Last mile logistics: Solutions for a changing world
Parcel delivery volumes have become quite staggering in the past few years, increasing at a steady rate and peaking in 2020 with over 50 million parcels being shipped every day – in the U.S. alone. This swell is, of course, driven by e-commerce sales, which have also been climbing at a dizzying pace. Pandemic lockdowns and shutdowns contributed to the all-time high e-commerce sales spike of Q2 of 2020. And while these numbers are leveling out somewhat as things return to normal in the world, online retail sales figures in Q3 of 2021 were higher than they were prior to COVID-19, suggesting a lasting change in consumer behavior. And on top of it all, consumer demands are also shifting and evolving at an accelerated speed.
Today’s online shoppers don’t just want more and cheaper products, they want them on their doorstep by tomorrow morning, if not sooner. In the midst of this whirlwind, last mile logistics providers are on the cusp of a revolution in sustainable logistics while also enduring a time of urgent and challenging transition.
How technology is (literally) driving innovation in last mile transportation
With each year, we see a rise in electric vehicles among last mile delivery providers – yet there are hundreds of thousands of gasoline powered ones that are still on the road and will be for some time.
For businesses, mapping a (profitable) path to more energy efficient operations will require commitment and focus. But mainly, it will require knowledge – and that knowledge will come from data. Data management and advanced analytics give businesses the ability to make swift decisions, roll with the market, predict risks, and make confident investments in electronic vehicle (EV) fleets and other green technologies.
What is last mile logistics (and where do all the other miles fit in)?
As it progresses on its supply chain journey from manufacturer to customer, a product moves to increasingly smaller vehicles and acquires more specific delivery criteria. The first, middle, and last mile stages of the logistics journey are essentially defined by a gradual decrease in shipment size and distance from the final consumer.
Today, the last mile link in the supply chain is under enormous pressure and scrutiny to change and adapt at a lightning pace. But it’s important to remember that a company’s last mile solutions are only as strong as its supply chain planning infrastructure and the ability to deliver visibility and connectivity across all the “miles” in the supply chain journey.
- First mile logistics – manufacturer to primary distribution warehouse: The first mile of an item’s trip usually takes it from the production facility to the primary distribution warehouse and typically involves shipping containers and international land or sea freight. With better and more integrated quote and schedule management systems both retail and commercial vendors and supply chain managers can gain greater transparency regarding cross-border and transcontinental shipping prices and availability. Streamlining this early stage in the journey helps last mile logistics and delivery coordinators to get an accurate big picture of their budgets and to coordinate their networks in the event of disruption or delay at this early stage.
- Middle mile logistics – warehouse to regional distribution hub: The middle mile takes goods from the primary distribution warehouse and transports them to regional distribution hubs, closer to the final consumer. This typically involves large, long-haul transport trucks. Where there used to be only a handful of regional warehouse hubs to serve large chunks of the county, the Amazon effect has resulted in a need for often hundreds of local distribution hubs to service next-day or same-day delivery turnarounds. In order to serve this relatively new demand, supply chain managers need larger mid-size vehicle fleets and more sophisticated cloud-based systems to coordinate local drivers.
- Last mile logistics – distribution hub to final customer: The last mile, of course, sees the product getting to the customer’s doorstep. More than first and middle-mile logistics, last mile has seen the greatest amount of recent change to its traditional operational structures. Furthermore, it is the most publicly visible link in the supply chain – and the service most likely to be blamed by customers if anything goes wrong. But like a cog in any machine, last mile logistics can only function as well as the other moving parts across the entire supply chain.
Last mile fulfillment and changing customer expectations
For delivery operations, the real activity goes on after the customer has placed an order. But increasingly, customers expect to be engaged in the fulfillment process at every step along the way. The advancement of smarter, more transparent digital supply chain technologies has made it simpler and more efficient for companies to manage complex logistics networks. But the flip side to that coin is that it’s now easier than ever for new players to enter the market, competing on both service and price. Competition is at epic levels these days and the ability to meet and exceed customer demands has become a vital factor in securing brand equity and consumer loyalty.
