Parcel delivery volumes have become quite astonishing 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 US alone. This surge is, of course, driven by e-commerce sales, which have also been rising at a dizzying pace. Pandemic lockdowns and closures contributed to the record high e-commerce sales surge of Q2 of 2020. And while these figures are levelling 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 behaviour. And on top of everything, consumer demands are also shifting and evolving at an accelerated pace.

Today’s online shoppers not only want more and cheaper products, they also want them delivered to their doorstep by tomorrow morning, if not sooner. Amidst this whirlwind, last mile logistics providers are on the verge of a revolution in sustainable logistics whilst also experiencing a period of urgent and challenging transition.

How technology is (literally) driving innovation in last mile transport

With each year, we see an increase in electric vehicles among last mile delivery providers – yet there are hundreds of thousands of petrol-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, adapt to the market, predict risks, and make confident investments in electric 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 consignment size and distance from the final consumer.

Today, the final mile link in the supply chain is under enormous pressure and scrutiny to change and adapt at lightning speed. But it’s important to remember that a company’s last mile solutions are only as robust as its supply chain planning infrastructure and the ability to provide visibility and connectivity across all the “miles” in the supply chain journey.

1. First mile logistics – manufacturer to primary distribution warehouse: The first mile of an item’s journey usually takes it from the production facility to the primary distribution warehouse and typically involves shipping containers and international land or sea freight. With improved and more integrated quotation and schedule management systems, both retail and commercial vendors, as well as supply chain managers, can achieve 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 gain an accurate overview of their budgets and to coordinate their networks in the event of disruption or delay at this early stage.
2. Middle mile logistics – warehouse to regional distribution centre: The middle mile takes goods from the primary distribution warehouse and transports them to regional distribution centres, closer to the final consumer. This typically involves large, long-distance transport lorries. Where there used to be only a handful of regional warehouse hubs to serve large areas of the country, the Amazon effect has resulted in a need for often hundreds of local distribution hubs to provide next-day or same-day delivery turnarounds. In order to meet this relatively new demand, supply chain managers require larger mid-sized vehicle fleets and more sophisticated cloud-based systems to coordinate local drivers.
3. Last mile logistics – distribution hub to final customer: The last mile, of course, involves the product reaching the customer’s doorstep. More than first and middle-mile logistics, last mile has experienced 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 fulfilment and changing customer expectations

For delivery operations, the real activity begins after the customer has placed an order. But increasingly, customers expect to be involved in the fulfilment process at every stage along the way. The development of smarter, more transparent digital supply chain technologies has made it easier and more efficient for companies to manage complex logistics networks. But the other side of that coin is that it is 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 customer loyalty.

The following are some of the fastest emerging customer service expectations:

• Guarantee of prompt fulfilment: Despite the pandemic-induced strain on global supply chains, customers have become accustomed to fulfilment times of two days or fewer – and are showing a growing intolerance for anything else. A comprehensive consumer survey conducted in 2020 showed that not only were customers interested in the fastest delivery possible, but that 65% of them were willing to pay considerably more to achieve this. For businesses, this means the pressure remains on last mile delivery resources to improve their digital networks and become ever more agile, responsive, and scalable.
• Seamlessness and customisation: Companies lose billions every year due to basket abandonment. And while promised delivery speed plays a huge role in this, it is not the only factor. Experience has shown that a major cause of churn and basket abandonment is an apparent lack of engagement with the customer. Today's customers want seamless omnichannel experiences that continue online from where they left off in store. They want to customise their delivery options, see exactly where their items are 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 believed that certain products such as spectacles or shoes would always be bought in brick-and-mortar shops. At that time, 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 became accustomed to obtaining 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 representatives from the various suppliers 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 satisfied with same-day delivery for their personal goods, yet same-month delivery for their professional ones. Clearly B2B and B2C supply chains are very different, but, nonetheless, B2B customer demands are evolving rapidly and last mile providers should take note of these changing expectations.

