery
If technology and consumer trends were the gasoline that fueled changes in the last mile over the past decade, COVID-19 was the spark that finally set them ablaze.
We saw how in the wake of the coronavirus pandemic life at home, and at work, had to change overnight.
The Next Normal demands from consumers and businesses to transform. And that means delivery is no longer about choice. It’s the key to adapt and survive.
People who’d never before done their shopping online started buying everything from groceries to medicines and clothes over their phones and computers.
Businesses that refused to offer home delivery and open up an e-store on their website did it without hesitation.
But, at the same time, companies that offered these things were prepared for the high intake of business in a world that relies on almost solely on delivery (be it B2C or B2B).
These businesses too had to adopt technology and cater to the new consumer to keep up with the high expectations and demand. They learned that you have to improve the last-mile delivery when demand exceeds your capacity.
So, the pressure to change is real. And companies are scrambling to transform. (Both in terms of how they do business and how they see their customers)
But that means it’s not over yet. And although the future is still unclear, there is evidence about what it might bring. So, let’s take a look.
Upcoming trends in last-mile delivery
- Even faster order fulfillment
- Local in-house delivery
- Insourcing deliveries
- Hybrid fleet management
- Gig economy and crowdsourcing
- Urban Warehouses
- Automation of last-mile delivery
- Adoption of blockchain technology
- Adoption of AI
- Robot and Drone Delivery
- Driverless vehicles
- Merging with reverse logistics
- Using drivers for upselling and cross-selling
It’s clear that technology and consumer expectations will be the driving force of transformation.
Of course, this isn’t concrete.
But it can give you a glimpse of the future, and how last-mile delivery innovations can help you to overcome all of the challenges brought upon by this change.
Let’s jump in.
1. Even faster order fulfillment
Faster fulfilment isn’t anything new. Delivery is always speeding up. And customers will continue to want their orders to arrive as soon as possible.
Ten years ago, people were willing to wait on average 5-7 days for an order to arrive. Jump to 2020, and the standard delivery is now two days.
The same thing may happen with one-day delivery.
In fact, same-day delivery is already here. Albeit you either have to pay for it, or meet specific criteria.
At the moment, Amazon is spearheading the revolution. In 2019, the company rolled out its free one-day delivery for Prime members.
Even though we’re still a long way away from widespread adoption, it will become a reality at one point thanks to technology. (Which will make it more affordable and easier to manage the supply chain)
2. Local in-house delivery
Local SMBs were at the biggest risk in 2020. But also the greatest risk-takers.
By adapting to survive and adding local delivery to their list of services, local businesses have tapped into the most efficient way of delivering goods and services to local consumers. And customers had greeted the decision with opened arms.
The success of local delivery comes from three things: rapid fulfilment, low cost, and intimate knowledge of the local last-mile.
That has meant the returns were quick, while the risk was zero since the chance of a failed delivery is almost impossible.
The next step for SMBs is to plan multi-depot locations around their brick-and-mortar presence and treat their stores as warehouses.
That allows you to create both an online and offline offer, which can lead to even more profit.
3. Insourcing deliveries
Thanks to the demand for last-mile delivery and affordable SaaS solutions for managing it, insourcing delivery operations is easier than ever.
In 2020, we’ve seen more and more companies move away from 3PL and delivery providers.
Instead of outsourcing their last-mile delivery operations, many retailers have decided to handle things internally.
Most rely on a small internal fleet or offload part of their operation to an outside source (a hybrid fleet).
With the promise of 100% control over operations, prices, and costs, it makes a lot of sense for many businesses to own their own fleet.
And even though outsourcing continues to be the order of the day, we predict that this trend will change in the future.
4. Hybrid fleet management
As mentioned above, some businesses are moving towards a hybrid fleet model to handle their last-mile delivery operations.
A hybrid fleet is a mix of an internal fleet and teams, and outside contractors, freelance drivers, and 3PL providers.
Compared to other strategies, the hybrid model is more flexible and affordable. But it’s also necessary for some situations.