The following are some of the fastest emerging customer service expectations:
- Guarantee of speedy fulfillment: Despite the pandemic-induced strain on global supply chains, customers have become used to fulfillment times of two days or fewer – and are exhibiting a growing intolerance for anything but. An extensive consumer survey taken in 2020 showed that not only were customers interested in the fastest delivery possible but that 65% of them were willing to pay a fair bit more to achieve this. For businesses, this means the pressure stays on last mile delivery resources to improve their digital networks and become ever more agile, responsive, and scalable.
- Seamlessness and customization: Companies lose billions every year due to cart abandonment. And while promised delivery speed plays a huge role in this, it’s not the only factor. Experience has shown that a major cause of churn and cart abandonment is an apparent lack of engagement with the customer. Today’s buyers want seamless omnichannel experiences that pick up online where they left off in store. They want to customize their delivery options, see exactly where their stuff is along the route, and be able to communicate with the driver in real time.
- More flexible e-commerce options: In the early days of online retail, companies thought that certain products like eyeglasses or shoes would always be brick-and-mortar purchases. Back then, they did not anticipate try-before-you-buy models such as Amazon’s Prime Wardrobe. Returns are already a complex and costly element in the last mile equation, so services entirely dedicated to returning products add yet another layer of complexity. Furthermore, during lockdown people got used to getting practically everything online so today even the most unlikely products – from tropical fish to paternity tests – are now expected to be available for home delivery.
- CEOs are shoppers too: B2B customers have traditionally had strong relationships with sales reps from the various vendors that they use – relying on them to anticipate their product needs and navigate logistical challenges. While this important professional relationship remains strong, business leaders are no longer happy with same-day delivery on their personal goods, yet same-month delivery on their professional ones. Clearly B2B and B2C supply chains are very different, but, nonetheless, B2B consumer demands are evolving fast and last mile providers should take notice of these changing expectations.
Last mile delivery technology and supply chain digitalization
In the world of online shopping – for both B2C and B2B – there are more digital touchpoints than ever. Sensors gather data in the sourcing and manufacturing stage, Internet of Things (IoT) devices send and receive streams of data and intel, and customers leave increasingly complex and rich trails of data as they move through the retail ecosystem. The best digital supply chain solutions use cloud-based systems, artificial intelligence (AI) technologies, and real-time connectivity to leverage all that data – and to power the logistics management systems they need to keep things humming.
This integrated, data-driven approach empowers businesses with the following capabilities:
This employs an algorithm to match a delivery task with a specific driver based upon predefined priorities and rules. By putting AI into the mix, the system can simultaneously analyze complex data points such as the driver’s location and type of vehicle relative to package size. And with a cloud-based app, the driver and dispatching system are always in real-time contact.
Once the dispatch system has identified a driver and vehicle type, other factors must be considered to ensure that the most economical route is taken. This involves the simultaneous analysis of live data such as weather and traffic reports, location data such as charging stations en route (in the case of e-fleets), and density of delivery addresses in a particular area. And again, user-friendly mobile apps keep drivers in the loop at all times.
Businesses (often even competitive ones) typically make efforts to amalgamate long-haul and container freight based upon destination and specific handling needs. For a single trans-Pacific crossing, this is not so complicated a task. But, when that cargo is atomized into thousands or millions of individual orders, all with unique delivery destinations and schedules, the task of load optimization becomes pretty daunting. With margins tighter than ever, AI-powered solutions once again become the answer. By connecting all the planets in the last mile universe to a single accessible dashboard and system, load planning becomes strategic and automated, which helps to eliminate costly half-full vans.
Fleet tracking and ETA calculation
This is one of the oldest logistics practices, making use of CB and two-way radios, well before the days of mobile networks. But today, instead of relying upon the driver to guesstimate an ETA while in transit, smart tracking systems can use drivers’ own smartphones to access GPS and traffic data to ensure real-time fleet visibility. Powered by cloud-connected apps, this lets dispatchers and customers know where drivers are without the need for any additional hardware.