Meet rapidly evolving customer expectations with modern last mile delivery systems

Last mile delivery technology and supply chain digitalisation

In the world of online shopping – for both B2C and B2B – there are more digital touchpoints than ever before. Sensors collect data during the sourcing and manufacturing stage, Internet of Things (IoT) devices send and receive streams of data and information, 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 everything running smoothly.

This integrated, data-driven approach empowers businesses with the following capabilities:

Automated despatching

This uses an algorithm to match a delivery task with a specific driver based on predefined priorities and rules. By introducing AI into the equation, the system can simultaneously analyse complex data points such as the driver’s location and type of vehicle in relation to the package size. And with a cloud-based app, the driver and dispatch system are always in real-time contact.

Route optimisation

Once the despatch 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 the density of delivery addresses in a particular area. And once again, user-friendly mobile apps keep drivers informed at all times.

Load optimisation

Businesses (often even competing ones) typically make efforts to amalgamate long-distance and container freight based on destination and specific handling requirements. For a single trans-Pacific crossing, this is not such a complicated task. However, when that cargo is broken down into thousands or millions of individual orders, each with unique delivery destinations and schedules, the task of load optimisation becomes rather 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-empty 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 on the driver to estimate 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 enables dispatchers and customers to know where drivers are without the need for any additional hardware.

Last mile distribution logistics and asset sharing

As of October 2021, sales figures for ride-sharing companies were up by as much as 100% year-on-year. And in urban centres, 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 doing the sums and asking similar questions about their company-owned fleets. Most businesses have peak periods when their fleets are stretched to capacity, and then quieter times when they are paying to keep and maintain these expensive resources.

With intelligent supply chain planning platforms, IoT networks, and cloud-connected assets, businesses can implement a flexible network of delivery providers – much like the ride-sharing model – to scale up and down as needed. The simplest use of this “crowdsourcing” approach allows businesses to integrate similar types of vans and lorries from neighbouring delivery providers into their own existing fleets.

The more advanced model involves integrating a hybrid network of alternative vehicles into their existing operations. Some deliveries, for example, may be best served by consolidating packages into a larger networked vehicle, then pairing downstream with e-bikes or delivery robots 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, once again, an essential component of the system.

Last mile transport: alternative vehicles and networks

We have examined alternative business models and some of the technologies that support intelligent 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 revolutionising 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 nearer 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 advancing rapidly. This is due to advances in battery technology and vehicle engineering, as well as more strictly 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 plan delivery routes that incorporate charging opportunities. As high-speed inductive charging stations become more widespread, this capacity will become even more relevant. Fast and abundant 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 items such as e-bikes and scooters, which are increasingly entering the last mile logistics network. At present, 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 applications that drive these networks are becoming easier to use, ensuring that drivers can be connected to both the control tower and the customer interface… all in real time, of course.
• Drones and autonomous fleets: In recent years, drones have found a role within the distribution network as automated pick-and-pack and stock management robots. In the near future, as security and tracking challenges are resolved, we should expect to see greater use of last mile drones in urban areas. Even seeing them used in novel ways, such as small fleets of delivery robots that are deployed from a larger lorry to serve a particular geographical radius.

Next steps towards 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 unsung heroes of the supply chain fulfilment process. Despite a great deal of highly publicised supply chain disruption, they ventured out into the world when we couldn’t and kept us supplied with flannel trousers, bread makers, and yoga mats – not to mention basically everything else. In many ways, the world will never be the same as it was before 2020, and that includes how we shop and how we expect those things to arrive at our doorsteps.

Sustainability targets, increased competition, and razor-thin margins are contributing to a challenging future for last mile delivery. But we are also witnessing powerful innovation in specialised software and many new technologies and ideas that indicate a future that is more sustainable and profitable than ever before. To begin the digital transformation of your logistics operations, contact your software supplier to find out about the best solutions for your specific needs and challenges.