Last-mile delivery explained – challenges and solutions you need to know

Digitalisation has affected various aspects of life and one of them is the massive shift from conventional shopping to online shopping. Compared to conventional transactions, online orders do not require a face-to-face interaction, which then requires sellers to opt for delivery services from transportation companies to ship packages to their customers.

The process of shipping packages to customers is known as last-mile delivery.

Last-mile delivery has become a never-ending topic in the supply chain industry because companies deemed this final stage of shipping the most complex, especially with the rising demands from customers for speedy deliveries. Businesses will need to employ plenty of resources to fulfil their customers’ requests in order to thrive in the competitive climate.

Last-mile deliveries are relatively expensive and due to its dependency on fluctuating demands, businesses tend to cut budget allocation for last-mile deliveries. A budget reduction might become a roadblock as companies need to provide an excellent customer experience to build brand loyalty.

To help you understand this topic better, we’ll explain what last-mile deliveries are and how you can reduce the costs while providing a good customer experience. 

What is last-mile delivery?

Last-mile delivery refers to the procedure of directly shipping goods to the customers. The primary goal of this step is to ensure that the goods are delivered safely to customers.

This step is crucial for a business that needs goods to be delivered to a customer. The service quality in last-mile delivery will define the level of customer satisfaction. The more reliable the transaction, the more your customers will trust your service and, by extension, your brand.

Additionally, decent services have become a norm for e-commerce and logistics companies due to the rise of omnichannel services. As a result, they might want to enhance their customers’ experience by providing efficient and reliable sources for shipment. 

Nowadays, customers prefer online shopping. The ease of one-click purchases has given them instant ownership of products, and they will expect delivery as soon as possible.

For this reason, businesses do not want to risk losing their customers if the delivery attempt is unsatisfactory. They will most likely examine their business models and build strategic plans to solve the complexity of last-mile delivery.

However, enhancing the quality of last-mile delivery remains a challenge for many businesses because providing quick and efficient last-mile service is relatively expensive. Last-mile shipping usually partakes 53% of the overall transportation costs.

Last-mile delivery remains one of the biggest roadblocks in revenue gains compared to the final and mid-mile deliveries because business owners would look into every aspect of the business to increase profit margins. It is a challenge to do so when it comes to last-mile operations. 

What is first-mile delivery?

First-mile delivery is the initial stage in the supply chain process. This stage entails sending items from the first parties to the other distribution centres.

E-commerce will perceive this stage as collecting items from retailers and dropping them at logistics companies. The logistics companies will then be responsible for delivering the items to the recipients.

Meanwhile, manufacturers would consider first-mile delivery as the process of sending items from their factory to their client’s warehouse.

First-mile delivery problems

As the first stage of goods movement, first-mile delivery may have its own set of barriers and challenges. However, unlike last-mile service problems, first-mile delivery hurdles are not directly related to the end-user or customers.

So, what are the things that could cause issues during first-mile transportation?

Packaging problems

Packaging is frequently becoming one of the problems in first-mile delivery. In many cases, the sender does not pay much attention to the quality of the packaging they use.

They tend to use the same type of packaging regardless of the fragility of the goods. For example, glassware should have an ample amount of bubble wrap and foam protector. Overlooking this aspect will impact the first-mile deliveries and last-mile deliveries because without proper packaging, the items would almost certainly be damaged even before the start of the last mile leg. 

Labelling issues

Labelling issues frequently arise during the initial process of shipping. Although it appears to be a simple case, it can disrupt the delivery process.

For example, many shippers still write their labels by hand. The manual labelling process may result in faded ink or illegible writing, which would result in misinformation during handover from first to mid to last mile delivery.

It would be beneficial for shippers to consider adopting a delivery management software which allows them to automatically print labels upon delivery order creation, getting the delivery information correct at the start of the process. 

Poor traceability

Traceability can be a significant issue even in the beginning step of shipping. Be it a container of imported goods or a hundred trucks carrying goods to distribution centers, traceability is key to achieve timely delivery, delivered at the right place at the right time. It can disrupt the shipping process without clear information, including mid-mile and last-mile deliveries.

