The last mile hurdle is a classic issue for businesses concerned with logistics and transportation, as well as anyone who ships products. When you have to deliver something, it’s often the very last part of the journey that causes the most difficulty.
Parcel Industry cites that an estimated 28% of the total cost of delivery comes from last-mile expenses.
What can be done about that?
The following are some tips to help you prevent and overcome last mile challenges:
Why the Last Mile is a Problem
Transportation and shipping today are quite fast and efficient. You can send items relatively fast to just about anywhere in the world. There are a variety of delivery options depending on the distance and region. At the same time, customers’ expectations have also increased, to the point where they want what they ordered to appear at their front door within hours. Amazon, of course, is largely responsible for this transformation, known as the “Amazon Effect.”
At the heart of the last mile hurdle is the fact that there aren’t shipping centers everywhere. Many delivery sites aren’t conveniently located across the street from a warehouse or post office. Once something is delivered to the closest shipping center, it still has to reach the final destination. These final destinations are scattered in all directions.
You may, for example, have 100 pallets going to the greater Los Angeles area. However, many of these will be going to the hundreds of smaller towns and suburbs that surround the city. Delivering to these less populated areas is quite a bit costlier than sending shipments to major centralized shipping centers.
We call it the last mile hurdle, but it’s more accurately the “last leg of the journey” hurdle. It could be one mile, five miles or ten. But this is the part of the shipping process that can slow things down and cause complications.
How the Last Mile Hurdle Affects You
It’s one thing to understand the last mile problem as an abstract idea concerning logistics. At a more practical level, who is affected and how?
As e-commerce grows, more and more customers are ordering products online. Amazon Prime members now expect a package to reach them from across the country in two days. Amazon, of course, has warehouses located throughout the world as well as the budget to experiment with its own innovative shipping solutions.
How can other supply chains meet such expectations?
According to McKinsey, last mile expenses can end up costing more than 50% of the total shipping cost for residential deliveries. The same can be said for deliveries to smaller warehouses, distribution centers and retail stores. This is striking when you consider that many packages travel hundreds or even thousands of miles. This means you either have to pass this cost onto your customer or absorb it yourself – and today’s customers aren’t keen on paying premium prices for shipping.
Last mile costs can cut into profits if they aren’t held in check. This can put you in a Catch-22 type situation where you either sacrifice delivery speed or profits. In today’s climate of economic tightening and constricting supply chain pressures, neither sacrifice seems like a good option.
How can companies overcome this challenge?
Options for Overcoming the Last Mile Hurdle
Flexibility: The Key to Efficient Shipping
There’s no single or simple solution to the last mile hurdle. By its very nature, it’s an issue that requires customized solutions. That’s why the real answer is flexibility. Your Transportation or Logistics Management System, or TMS/LMS, should integrate with other supply chain software with the ability to expand, modify and refine the ecosystem as needed. Efficient real-time inventory management software can add visibility to shipping as well.
Integrate field service management solutions to gain even greater flexibility in last mile strategies. Include solutions for:
- Electronic Data Interchange (EDI) / Advance Ship Notice (ASN)
- Delivery Confirmation (using customer signatures)
- GPS-enabled Direct Store Delivery (DSD)
- Vendor Managed Inventory (VMI) or Consigned Inventory Tracking
- Mobile Sales Order Entry in the field
Having multiple business systems working together to bolster your core shipping processes creates more options and more data points for better, more flexible decision-making.
In a case study published by RFgen Software, Myers Tire Supply successfully integrated their IMS, WMS, mobility and field services solutions into a single harmonized ecosystem. Read More »
Outsourcing the Last Mile
One option to increase flexibility is to outsource to delivery services to help close the last mile gap, such as USPS, UPS, FedEx, DHL or third-party logistics (3PL) services. Each has strengths and weaknesses to consider:
- USPS Priority Mail. This is efficient for delivering packages to residences in rural areas.
- UPS Mail Innovations. This option, along with DHL eCommerce, is only for packages weighing under 3 pounds.
- FedEx SmartPost. FedEx ships packages of up to 9 pounds to post offices where the USPS makes the final delivery.
- 3PL. Consider using drop shippers or third-party logistics (3PL) to reduce your shipping needs.
Or you can elect to go with more than one carrier. Pursuing a multi-carrier strategy does mean that you have to spend more time dealing with each provider. However, it ultimately can help you save money and improve efficiency by optimizing delivery for multiple types of products or lines of business.
Capture Accurate Data
Tracking data can help improve efficiency in a number of areas. Using technology to automate data collection ensures this data is accurate and up-to-date across multiple locations. Mobile barcoding solutions provide automated data collection (ADC), inventory management and enterprise mobility in a single-vendor total solution.
Data accuracy is crucial because it can help you calculate the optimal economical and efficient shipping partners. For transportation and shipping companies, route planning software identifies routes. Parcel auditing services automate the process of getting refunds from shipping companies such as UPS and FedEx when necessary.
Understand and Negotiate Contracts
Make sure you’re familiar with the fine print in your contracts with delivery services, drop shippers and 3PLs. You may be able to negotiate more favorable terms, especially when you show that you’re familiar with what the competition offers. Savings can then be passed onto your customers or leveraged to invest in new profit-generating initiatives.
Streamline Your Packaging
Packaging has an impact on shipping costs. By reducing the density of your shipments, you can often save money and/or get items shipped faster. Make sure you’re using the most efficient boxes or shipping containers for each item.
For example, mailing tubes are more efficient than boxes for certain items. This doesn’t address the last mile issue per se, but it helps you reduce shipping costs. This, in turn, helps you stay in profit while still providing the best possible shipping solutions to customers.
Implementing an Advanced Warehousing WMS solution can further accelerate efficiency and cost savings in the warehouse.
Keeping Up With the Future of Logistics
As technology advances, new last mile solutions are emerging. Amazon is developing drones that can fly 15 miles in less than 30 minutes for light packages and other robots to deliver via ground transport. This type of technology could put a big dent in the last mile hurdle.
Other possibilities, not quite as high tech, include scooters and bicycles. UPS is testing delivery tricycles to help navigate heavy urban traffic. At this stage, however, these solutions are still in the planning stages (although Amazon claims its drones will be operating within months).
For the majority of businesses operating in the supply chain, digital process automation is a more practical means of staying competitive in 21st century logistics. Technology solutions for mobile barcoding, traceability, inventory control, warehouse management and license plating can have a big impact. These digitally transformative solutions also supplement and integrate with robotic and physical automation as well.
Considering how quickly drones and automation technology are developing, last mile hurdles could soon be a thing of the past. It’s a good idea to keep up with the latest options so you can take advantage of them when they’re available. However, you also have to deal with the here and now. Do your research, use the best tools to track your results, and make sure you’re using the most cost-effective delivery option at all times. Look for solutions that solve your present challenges but also offer the ability to evolve into solving future challenges as well.