For example, when demand for delivery exceeds the capacity of an internal fleet, many companies resort to this delivery tactic to grow their operation quickly to scale. But it’s benefits go beyond that.
If you align your strategy with your fleet operator, you can create more possibilities and generate extra value from the synergy within your supply chain.
5. Gig economy and crowdsourcing
The gig economy isn’t anything new. The result of the rise of now-familiar brands like Airbnb and Uber, it’s slowly making its way to the last mile. In no small measure, thanks to the likes of Amazon Flex and Postmates, and their crowdsourced delivery service.
In case you don’t know, crowdsourced delivery is an emerging method of fulfilment that:
“leverages networks of local, non-professional couriers to deliver packages to customers’ doors.”
And while it wasn’t possible 10, 15 years ago, the model has taken off in recent times thanks to technology such as GPS tracking and advanced telematics. And integration with last-mile delivery software.
For business, crowdsourcing is a quick way to assemble a disparate delivery force. Based on several factors, like availability, location and fees, you can drastically reduce shipping costs.
Customers, on the other hand, enjoy greater flexibility when scheduling their deliveries. They can use real-time tracking to see which delivery agents are available and choose the best one based on their location on the map.
Even though crowdsourced delivery services are showing promise, there are still some challenges it has to overcome until there can be wide-spread adoption.
Chief among these is its application in rural environments. There is no denying that this kind of delivery works when you have to navigate congested streets in dense urban areas. But when it comes to delivery outside the city, it’s yet to take over from traditional methods.
Another problem is the lack of oversight, which leads to more inefficiency in the last mile. Still, companies that invest in route optimization software to gain visibility and expand their line of sight over the last mile are starting to overcome this issue.
So, if it can resolve these problems in the coming years, there is no reason for crowdsourcing to become commonplace in order fulfilment in the last mile.
6. Urban Warehouses
Thanks to eCommerce and the demand for faster order fulfilment, there is a real need to rethink the supply chain and make it more robust. One approach is to take a look at how you manage inventory in the last mile.
Without suitable depots sites across the final mile, there is less chance of building an agile delivery operation. And there is less chance to raise the rate of fulfilment.
Enter urban warehousing.
For a while now, Amazon, Walmart, IKEA, and Target have used urban warehousing to cut waste and make their supply chains more efficient. Other companies are slowly starting to follow in their example.
The idea behind it is a simple one: bring the fulfilment centres closer to the consumer to reduce delivery time.
If you take into account that the majority of your customers live in dense urban areas, setting up depots at several locations across the city is a practical way to reduce waste and cut the time it takes to pick-up orders from inventory. That makes it easier to manage last-mile logistics and carry out same-day delivery.
Here’s a look at multiple depot locations scattered across London:
Another benefit of urban warehousing is that it brings inventory managers and teams closer access to their workplace. Which cuts commute times and helps them to achieve a better work-life balance.
But there’s a problem.
While retail giants have a seemingly endless pool of resources they can tap into, the same cannot be said for SMBs. The cost of real estate and development alone is too much for most.
What smaller companies have started doing is repurposing their existing resources, turning stores into urban warehouses.
The point of sale remains at the front of the store, while you use the back of the store as inventory, loading dock, and supply depot all in one. And, in fact, that’s how Target fulfils 30% of its online orders.
And while it’s still early days, it’s safe to assume that the promise of faster fulfilment will lead many on this path in the coming years.
7. Automation of last-mile delivery
Are you still manually planning routes, or creating delivery schedules? It’s hard to imagine anyone is nowadays.
Thanks to last-mile software solutions, automation is well underway. These can include specialized software for:
- Route optimization
- Order management
- Fleet management
- Warehouse management
- And more
But also end-to-end solutions like last-mile delivery software.
Also called delivery management software, the tool allows you to manage all aspects of the delivery, from the first to the last mile, and reverse logistics.
The success of this software comes down to three features.
First, it’s a modulated platform.