Therefore, even though this initial delivery step is not directly related to customers, it is still important for businesses to gain visibility over the goods they send, as there are always ways to shorten delivery times, increase efficiency and reduce costs. 

Lack of resources

Due to the customer-facing delivery leg in last-mile delivery, many businesses focus more on the last mile than on the first mile. Resources are allocated to manage last mile operations and first mile are often neglected. 

If business owners are able to build a strong foundation in the initial stages of a delivery, they could actually achieve end-to-end visibility and control operation costs in first, mid and last mile operations. 

What is middle mile delivery?

Middle-mile delivery, also known as mid-mile delivery, is the process of delivering goods from a warehouse or distribution centre to retail stores and other fulfilment facilities where customers purchase the items. It is also known as local distribution. This step contrasts with last-mile delivery, where goods are shipped directly to the customer’s home.

Mid-mile delivery operations can often be lucrative as opposed to last-mile due to the control of both distribution centres and retail outlets. Business owners would control inventory stock and shipping resources, increasing operational efficiency and cost savings.

Lower operating costs would allow businesses to mark down their retail price, which creates a competitive advantage over online retailers.

That said, there are still perks in using last-mile delivery, and we’ll explain how it goes.

What is the process for last-mile delivery?

Businesses might want to ensure a smooth delivery process during last-mile operations. With the rising demands from customers for fast deliveries, they, of course, do not want to risk disappointing their customers.

Before we tackle how businesses such as e-commerce, logistics companies, and retailers can achieve quick order fulfilment, it’s essential to understand the steps involved in the process:

Step 1: Consolidating delivery orders in one single place.

Delivery orders can be captured in paper or Excel or in a delivery software. Both the sender and the recipient will attain tracking numbers and may use it to check the shipping status.

Step 2: Receiving packages in the transportation hub.

The last-mile delivery process begins when the package is dropped off at the transportation hub by the sender. It could be an internal hub, managed by sender’s own fleet or sender could handover the package to transportation companies in an external transportation hub. 

Customer satisfaction will greatly rely on the service rendered by these transportation companies so they would need to ensure that the delivery process is as smooth as possible until the customers receive the package.

Step 3: Dispatching orders to drivers.

There will be a dispatcher scheduling all the delivery orders based on delivery locations, pick up/drop off times as well as vehicle availability and capacity. Drivers will receive the orders based on delivery zones and their vehicle capacity. These drivers will be responsible for delivering goods in their assigned zones. A well planned delivery route will ensure faster, more efficient, and cost-effective shipping process.

Step 4: Scanning of orders prior to goods loading

In case of additional orders or unassigned orders, drivers may choose to scan the barcodes or QR codes on the packages during goods loading. This will automatically assign the delivery orders to the respective drivers, where all the information regarding the order is safely captured and passed to the driver for a fuss-free delivery process. 

Step 5: Arrival of packages at their destination.

Once the package has arrived at the customer’s address, the driver will typically request a signature, be it on paper or on a mobile app to confirm a successful delivery. After the delivery is marked as completed, both sender and recipient will receive the proof of delivery.

What is the last-mile problem?

Last-mile problems are inefficiencies that occur during last-mile deliveries. Every additional inefficiency will lead to higher operating costs. Unfortunately, it might be challenging to avoid all of the potential hurdles altogether.

What are the factors causing this problem?

As mentioned before, any obstacles or other complications in last-mile delivery may increase shipping costs to get a package to your customer. Unfortunately, it’s difficult to avoid such problems, especially if it’s out of the sender’s control. 

Here are some of the issues you might come across if you do get to last-mile delivery service:

Poor route planning

Inefficient route planning can lead to roadblocks in last-mile delivery. In many cases, many packages might get lost or delayed due to this problem. If the issue is persistent, it’s possible that customers might feel dissatisfied and move on to other alternatives.

Route planning also becomes a crucial part of last-mile delivery due to its correlation with financial performance and customer experience. When planned properly, businesses are able to achieve shorter delivery times with lower fuel consumption. Order discrepancies and wrong task assignment could be reduced resulting in a high performing logistics team.

