Last mile delivery: definition, challenges, and trends

Last mile delivery, also known as final mile delivery, is the crucial final segment of the logistics process where a product is transported from a distribution hub or warehouse to the end customer.

This phase of the purchasing process is often the one that is under the most pressure, and has the largest number of risks. At this stage, delivery vehicles have to navigate complex environments including residential streets, industrial zones, and remote rural destinations. Along the way they deal with traffic congestion, parking difficulties and unexpected route changes. It’s these complexities that make last mile delivery the most costly part of the shipping process. The intricate logistics required to meet customer expectations for speed, tracking, and convenience add layers of operational difficulty and cost.

The importance of last mile delivery

If the delivery process can be broken down into three phases, why is so much emphasis placed on the last mile? For transport and logistics providers, the final mile represents the most intricate part of the logistics process. Effective last mile delivery requires precise coordination to navigate the unpredictability of the roads. Failure to optimise this stage can lead to delays and increased costs which directly affect your bottom line and not only your reputation, but the retailers and even manufacturers.

Delivery speed, customer satisfaction, and brand loyalty

For retailers, last mile delivery is a pivotal touchpoint with their customer and is often the factor that determines the overall quality of the shopping experience. Even the most beautiful  website or luxurious shopfront can’t make up for late delivery, damaged goods, or difficult returns. So how do delivery speed, customer satisfaction and brand loyalty intermingle? 

Research highlights that consumers increasingly value fast and reliable delivery services, viewing them as an integral part of the shopping experience. Faster delivery not only reduces waiting times but also enhances the perception of service efficiency and reliability, leading to higher levels of customer satisfaction. In support of this, research found that 55% of consumers will switch to a competing retailer or brand if it offers a faster delivery service, showing just how important speed is to engaging brand loyalty.

Customer satisfaction is the culmination of many different touch points during the purchase process, but is often most greatly influenced by fast and reliable delivery. When your customers receive their orders quickly and as promised, their trust in the retailer or logistics provider increases, making them more likely to return for future purchases. Research by Gensler, Verhoef, and Böhm (2012) supports this, showing a strong correlation between satisfaction with delivery performance and repeated patronage.

Successful last mile delivery strategies that prioritise speed and reliability not only enhance customer satisfaction, but also help to build a competitive advantage for logistics and retail businesses.

By utilising advanced technology and efficient logistics solutions, you can meet and exceed your customers expectations for fast delivery. As illustrated in a study by Rao, Griffis, and Goldsby, effective last mile delivery strategies contribute to a positive brand image, which is vital to maintain customers and drive sustainable business growth. By investing in such strategies, you can create a cycle where happy customers become brand loyalists leading to increased profitability and market share.

The process of last mile delivery involves several key steps, none of which can be missed when aiming to streamline the delivery process and enhance the customer experience. These steps are:

1. Order placement and processing: The last mile delivery process begins when your customer places their order through an online, or offline, platform. Once the order is received, it’s processed in the company’s system, where inventory levels are checked and the order is confirmed. This step involves capturing customer details, payment processing and preparing the order for fulfilment.

By following these structured steps, you can optimise your last mile delivery processes. The result should be reduced costs and enhanced customer satisfaction leading to improved brand loyalty and bottom line business growth.

Despite its critical role in the logistics process, last mile delivery is fraught with challenges that can negatively affect efficiency, increase costs and affect customer satisfaction. These challenges range from navigating unpredictable delivery environments and managing sustainability to meeting high customer expectations and incorporating advanced technologies.

Below is an overview of the key challenges faced in last mile delivery, but for an in-depth exploration of these issues, along with actionable solutions to address them, be sure to download our PDF guide.

Navigating complex delivery environments

Delivering goods to national and international locations ranging from congested urban areas to remote rural regions poses significant logistical hurdles. Congestions, parking and unexpected route changes can lead to delays and increased operation costs.

Route planning and real-time tracking are essential to overcoming these challenges and ensuring on-time deliveries.

Integrating innovative technology to enhance customer satisfaction

The rapid evolution of technology presents exciting opportunities and challenges for last mile delivery. While integrating solutions like telematics, electronic proof of delivery (ePOD), and smart lockers requires investment and adaptation, they offer significant benefits in terms of improving delivery efficiency and customer satisfaction.

Reducing environmental impact while maintaining service quality

The environmental footprint of last mile delivery is a major concern due to the reliance on traditional fuel-powered vehicles. This stage contributes significantly to carbon emissions and operational expenses. We discuss how adopting greener alternatives like electric vehicles and optimising delivery routes can reduce environmental impact in our guide.

To explore these challenges in greater detail and discover practical solutions, download our guide “How to conquer last mile delivery challenges: Six tips for success with innovative technology.”

One of the biggest challenges of last mile delivery, though, is managing the associated expenditure. Last mile delivery costs encompass the various expenses associated with the final step of delivering a product from a distribution centre to your customer’s doorstep. These costs include vehicle operation expenses including fuel, maintenance and labour, as well as outgoings related to warehousing, storage and handling. In addition to this, the unpredictable logistics challenges of complex delivery routes, traffic and parking can all inflate these costs significantly as well as the demand for fast and flexible delivery options. According to industry data, last mile delivery can account for over 50% of total shipping costs, a figure that underscores its financial significance for businesses.

High last mile delivery costs can significantly affect your profitability and competitiveness. As a logistic provider, these costs can erode profit margins if not managed effectively. Retailers, especially those of you offering free or discounted shipping, need to absorb these expenses which can impact your pricing strategies. Failed deliveries and returns also add to the financial burden making efficient last mile delivery crucial for maintaining a positive bottom line. To mitigate these expenses, businesses are increasingly adopting innovative technologies and practices, such as route optimisation, real-time tracking, and the use of electric vehicles, which can help reduce last mile delivery costs and enhance operational efficiency.