Unlike specialized software, delivery management software had multiple different modules that give you complete control over every facet of the process. Including:
- advanced dispatching
- route optimization and scheduling
- driver and vehicle tracking
- fleet management
- electronic proof of delivery
- setting up notifications
- analytics and reporting
- and more
At the same time, the system operates on the cloud.
Unlike legacy software, SaaS solutions are more affordable and scalable. That makes them a good choice for all businesses regardless of size or industry.
And thirdly, these solutions can integrate with any other system thanks to APIs.
So, instead of using a host of disconnected apps, you can manage the whole process from one location.
At the moment, many companies are starting to see its benefits. And in the future, we predict that it will be unthinkable to imagine last-mile delivery without it.
8. Adoption of blockchain technology
Like everything new, blockchain has become somewhat of a hype term in recent years.
And while we’re still a long way away from adoption, there is evidence to support that blockchain technology may become a crucial value proposition in the coming decade.
According to the Harvard Business Review, at least three factors are guiding the move towards blockchain:
“New infrastructure and technology, richer and more visible logistics data, and relentless pressure to reduce costs.”
However, the main driving force behind the trend is the increasing use of delivery management platforms to manage logistics.
At the same time, more and more companies are relying on data to forecast and understand the market.
Here the role of blockchain is indispensable, as companies look to refine their decision-making by increasing visibility across the logistics value chain.
Thanks to its open architecture, you could use it to collect data from multiple sources. And with several contributors who can share and manage the data at a single source.
While the main reason for the adoption will come down to the security and transparency of the data you will use, which will assure service quality.
9. Adoption of AI
Artificial Intelligence (AI) and machine learning are fast becoming a part of the automation of delivery.
So far, AI has only limited application. Most of it comes from integration with other systems like warehouse automation and cloud-based delivery management platform.
But as companies start relying more and more on big data to make the last mile more efficient, we see AI as a way to help you analyze those large data pools faster and with more accuracy.
10. Robot and Drone Delivery
As robotics and drone technology evolves, we may see the development of autonomous last-mile delivery in the not so distant future.
If you remove the interaction at the customer’s door from the equation, delivery is a repetitive task. So, it makes sense to let machines handle it.
We’ve already seen the work of Amazon Robotics. At the moment, the retail giant is using its over 200,000 robots in its warehouses in the US.
But will drones and robots actually start delivering orders to customers?
It’s still early to tell. But there are some breakthroughs on the horizon.
For example, companies like Kiwibots are testing last-mile delivery robots in California.
While Mckinsey predicts a future where drones and autonomous vehicles will deliver 78% of all deliveries.
It’s exciting news. But for now, all we can do is wait and see.
11. Driverless vehicles
Availability of drivers, payroll, keeping up with their performance on the road, and other factors are usually an unfamiliar part of the last-mile.
In the future, self-driving vehicles may solve all of these problems.
Not only can they reduce cost, but the autonomous vehicle may solve the problem of continuous, on-demand delivery since they can operate 24/7, even during the holidays.
Mercedes-Benz has already announced the release of its autonomous self-driving trucks for 2025.
It’s fair to assume that smaller vehicles that can work in urban areas aren’t far behind.
12. Merging with reverse logistics
Blending reverse logistics and last-mile logistics is already a key trend in delivery.
Technically, the last-mile is the first-mile of reverse logistics. So, it’s using the same technology (in reverse) can automate the return of goods back to your store.
If you want to know more about this topic, please read our guide on the link between reverse logistics and eCommerce returns.
13. Using drivers for upselling and cross-selling
Upselling is a sales technique used to boost profits. It means motivating customers to buy the same type of product but at a higher price.
Since the difference between upselling and cross-selling isn’t that significant, it’s easy to confuse them.
Simply put, cross-selling is a sales strategy where the goal is to make customers spend more money on additional products.
Many companies are already doing that on their websites. But in the future, we may see it happen during delivery.
Here’s our guide on how you can start upselling and cross-selling with delivery right now.
We have everything you need to start improving your delivery.