Many logistics businesses count on route planning to constantly improve their logistics operations. It is also applicable for detecting problems that needed to be solved or operation aspects that needed to be worked on (e.g., shipping rates, vehicle capacity). Businesses can effectively cut operational costs and enhance their customer service with good route planning.

Lack of transparency

Online shopping has changed buyers’ behaviour, where every detail is expected to be accessible online. It is no surprise that buyers expect a certain level of transparency where they would want to be informed of their shipping status, the location of their packages at any point of time as well as the estimated time of arrival (ETA) of their packages. 

When businesses are unable to provide real-time shipping status to their customers, they would spend more on call centres and administrative costs to manage inbound enquiries of shipping status between buyers and delivery drivers.  

High delivery cost

Providing fast and reliable delivery while increasing profit margins has become a challenge for many e-commerce, logistics companies, retailers and manufacturers. Last-mile delivery requires approximately 53% of the total shipping cost. 

Supply chain leaders might need to consider and oversee a few factors contributing to the escalation of last-mile delivery costs. Inefficient route planning leads to increase in fuel consumption and vehicle wear and tear. Manual shipment tracking incurs call centre costs while failed deliveries contribute overall operational costs.

External factors

Last-mile logistics are often related to the field’s daunting and endless unpredictable or uncertain elements such as road traffic, weather conditions and technical roadblocks such as flat tyres, faulty engines, or work-related accidents.

Businesses could have a strategic plan that involves a Plan B or alternatives if such an event occurs. They might register their businesses with reputable insurance companies covering their drivers and vehicles from any of the unpredictable events.

A robust delivery management software that allows businesses to make real-time changes like changing a new vehicle in the event of an accident or re-assigning a task to a new driver would help enterprises to adapt quickly whenever something unexpected happens.

Rising demand for same-day delivery

Buyers are now willing to pay extra to deliver their purchases faster to their doorstep. The rising demand for same-day delivery has made businesses keep up with the customers’ expectations. 

Keeping up with the expectations can be a new challenge as the other mentioned problems have made timely delivery nearly impossible. In addition, speeding up the delivery process to same-day delivery may interfere with other delivery legs, such as first-mile delivery and mid-mile delivery.

Another roadblock for same-day delivery is that most of it involves small-sized packages. Maximising the delivery vehicle can be tricky with small-sized goods and may lead to another problem in terms of cutting last-mile delivery costs.

Moreover, businesses do not have enough time to wait until they can fully load specific numbers of orders into the delivery vehicle. Doing this may cause delay, as it will take more time, and delivering packages on the same day may fail and disrupt customer satisfaction.

Carbon emissions

It’s not a surprise that the transportation industry contributes to high carbon emissions. Due to the increase in environmentally friendly communities, many customers demand shipping with reduced carbon emissions. They are willing to pay extra bucks to ensure that they do not contribute to the high carbon footprint.

How does miscommunication contribute to last-mile problems?

Besides the technical issues, miscommunication between delivery stakeholders may cause last-mile problems. For example, a shipper (goods manufacturer) which uses third-party logistics (3PL) companies may experience delivery issues if the warehouse manager faces challenges with inventory management. For example, ordered goods are not available in the specific warehouse and would need to be picked up from another warehouse. Miscommunication between delivery partners like arranging for a specific vehicle to pick up a non-standard size goods or to drop off a package before the rush hour. All these examples would directly impact the estimated time of arrival to the final destination. 

Although the shippers might not directly contribute to the delivery process, poor last-mile service from the third-party logistics (3PL) might lead customers to think that the shippers are unprofessional resulting in lower credibility and brand loyalty. 

A last-mile delivery software can aid in streamlining communication between stakeholders. When a dispatcher has an overview of all the delivery orders with real-time information of 3PL assigned tasks, shipment status, daily routes and is able to communicate with the drivers through the Driver App, issues that occur can be quickly resolved.

How do last-mile delivery problems impact business adversely?

Without a proper final mile strategy, you’ll be setting your business up to fail in the long run. As a business owner, you may find yourself in a situation where you have to deal with increased costs, late deliveries and unsatisfied customers. 

