Member Article

Driving down the cost of last-mile delivery

Written by Matthew Robertson, Co-CEO NetDespatch

I read a thought-provoking article recently which talked about how the ‘last mile’, though extremely inefficient, is the final frontier of logistics and the costs, whilst an absolute necessity, are burdensome to supply chains. The last-mile element of the delivery model currently accounts for up to 55% of shipment costs, and today’s expensive methods also tend to be polluting and slow.

Traffic congestion in urban areas and the tyranny of distance in remote areas both add time and cost, negatively impacting the economics. The problem is further compounded by practical issues such as invalid or incorrect address details, hard-to-find locations, customers not being home to accept delivery, buyer remorse – the purchaser no longer wanting the delivery, lack of nearby parking and many other hurdles. All these issues add cost, time and inconvenience to what is an already marginal activity. Solving this conundrum, therefore, begs for more futuristic approaches, e.g. drones, electric or self-driving cars, to make last-mile delivery more palatable for those involved.

Anyone who works in the retail industry will be aware that the last-mile discussion seems to be forever on the agenda. Fast delivery has become the battle ground for retailers and while customers have ‘never had it so good’ with the mounting number of delivery options, the retailer has been left to bear the brunt of the soaring costs associated with fulfilling them.

Understanding the last mile

For those less familiar with what the ‘last mile’ means, last-mile services are the end-stage logistics involved in getting orders to customers, as well as in accepting returned goods. For traditional bricks and mortar retailers, it’s simply not a core strength. These businesses were built around the idea that shoppers come to the store, find something, buy it, and take it home. It worked well enough for many decades.

The internet has given us virtually unlimited product options, with companies like Amazon and Zappos changing our expectations for receiving and returning these products. From two-day, overnight, same-day and now one-hour or even 30-minute home deliveries, to in-store, drive-through and parcel locker pickups, we have a multitude of options. The shopping genie has been let out of the bottle, and consumers are never going back to how things were.

That’s a problem for the many retailers who struggle with the last mile. If the road to getting that package into your consumers’ hands is not smooth, if it makes them wait too long, or if it has them chasing after you, you have already created a powerful negative experience - one that is likely to be remembered and shared. In research that we did last year that looked into consumer expectations around their shopping and delivery experiences we asked consumers what they love and hate about online shopping. Convenience and ease, not surprisingly, featured highly. 82% of respondents said they love the convenience of online shopping; 90% love the ease of shopping, and 82% love that they can get what they want when they want it. Conversely, when asked what they hate about online shopping 66% cited the inconvenience of returning goods and 32% hate signing for parcels. Furthermore, having visibility of their parcel’s journey and knowing the exact time (not just the day) that the parcel would be delivered was also extremely important.

Balancing delivery speed with cost

But are all the delivery options available today actually necessary and is the cost of delivery too high for the reward? Over the last few years we have seen all sorts of innovations; Amazon, for example, has its own last-mile, same-day delivery service using bike messengers. Meanwhile, services such as ‘Doorman’ seek to appeal to consumers who want their ecommerce purchases collected for them at a secure location and delivered to them in one batch. On top of this, there has been an evolution in carrier services in urban areas whereby independent drivers are competing with more established local carrier firms, driving down costs again, in much the same vein that Uber has shaken up taxi services.

All of these initiatives revolve around the final leg of the last mile. But focusing solely on the last stretch of the last mile can be short sighted, because last-mile success also calls for appropriate fulfillment at the order management, distribution and shipping level. Sure, carriers need better approaches to processes like fleet scheduling and vehicle tracking, but if order fulfillment and shipping aren’t set up appropriately and the whole process isn’t seamless, then the last mile also suffers. Let me give you one very simple example – a label with an incorrect address - this means the carrier has a meaningless journey and the speed of the last mile is irrelevant.

The future of delivery and perfecting the last mile So what is the future of delivery and how do you perfect that last mile? Many retailers are streamlining operations to counteract the growing cost of fulfilment and that means not just implementing the latest drone to handle the last mile but putting the whole end-to-end shipping process under the microscope. From order processing, picking the parcel in the warehouse and producing the shipping labels, right the way through to finding faster and more cost-effective ways for the last mile delivery – everything can be improved.
Here at NetDespatch we’re helping retailers eliminate unnecessary manual processes by seamlessly connecting their warehouse systems to their parcel carriers and increasing automation. We automate the whole despatch process through our SaaS-based platform, helping retailers remove the need for manual data entry and data duplication, potentially saving hours of administration and reducing the risk of human error, in effect enabling parcels to fly out the door. A balanced approach We’ve seen a lot of talk in the press about key enabling technologies for the last mile, from energy independent vehicles such as new cargo trikes, microbuses and unmanned inflated wings carrying heavy cargo and lowering it precisely to final destination, to smaller drones and robots. However, I believe what is truly needed is a common sense approach to excelling at the last mile. By adopting a balanced approach, incorporating innovative solutions that address the final stretch, combined with the proper attention to order fulfillment and streamlined despatch processes further upstream, we may finally reduce the headache and costs that currently make the last mile the hardest mile of all.

This was posted in Bdaily's Members' News section by Matthew Robertson .