9 min read
Oct 30, 2019
Insights

6 Solutions to the Last Mile Problem

A contributor to urban congestion, the last mile problem affects us all. But the drain on resources during the delivery of goods to their final destination creates much deeper challenges for businesses.

V.W.
Victoria WilsonSpecialist Analyst

If you commute in an urban area you've seen the problem first-hand: you're driving down a congested street and you notice a UPS, FedEx, or Amazon (sometimes all three at once) vehicle is double-parked, emergency lights flashing, blocking precious road space. The scene is chaotic, horns honking, frustration all around.

In the logistics world, the commuter's problem is known as the last mile problem. From a business perspective, the time and money it takes to make doorstep deliveries is a huge problem for companies trying to keep customers happy with short delivery times all while still making a profit.

What is the last mile?

The “last mile" refers to the last segment of a delivery, which ends at the consumer or business' doorstep. It's the most impactful step from a customer experience standpoint because the customer is receiving their product or service. What is interesting about this segment is that it is usually the shortest, distance-wise, yet it is the most expensive and time consuming.

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What is the last mile problem?

Deliveries to several individual consumers means one delivery truck may be dropping off a small number of parcels to a large number of dispersed locations. The inefficiencies this model produces—including increased travel time, gas usage, and number of vehicles— is at the heart of the last mile problem. Yet, it is further complicated by factors such as reduced capacity, damaged or stolen packages, and failed delivery attempts.

It's also not just logistics companies and retailers that are affected by these trends—nearly everyone is. The rise of door-to-door deliveries has meant an increase in congestion, especially in urban areas. According to the Texas A&M Transportation Institute's Urban Mobility Report, trucks now account for 12 percent of the cost of congestion (time and fuel), in spite of representing a 7 percent share of traffic.

This lack of delivery density combined with additional circumstantial factors makes the last mile expensive: The cost of last mile deliveries are about 28% of total logistics costs.

The last mile problem has been exacerbated by changing shopping trends and customer expectations. Online retail sales have quintupled from 290.4 billion in 2008 to $1.6 trillion in 2018 and, according to Gartner (available to clients), 73% of leading brands were identified as offering both two-day and next-day shipping.

Online shopping and quick deliveries aren't going anywhere for now, so it's up to businesses to uncover creative solutions to this complex problem.

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How can your business solve its last mile problem?

Retailers and logistics companies have tried different approaches to reduce the costs associated with and improve the efficiency of the last mile. Some solutions involve building out more infrastructure, others require a process change, while others represent full disruptions of the current delivery model.

Gartner conducted a survey of retailers to find out which technologies and methods have already been or will soon be implemented.

Implementation of Customer Fulfillment Methods. Percent of respondents to a Gartner survey (full report available to clients)

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3 re-centralizing delivery models

Sending delivery vans and trucks door-to-door adds up to a lot of miles, and also leaves a lot of room for error. That's why some last mile solutions essentially require taking half a step back: Bring packages as close to the customer as possible, without dropping them off at their doorstep. These are a few approaches:

Click and Collect

This method involves dropping off online purchases to a store or at a collection partner for customers to pick up when convenient. The model streamlines processes by reducing the number of trips logistics companies need to make to each customer. Because it is inexpensive for retailers, 34% of companies have reported implementing this process, while 11% plan to implement it this year.

Lockers

Your business could skip the doorstep delivery in favor of a locker that can be accessed by specific customers on their own terms. While only 7% of retailers have implemented this method, 21% plan to do so in 2019. Using lockers avoids the failed delivery attempt scenario by removing the customer from the equation. They may also reduce the number of stolen parcels, and reduce congestion by centralizing some deliveries.

Transport drop-offs

Locations designated as parcel drop-off points. Like lockers, these reduce miles traveled removing trucks from the road. Unlike lockers, these locations (metro stations, for example) already exist. 5% of retailers are using this method, and 15% plan to use it this year.

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2 disruptive models to look out for

To reduce fuel costs and congestion delays, companies have had to begin contemplating more disruptive models. Delivery robots and drones rely on advanced tech that can do a lot to alleviate some of business’ resource use, yet will require changes to infrastructure, zoning, and regulations to be fully implementable. Still, some businesses are already piloting these solutions, bringing them into the realm of a foreseeable future.

Delivery robots

Delivery robots are smaller than delivery vehicles, fully electric and travel on sidewalks, thus eliminating the pollution and congestion issues. Over time, they could also prove less expensive than traditional delivery vehicles. Due to their small size, delivery robots are more efficient per kilowatt than an electric vehicle. And, while delivery robots would likely need remote operators, one operator could oversee many robots at once, as they only need to interfere in difficult situations.

Starship robots have already tested in over 100 cities in 20 different countries, and are about to be piloted on college campuses. This is just one of many companies—Amazon, Postmates, Ford, just to name a few—competing in the delivery bot space.

But there are still challenges. These robots make use of public spaces (sidewalks and other pedestrian zones) and are not allowed everywhere. Some have caught on fire, and they need to be able to cross roads and dodge numerous obstacles—not an easy task.

Drones

These small quadcopters have captured our imaginations with the possibility of aerial deliveries that remind us more of The Jetsons than of real life. The benefits of this method are clear: No road traffic, no fuel expense, no driver.

Unfortunately, the regulatory landscape is not quite ready, explaining the low adoption amongst retailers—but it's getting there. UPS Flight Forward has gained federal approval to expand its drone delivery pilot thanks to its Part 135 certification. The certification is needed to fly commercial drones past the pilot's line of sight.

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1 process improvement tool

Discussing process optimization is not the most exciting topic, but it can lead to significant savings over time. Companies fulfilling last mile deliveries could have a lot to gain if they use software to improve their operations.

Logistics and fleet management software

There are several vendors that help logistics and fleet companies improve operations and streamline processes. Specifically, look out for products with the following features:

  • Mobile capture: Losing a parcel is never good, but if you equip your employees with devices capable of taking and storing pictures of parcels at the delivery stage of the last mile, your company will be better informed as to where along the supply chain the loss occurred.

  • Load planning: This feature enables your business to group deliveries near each other in different trucks and make the most of valuable space.

  • Route optimization: Making sure your delivery vehicles are making as many deliveries as possible by traveling the least number of miles will lead to big time and fuel savings.

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