Lower profit margins and higher operating costs

Failed deliveries and unoptimised route planning could lead to an increase in operating costs dramatically. It’s essential to keep track of the last-mile delivery as a single failed delivery can add up to the total costs. 

Unfortunately, higher operating costs can impact you negatively as this issue could cause a lower profits margin.

An inadequate customer experience that leads to less brand loyalty

The quality of the delivery service has a significant impact on customer satisfaction. It’s a fact that customers want their goods to arrive on time and in good condition.

Customer dissatisfaction and low repurchase rates will ensue if you fail to meet these expectations. After a negative last-mile delivery experience, customers tend to be hesitant to purchase from the same company again.

In addition, customers demand same-day delivery or at least next-day delivery. They will not know how complex and challenging it is for e-commerce and logistic companies to meet their expectations. In most cases, your customers would only experience the end results, which is, will they receive their goods on time?

More returns and cancellations

Customers are significantly more inclined to cancel an order if they think it will take too long to receive it. In addition, it is more likely that customers will return the product if they have already purchased a comparable choice in a physical store.

Business impacted by last-mile delivery problems

Last-mile problems tend to hurt businesses that provide direct deliveries to their customers. These businesses will be highly affected without proper final-mile optimisations:

What causes last-mile delivery to be expensive?

It’s a fact that customers favour free shipping. However, contrary to that, last-mile transportation is the most expensive compared to the other legs of the journey. Several factors may contribute to the pricey final-stage delivery fees.

If you’re wondering why last-mile delivery is so expensive, we’ve got you covered with a list of some reasons below:

Fuel cost

Since last-mile delivery involves shipping packages to various addresses, the delivery drivers will need to stop at multiple drop-off points. As a result, this condition will require drivers to drive at slower speeds and result in more gas per mile consumption.

Meanwhile, drivers in rural areas might not experience similar conditions as in urban areas. However, the distance between each drop-off point in rural areas is usually far, thus equally requiring high fuel consumption.

Although fuel consumption is one of the huge components in last-mile delivery, there are still solutions available to reduce the fuel costs:

Failed deliveries

Companies are often worried about whether or not the delivery is successful in the last mile. Failed deliveries can be a common issue that happens in this type of delivery. Unfortunately, it will pile up to the total cost if this issue continues, leading to unnecessary expenses.

Now you might wonder, why do failed deliveries become typical obstacles in last-mile delivery? Here are the common reasons why companies have to deal with unsuccessful delivery every day:

Idling and downtime

Idling and downtime are common issues when delivering goods in cities. With a rise in the number of traffic issues, drivers tend to consume more fuel unnecessarily. 

Furthermore, fuel inefficiency may cause adverse impacts on engine performance. Fewer miles per gallon consumption will wear and tear on the vehicle and cause frequent maintenance problems.

There is also loading and unloading time which are commonly missed during delivery scheduling. If not these activities are not factored in during planning, the estimated time of arrival would be inaccurate and drivers would sit idling during these times. 

Logistics companies may reduce this dilemma by utilising a route optimisation plan. By optimising the shipping routes, drivers can ship packages more efficiently, and there will be less idling time. Subsequently, you can save your budget on fuel consumption and maintenance fees.

Out-of-route miles

Drivers deviating from planned routes due to road traffic, road accidents and closed roads? How about making additional stops for a meal or a restroom break? These are out-of-route miles which transportation companies would allow drivers to take on top of the suggested/planned route. Out-of-route miles can hike up the travel distance, increase vehicle wear and tear if not properly monitored. 

How can I decrease last-mile delivery costs?

Just because last-mile delivery is expensive, it does not necessarily prevent finding ways to reduce costs. To maximise profits, retailers and logistics companies must think strategically about reducing the allocation for the final leg of shipping.

Here are a few ideas on lowering the final mile shipping costs. Furthermore, these approaches have the potential to improve your customers’ experience and satisfaction while using your service.

Frequently optimise shipping routes.

Essentially, the delivery fee is proportional to the distance between the drop points. It lowers the travel time to send packages and minimise shipping costs through route planning and multi-stop optimisation.

