Even the best-laid fulfillment strategies can break down when it comes to the “last mile” of package delivery. The final stretch from a fulfillment center to the customer’s home or office is the most logistically intricate. It is also the most costly, accounting for at least half of the total cost of delivery. Businesses face everything from traffic congestion and package theft to rising labor and fuel costs. It’s where efficiency, cost, and customer experience converge.

“The last mile is the most expensive leg of the delivery journey because you’re moving a small number of packages to individual addresses,” says Tony Jasinski, partner overseeing North America at Last Mile Experts, a last-mile logistics consultancy firm. “Unlike warehouse drop-offs where shipments are consolidated, the cost per stop in last-mile delivery is significantly higher.”

Meanwhile, package delivery shows no signs of slowing down. According to McKinsey, even as mail volumes decrease globally, parcel volumes are on the rise, with a 6% to 9% CAGR between now and 2028. B2B e-commerce deliveries are also on the upswing, according to the International Trade Administration, fueled by industries such as advanced manufacturing, energy, healthcare, and professional business services.

As package delivery expectations grow, both business-to-consumer and business-to-business organizations will increasingly seek innovative strategies for the final leg of the fulfillment journey. “The future of last mile will be hyper-local, tech-driven, and deeply collaborative,” Jasinski says. “Those who master the balance between efficiency, flexibility, and sustainability will lead the pack.”

We spoke with experts in the logistics field about four key trends in last-mile delivery. From micro-fulfillment centers and crowdsourcing to e-bikes and parcel lockers, here’s what businesses are doing to bring efficiency, cost reductions, and sustainability to the last mile.

Micro-fulfillment centers: reducing distance, increasing speed

As delivery demands increase, it’s no longer enough to have massive fulfillment centers on the outskirts of major metro areas. The time it takes to travel back and forth between final destinations and these sub-rural fulfillment centers has become untenable.

Enter the rise of the micro-fulfillment center. Micro-fulfillment centers (MFCs) are small, technology-driven facilities that allow retailers to store high-demand products closer to consumers. These centers also use automation, robotics, and AI-powered predictive analytics to increase the speed and accuracy of inventory management, order processing, and warehouse operations.

“Companies that are investing in micro-fulfillment are providing more value to their customers, increasing customer satisfaction, which in turn increases revenue,” says Bill Catania, founder and CEO of OneRail, a provider of last-mile orchestration software that integrates with SAP’s ERP system.

Micro-fulfillment centers are not just about speed—by decentralizing inventory, MFCs can reduce dependency on long-haul transportation and lower fulfillment costs. Their expansion into urban and even rural areas is helping businesses create highly localized fulfillment networks that improve service reliability and reduce carbon footprints.

Walgreens is just one retailer that plans to intensify its focus on MFCs. It currently has 11 centers servicing 4,500 stores and will build additional MFCs to support 6,000 stores in the next year, according to the CEO in a Q1 2025 earnings call.

According to McKinsey, delivery speeds accelerated by about 40% between 2020 and 2023. This was due in part to shippers’ investments in shortening the distances needed to travel and acquiring the technology needed for route planning and package tracking.

Key considerations: MFCs require additional investment in both technology and real estate. According to Nearby Engineers, a construction engineering firm, the upfront cost to build a 10,000- to 12,000-square foot center is US$3 million to $5 million. However, because of the reduced cost per order and speedier order processing, the payback period is typically two to three years.

In terms of real estate, businesses need to use AI to analyze demand patterns and create partnerships with fulfillment service providers before determining the best location to house an MFC.

A big hurdle is integrating the disparate logistics systems of MFCs and larger warehouses. Companies need strong API-driven platforms that connect both types of fulfillment centers, as well as the various carriers and tracking systems involved.

Crowdsourcing: the flexible workforce powering deliveries

Businesses are shifting away from a reliance on just one or two large logistics partners or owning their own fleet of vehicles. Instead, they are looking to a crowdsourcing model, where—in addition to their internal fleet—they deploy a mix of local drivers and regional delivery companies that can meet a range of delivery needs. This multimodal model allows daily and even hourly turnaround. With this approach, businesses can reduce delivery costs while also responding quickly to demand spikes.

In a 2024 survey by global consultancy AlixPartners, three out of four retail executives reported they are using a mix of last-mile options. Two out of five said they made some volume switch away from either FedEx or UPS to other providers in the past year. Just last year, workwear retailer Duluth Trading Co. credited its strategy of adding new carriers to its transportation mix for a reduction in its outbound shipping costs.

The need for flexibility is also reshaping the last-mile model. “Even large players like FedEx and UPS are tapping into gig economy drivers, giving them the ability to scale up or down rapidly—which is crucial in today’s unpredictable demand cycles,” Jasinski says.

Key considerations: For a multimodal model to work at its best, manufacturers must use analytics and AI predictive planning tools to optimize route planning, driver assignment, and service reliability.

“The ability to have a multi-carrier strategy is enabled first by technology. You have to have some type of decisioning and connection to all these carriers to ensure alignment with service levels and cost efficiency,” explains Catania.

Ensuring service consistency remains a key challenge. Businesses need to implement strong vetting processes for third-party carriers and invest in technology to monitor performance. AI-driven dispatching, real-time tracking, and automated service-level agreement enforcement can enhance reliability.