For more in-depth insights and strategies on managing last mile delivery costs, download our comprehensive PDF guide, which offers detailed solutions and case studies.

Route optimisation software

Route optimisation software uses a sophisticated algorithm to plan the most efficient delivery routes for drivers. They take the guesswork and administrative labour out of factors such as:

• Distance and traffic: Route optimisation software calculates the shortest routes while factoring in real-time traffic conditions to minimise travel time, doubling back, and fuel economy.
• Delivery windows: The software ensures that deliveries meet the specific timeframes set by customers. This is especially important for customers who have booked next day, or specified time delivery slots.
• Vehicle capacity: It also takes into consideration the size and capacity of each delivery vehicle to optimise the package volume per trip. Higher package volume means less deliveries and lower costs.

By implementing route optimisation software into your day-to-day operations, you can significantly reduce the costs associated with your delivery vehicles including fuel costs, driver hours and delivery times.

Learn more about how route planning software can save your business money. 

Real-time tracking and visibility 

Real-time tracking software (RTLS) delivers constant visibility of the location of delivery vehicles and packages. With last mile delivery tracking you can improve your customers' experience as they know where their deliveries are and when they’re going to receive them, also reducing failed deliveries, and you can enhance dispatch efficiency by rerouting around unexpected issues.

Real-time tracking fosters transparency, improves customer satisfaction, and allows for proactive problem-solving.

Discover more about fulfilment solutions to improve your customer experience. 

Mobile delivery management systems (MDMS)

MDMS are applications designed to work on handheld devices including tablets and rugged smartphones that are used by delivery drivers. They are able to:

• Provide proof of delivery: Drivers can use their devices to take electronic proof of delivery (ePOD), capturing electronic signatures or photos as part of the final delivery process.
• Act as a navigation: Integrated GPS navigation helps drivers navigate unfamiliar routes efficiently.

MDMS streamlines the delivery process, improves driver productivity, and reduces the need for paper-based workflows.

Discover how you can improve your last mile delivery efficiency in our guide. Download now.

Last mile delivery presents a unique set of challenges, but a huge range of opportunities at the same time. While cost-efficiency is a natural focus for many businesses, other factors like speed and customer satisfaction are equally as important. No matter what you want to be known for, this section will explore the key step that you need to take to improve your last mile delivery operations; establishing effective metrics and KPIs before sharing some specific strategies for enhancing efficiency and customer experience.

Establish your last mile delivery metrics and KPIs

It’s vitally important to know what direction you need to travel in before you start running to avoid wasting time, energy, and getting lost along the way. The same rules apply to establishing the measures of success of your last mile delivery optimisations.

Taking the time to really consider your last mile delivery metrics and ensure that they are watertight may seem like time that could have been spent implementing, but trust us when we say that the planning is a step you really shouldn’t be looking to rush. Here’s a quick run-down of how to establish a strong foundation for your metrics and KPIs:

Identify your goals

The rapid evolution of technology presents exciting opportunities and challenges for last mile delivery. While integrating solutions like telematics, electronic proof of delivery (ePOD), and smart lockers requires investment and adaptation, they offer significant benefits in terms of improving delivery efficiency and customer satisfaction.

Select only the most relevant metrics 

Choose ones that directly tie back to your goals. Common metrics you might want to consider if you are prioritising customer satisfaction include on-time delivery rate, first attempt delivery success and customer satisfaction score.

Set benchmarks

Know where you’re starting from so you can track your progress over time. If you don’t currently have this data, using industry benchmarks or your own historical data will work. 

Think about how you will collect your data

Implement a system for collecting data on your chosen metrics and make sure you maintain consistency. This might include telematics software, delivery driver apps or customer surveys.

Analyse regularly and course-correct when needed 

Schedule regular times to analyse your data and look for trends and areas of improvement. Feed this back to your teams and then use the insights to keep refining and improving.

So now you’ve got your priorities, what solutions could you look to to achieve them?

Want to reduce costs and improve delivery performance? Use telematics

Telematics might sound complicated, but many of us are already using them in our day-to-day professional and personal lives. Telematics is the blend of telecommunications and informatics. In the context of last mile delivery, we’re referring to devices and software that are used to collect, transmit and analyse the data from vehicles and drivers in real time.

You can use telematics to gain real-time insights into driver behaviour, vehicle performance and fuel consumption. As an example, GPS technology that provides you with precise location tracking, coupled with route planning software can help you reduce wasted journeys and excessive fuel consumption. Driver behaviour tracking provides insights into everything from speed to braking patterns and idling. Knowing this can help you address any potentially unsafe driving styles; reducing accidents and hopefully reducing your fleet insurance premiums!

You can only improve what you’re tracking, so gathering as much data as possible on your drivers and vehicles is a great place to start and will often provide quick wins that will have an impact in the short and long term.

Want to improve delivery times and accuracy? Use electronic proof of delivery devices

Introduce ePod solutions (or upgrade your existing ones) to capture proof of delivery more efficiently. Improved verification, GPS location tracking and timestamping all help to reduce errors and enhance efficiency.

While last mile delivery has been a part of the purchasing journey for decades, there are always new innovations coming to the fore. Whether it’s new technology, or new ways of thinking, here are some of the latest trends in last mile delivery optimisation.

The Barcode Warehouse can help you address these challenges with a variety of solutions ranging from route optimisation software to real-time tracking systems and enterprise mobility managed services to rugged smartphones.

Speak to our team today to discuss how we can help.