Shipping routes are frequently optimised using artificial intelligence technology. Companies can improve shipping efficiency by incorporating artificial intelligence into route optimisation while keeping the following factors in mind:

Increase shipping options.

The increased number of delivery options can reduce last-mile delivery costs and improve customer experience. Suppose a customer wishes to receive their package faster, then they can opt to pay more to get their goods quicker. On the other hand, other customers might choose a cheaper delivery and do not mind getting their package a bit later than the other services. 

Relocate warehouse nearer to customers.

It will be a good idea that if your warehouse is far away, you might want to relocate it to somewhere closer to the general vicinity of where most of your customers reside. By opting for this strategy, you can cut the last-mile delivery costs. 

Many e-commerce companies have embedded this plan by renting or buying warehouses in the city centres, making the travel distance to end-users addresses shorter. This strategy is also proven to reduce shipping costs and time spent on delivery.

Utilise digital proof of delivery.

With the technology used for last-mile delivery, it’s easier to obtain electronic proof of delivery (ePOD). The ePOD can be beneficial to monitor the successful deliveries. There will be stamps which include:

Opt for smart dispatching.

The last-mile delivery process is made more easier with automation, especially in the dispatching process. One-click optimization, printable shipping labels and order management are tools which would help dispatchers in their daily work, increasing efficiency and enabling timely delivery.

Provide real-time track and trace.

Customers gain visibility and transparency by providing real-time track and trace. They will be informed about their package and will most likely be prepared to receive it, so this strategy can effectively reduce the chance of failed deliveries. This way, companies can save money on final-mile deliveries with fewer failed deliveries.

Real-time analytics and insights.

Delivery management systems with analytics dashboard would help businesses in understanding their logistics operations and areas to improve. Learn about delivery leg with longer delivery times, identify vehicle capacity limitations and late deliveries all in one single dashboard. 

The future of last-mile delivery

It’s undeniable that last-mile delivery will continue to develop. To be able to compete with other service providers, enterprises need to improve their last-mile strategy. They must strengthen the main points while utilising technology to help in improving the reliability of last-mile delivery, especially as digitalisation changes consumer behaviour.

As a result, these trends may emerge in the future of last-mile delivery as strategies to meet customers’ demand for quick and safe delivery:

Feature to ensure order traceability

A feature that allows you to track the status or location of your delivery is essential in last-mile delivery software. The feature will reduce the likelihood of packages getting lost if you know their exact location.

For example, a GPS embedded in the driver app will inform the fleet vehicle’s current position. That way, both shippers and recipients can get notified of their packages’ whereabouts.

In addition to that, tracing numbers may also be used to monitor the status of your items. Either shippers or recipients can track the numbers through the centralised system.

The increasing number of urban warehouse

The increasing demand for same-day delivery requires companies to build or rent warehouses in the city centre. It’s wise to own warehouses in the city centres as the primary recipients will most likely reside within that neighbourhood.

Urban warehouses can also solve the increasing number of e-commerce businesses in Singapore. Companies might want to use this strategy to compete with their competitors in providing quick deliveries.

Rising usage of automated delivery

The current delivery vehicles, which mainly use trucks, may be adequate for providing quick order fulfilment. However, this does not rule out the possibility of increased demand for faster intercity shipping. As a result, automated vehicles and drones will probably be widely used in the future to meet these customer needs.

In 2020, Singapore previously tested drone deliveries. Online food and grocery delivery platform, FoodPanda, collaborated with ST Engineering on drone food delivery trials. 

The success of the trials conducted by FoodPanda with ST Engineering has determined that there will be more delivery of goods via drones or automated vehicles in the future.

Rapid order fulfilment

Digitisation has not only caused a massive shift to online shopping. Instead, it also changes customer behaviour.

Customers nowadays are kind of impatient and wish to receive their goods quickly. Many of them are also willing to pay extra to get their orders on the same day.

To meet customers’ expectations and compete, businesses must emphasise speedy order fulfilment.

Insourcing last-mile delivery

Rather than partnering with third-party logistics companies, many businesses now prefer to manage last-mile deliveries independently. This strategy is known as insourcing.