Last mile distribution logistics and asset sharing
As of October 2021, sales numbers for ride share companies were up as much as 100% year-on-year. And in urban centers, car sharing companies are taking off as well, with McKinsey predicting a steady 20% growth in shared mobility solutions in the coming decade.
While individual consumers are questioning the value and risk of vehicle ownership, last mile providers are also crunching the numbers and asking similar questions about their company-owned fleets. Most businesses have peak periods where their fleets are stretched to capacity, and then quieter times when they are paying to keep and maintain these costly resources.
With smart supply chain planning platforms, IoT networks, and cloud-connected assets, businesses can implement an elastic network of delivery providers – much like the ride share model – to scale up and down as needed. The simplest use of this “crowdsourcing” approach allows businesses to integrate similar types of vans and trucks from adjacent delivery providers, into their own existing fleets.
The more sophisticated model involves integrating a hybrid network of alternative vehicles into their existing operations. Some deliveries, for example, may best be served by consolidating packages into a larger networked vehicle, then pairing downstream with e-bikes or delivery bots as they get closer to the final destination. And of course, to manage the complexity of this hybrid model, AI and machine learning technologies are, again, an essential systems component.
Last mile transportation: alternative vehicles and networks
We’ve looked at alternative business models and some of the technologies that support smart last mile delivery systems. But what about the vehicles themselves? Are delivery drones really a thing? Can last mile logistics ever be carbon free? We’re talking about revolutionizing large and long-established operations so some of these vehicular innovations will take a while to emerge. That said, the pandemic accelerated a number of alternative urban delivery solutions, and EV technologies are becoming more accessible every day – so the future of sustainable logistics may be closer than we think.
- EV vehicles: For last mile logistics, the challenge has often been vehicle size and durability. To date, most EVs are smaller family cars, not necessarily suited to high-volume delivery. However, the development of larger EV-powered light commercial vehicles (LCVs) is surging forward at a rapid pace. This is due to advancements in battery technology and vehicle engineering, as well as more tightly regulated constraints on supply chain emissions.
- Better charging options: Smart logistics software can help connect drivers to the EV charging infrastructure in real time and program delivery routes that build in charging opportunities. As high-speed inductive charging stations grow more numerous, this capacity will become even more relevant. Fast and plentiful EV charging will support on-demand last mile delivery networks as well as proprietary fleets within the hub radius.
- Micro-mobility vehicles: This term refers to things like e-bikes and scooters, which are increasingly entering the last mile logistics network. At the moment, it is predominantly food and grocery delivery services that are using these modes of transport, but as the micro-mobility vehicle network expands, we can expect this to extend to other products. Furthermore, the cloud-based apps that drive these networks are becoming easier to use, ensuring that drivers can be plugged into both the control tower and the customer interface… all in real time, of course.
- Drones and autonomous fleets: In the past few years, drones have found a role within the distribution network as automated pick-and-pack and inventory management robots. In the near future, as security and tracking challenges get ironed out, we should expect to see more use of last mile drones in urban areas. Even seeing them used in novel ways such as little fleets of delivery robots that are deployed from a larger truck to serve a particular geographical radius.
Next steps to a more efficient and future-proof last mile distribution network
If nothing else, the pandemic has shown us that last mile logistics providers are the unseen heroes of the supply chain fulfilment process. Despite a lot of highly publicized supply chain disruption, they went out into the world when we couldn’t and kept us stocked in flannel pants, bread machines, and yoga mats – not to mention basically everything else. In a lot of ways, the world will never be the same as it was before 2020, and that includes how we shop and how we expect that stuff to come to our doorsteps.
Sustainability targets, increased competition, and razor-thin margins are adding up to a challenging future for last mile delivery. But we’re also seeing powerful innovation in specialized software and a lot of new technologies and ideas that point to a future that is more sustainable and profitable than ever. To get started on the digital transformation of your logistics operations, reach out to your software vendor to learn about the best solutions for your unique needs and challenges.
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