“Routing and orchestration are where AI shines,” says Catania. “It’s not just about moving goods—it’s about merging demand sensing with transportation decision-making to optimize every single delivery.”

Jasinski agrees. “By analyzing historical delivery patterns, businesses can optimize their driver networks—for instance, proactively dispatching more drivers to zones that typically spike in volume every Thursday. It’s about using data to make smarter, more agile decisions.”

E-bikes: a sustainable shift in last-mile delivery

Cities pose many challenges to last-mile deliveries, the biggest of which is urban congestion. Not only does congestion cause delays, but the resulting truck idling time also contributes to increased carbon emissions.

Some cities, particularly in Europe, have begun to enforce air-quality regulations that affect idling time or the use of internal combustion engine vehicles. Others have instituted congestion control measures, such as establishing restricted zones and charging a fee for delivery trucks entering the city at peak congestion times.

Such challenges are spurring interest in e-bikes and electric cargo bikes as a viable, effective mode of package delivery. Unlike drones, which have also been postulated as a low-emissions way to bypass traffic and speed delivery, it’s this twist on a classic method of travel that’s actually gaining ground.

Cities around the world are either legalizing the use of e-bikes for deliveries (such as in London and New York City) or instituting pilot programs (such as San Francisco and Boston).

“Cargo bikes are already in use in major cities like New York and are even expanding into rural areas,” says Giacomo Dalla Chiara, a research engineer at the University of Washington’s Urban Freight Lab.

These aren’t just food deliveries. The larger-size electric cargo bikes can handle hundreds of pounds of cargo in an enclosed cab, making them fit for home deliveries as well as B2B deliveries like office supplies.

These vehicles also reduce another area of delay: parking. Once delivery truck drivers secure a parking space after circling city blocks in search of one, they are loath to give up the spot and, instead, head out on foot.

According to Dalla Chiara, drivers spend close to 80% of their time outside their vehicles in urban settings. “Drivers want to park safely in an area that won’t cause problems, usually parking in one spot and staying there for a while to do multiple deliveries.”

Key considerations: Scaling e-bike networks requires dedicated infrastructure, including secure bike lanes and MFCs to bring goods closer to their destination. Urban logistics companies have begun investing in bike-friendly microhubs. “Cargo bikes will never take over,” Della Chiara says, “but they can play a role in making delivery more sustainable and operationally efficient.”

Partnering with local governments to improve urban planning will be crucial for long-term adoption. As urban and suburban logistics landscapes continue to develop, businesses will need to adapt to new regulations, new technologies, and shifting consumer behaviors.

Parcel lockers: improving convenience and reducing waste

Just as post-office boxes centralize mail delivery in a designated place for secure recipient pickup, parcel lockers are becoming a fan favorite for companies looking to deliver packages in a safe, efficient way.

But unlike traditional PO boxes, parcel lockers are accessible at any time of night or day at various public locations, often in high-traffic areas. Today’s parcel lockers, which are most often found in metro areas, accept packages from multiple carriers and provide secure storage, reducing theft and lost packages. By allowing drivers to drop off multiple deliveries at a single location, they cut down on fuel costs, delivery time, and urban congestion.

According to Jasinski, sustainability remains front and center. “Parcel lockers, for example, help eliminate unnecessary driving and reduce emissions. They’re a key piece of green logistics strategies in Europe, and adoption is growing quickly in North America.”

Parcel lockers also reduce the need for multiple delivery attempts and eliminate the risk of failed deliveries and package theft.

In late 2024, New York City expanded its pilot program to install lockers on public sidewalks throughout the city, both to counteract the reported 90,000 packages lost or stolen per year, and to reduce the congestion caused by trucks delivering up to 2.5 million packages delivered citywide per day during the holiday shopping season.

Key considerations: Widespread adoption of parcel lockers requires close collaboration between businesses, logistics providers, and municipal governments. Regulatory hurdles can hamper installation or expansion of parcel lockers, according to management consultancy Kearney. For instance, some cities have strict limitations on where locker facilities can be placed and how they should look, Kearney says, and construction permits or real estate taxes might also apply.

Additionally, businesses need to educate consumers on the advantages of parcel lockers to increase utilization. One way to do this is to integrate locker pickup options into the e-commerce checkout process. High utilization is key to recouping the initial costs of parcel locker installation and operating the network, McKinsey says.

Parcel lockers also depend on MFCs to keep high-demand products stocked closer to consumers, ensuring faster replenishment and reducing delivery delays. By integrating MFCs with locker networks, companies can streamline inventory management, minimize transportation costs, and improve overall efficiency in last-mile delivery.

The road ahead: innovation and adaptation

Last-mile delivery is at the forefront of logistics transformation. Companies that adapt to these trends will not only drive efficiency but also contribute to a more sustainable and customer-centric future.

Looking ahead, Jasinski sees even more disruption on the horizon. “AI-driven routing, dynamic pricing, and automated micro-fulfillment are no longer futuristic concepts—they’re quickly becoming table stakes for any serious last-mile operator.”

Businesses must stay ahead of the knowledge curve, continuously exploring innovations like drones, autonomous vehicles, and advanced data analytics to remain competitive.

“Without technology, carriers will not survive,” Catania says. “Technology is the key to driving transformation, improving efficiency and meeting modern delivery demands.”