Businesses that use an insourcing system eliminate the need for third-party delivery. Therefore, they can save money previously spent on the third-party providers.

As a result, it is possible that online businesses will begin to use last-mile delivery software. Therefore, not only will the logistics companies benefit from the last-mile software.

Contactless delivery

Contactless delivery became increasingly popular and necessary over the years. This phenomenon does not rule out the possibility that contactless delivery will increase in popularity in the future.

Many people want contactless delivery for several reasons. One of them is a matter of safety in terms of health. Due to the COVID-19 outbreaks, many people are concerned about their health. As a result, without direct contact between the couriers and recipient, the risk of virus transmission can be reduced.

In addition, contactless delivery can cut delivery time. Previously the delivery person would need to wait and meet the recipient to hand them the package. Nowadays, it doesn’t happen as often due to the contactless policy implemented for the safety of both the recipient and driver. 

In cases like this, customers can now ask the delivery person to leave the package somewhere safe, so they do not have to contact one another directly.

Why is reliable last-mile fulfilment so important?

Whether they hire third-party logistic companies or manage their shipping, businesses might want to satisfy their customers by providing reliable service. By being reliable means, they will need to fulfil their customer’s expectations through last-mile delivery.

So, what are the demands that customers nowadays make on online marketplaces?

Now you might wonder why you should fulfil your customers’ expectations on reliable final delivery?

To answer that, buyers tend to feel connected and gain trust in your brand’s reputation if you provide them with reliable last-mile fulfilment. So, to secure your customer’s loyalty, you might want to work on your final mile delivery and ensure a quick shipment to your customer’s home.

Additionally, there’s been a massive shift in the e-commerce business model from multichannel to omnichannel systems. To compete with other providers, you might need to ensure that your business integrates and implements more reliable customer service.

Customers will usually feel connected with a specific brand regarding omnichannel depending on how they feel about the transactions. As a result, the more satisfying and memorable the experience, the more your consumers will be loyal to your company.

Last-mile delivery FAQS

How can Yojee enhance your last-mile delivery?

Last-mile delivery will most likely stay as the most complicated part of goods transportation. However, you can provide decent final-stage shipping by investing in a delivery management system.

A cloud-based SaaS logistics platform, Yojee can help you enhance your last mile operations by reducing the last-mile costs and increasing operational visibility.

Yojee offers the following features that enterprises can benefit from:

Final thoughts

Let’s take a quick review on last-mile shipment to help you understand it better!

So, last-mile delivery refers to the process of sending your customer’s package to their home address. Common delivery issues occur at this stage, and the costs are more expensive than other shipping stages–first-mile and mid-mile deliveries.

Although the last step of transporting items to the end customer is fraught with difficulties, it is not unsolvable. Implementing technology in last-mile delivery can make the process more feasible. Adding an automated dispatching system will make the delivery process smoother and more efficient as it will automatically follow the workflow you have set up. 

Additionally, last-mile software typically includes functionalities such as route optimisation, electronic proof of delivery, smart dispatching, and real-time tracking. All of these features can help to reduce any last-mile efficiencies.

To summarise, last-mile services will continue to evolve rapidly. As a result, businesses must understand how the final stage goes thoroughly. 

Through this, you’ll be able to promote your company’s brand in a positive light as you take your time to invest and improve the last mile delivery method to give your customers an excellent experience with your approach.

About Yojee

Helping businesses overcome their complex supply chain challenges has always been Yojee’s core value. We connect land freight players through our proprietary platform, providing supply chain visibility and enabling seamless communication between shippers and their customers.

Since our founding in 2016, we have worked alongside the world’s largest 3PLs, global freight forwarders, transportation companies, and brand owners to develop logistics solutions that meet their first-mile and last-mile delivery needs. 
How Yojee stands out from other logistics providers is our multi-carrier management feature, which allows collaboration between land freight players to meet demands. Coupled with our last mile delivery app for drivers, logistics providers can now efficiently move freight from point A to point B with optimal resource usage. We do all this with one goal in mind: fewer carbon emissions and sustainability.