Many changes in the last-mile delivery industry have taken place in recent years. This is largely driven by consumer demand for faster delivery times and increased shipping visibility and tracking (“Where’s my package?”). Many third-party logistics providers (3PLs) are affected because they are the intermediary between receiving products from manufacturers, and getting orders to shipping carriers.
The push to improve last-mile delivery accelerated in 2020. The pandemic turned that section of the supply chain on its head as more people began shopping online due to quarantines, stay-at-home orders, and health concerns over in-person shopping.
To gain a competitive advantage in last-mile delivery, companies need to understand the top trends in last mile delivery and adapt to the ever changing landscape and improve the customer experience.
Last Mile Delivery Explained
Last mile delivery is defined as the movement of goods from a transportation hub to the final delivery destination. This is typically home delivery or a commercial business. The focus of last mile logistics is to deliver items to the end user as fast as possible.
Last mile logistics has become a popular area of interest for ecommerce businesses due to the growing demand for integrated omnichannel fulfillment. Changing omnichannel fulfillment needs have forced businesses to evaluate current transportation delivery network capabilities and make adjustments accordingly.
An increased focus has been placed on last mile logistics because, in many cases, this is a key differentiator for businesses. Because consumers can easily change where they choose to order from, ecommerce businesses and their supply chain partners must provide exceptional service to gain market share and build brand loyalty.
Top Trends in Last Mile Delivery
Here are ten trends that companies are actively testing and implementing in an effort to enhance the last mile delivery process and keep up with growing consumer expectations to get their orders faster and be able to track every step along the way.
1. Smart Technology to Enhance Supply Chain Visibility
Visibility and tracking are major concerns for ecommerce companies and their customers. Letting customers know the current status of their order and when a package is on route to its end destination are only the beginning of what to expect in the future. Shippers and logistics companies are exploring ways to pinpoint the exact location of orders. From using GPS and RFID tags to track the movement of shipments in real time to embedding sensors in packages in order to monitor their temperature and humidity, smart technology has enabled companies to provide their customers with the transparency and traceability they desire.
2. Cutting Costs with Analytics
The amount of information coming from the smart technology mentioned above can also help to bring down overall fulfillment costs when combined with analytics and forecasting. Analytics allow companies to monitor and discover areas to cut costs throughout every area of their supply chain.
It might not seem like minor changes will have a major impact on initial costs, but when applied to economies of scale, data analytics provide insights that can help lower costs while not sacrificing the level of service that customers expect. As a result, the overall costs of last mile delivery can be pushed further down, allowing more companies to be able to offer expedited shipping options like two-day and even same-day delivery services.
3. Last Mile Delivery Will Enable Faster Fulfillment
Due to the Amazon Effect, consumers want their products delivered in two-days at the very least, and companies need to fulfill their orders at an ever increasing pace. Shipments that previously required days to process are now being forced into hourly time frames, if not faster.
Last mile delivery is increasingly in a position to become part of this movement toward faster fulfillment. By the time the order comes through an ecommerce website, it has to be processed and ready to go, in order to meet that narrow window of expectations. Companies will have to adapt to this model or risk getting swallowed up by larger competitors that can offer it. It’s critical that you make every effort to shorten your last mile delivery window. One way to do this is to partner with a 3PL provider with an advanced warehouse and inventory management system that allows you to optimize every aspect of the order fulfillment process.
4. Urban Fulfillment Centers
Another way to increase delivery speed and to offer benefits like same-day delivery is to increase the number of warehouses or fulfillment centers. This works best in major cities where the fulfillment centers will be located close to the maximum number of customers. Amazon has driven this trend with their two-hour delivery option, especially with their Amazon Fresh offering. Other companies have started to utilize this strategy which gives them easy access to their customers and allows them to provide same-day or next-day delivery.
5. Micro Warehousing
Renting additional commercial space and utilizing it for your companies fulfillment operations is another way last mile delivery can improve order fulfillment operations. This is because, with an increase in order volume, you will need a larger footprint to be able to fulfill the spike in orders.
With more facilities dedicated to fulfilling orders, you can dedicate different micro warehouses for different types of deliveries and distribute your inventory accordingly. You could have one space for next-day and same day deliveries stocked with your most popular products and another one that provides a slower fulfillment time frame.
6. Autonomous Vehicles, Drones and Robotic Delivery Grow More Important
This might not happen in 2021, but with more companies testing and disrupting the space, self-driving vehicles or trucks will impact last mile delivery in the foreseeable future. Any ecommerce company needs to be aware of this kind of trend, even if it might be several years off. Self-driving vehicles, drones, and robots will become important factors in enhancing last mile delivery options. Once automation reaches the point where it can offer high reliability and same-day delivery, their adaptation will be near universal across the fulfillment landscape.
7. The Gig Economy & Crowdsourcing
The last mile delivery business has begun to see the emergence of technology-based solutions that utilize crowdsourcing and the gig economy to deliver products to the end customer. This has come to be known as the Uberification of the fulfillment space. Independent owners of delivery vehicles can be connected with companies that need their orders delivered in specific areas. The technology that enables this doesn’t require upfront capital investment required in traditional fulfillment and so there are less barriers to entry. Essentially, if you have a car or truck you can become the last mile part of a company’s supply chain.
Crowdsourcing last mile delivery isn’t without its challenges. There is some concern that you will have less visibility with crowdsourcing than they would with traditional fulfillment methods, since it requires a web of independent contractors that you will have to rely on. If something goes wrong with a delivery the responsibility still falls on you to correct the error.
8. Insourcing Deliveries
Rather than outsource last mile delivery to a 3PL, some ecommerce businesses are moving towards handling fulfillment themselves, relying on their own fleet of vehicles or a hybrid fleet to deliver their products. Outsourcing is still the dominant method last mile deliveries are handled, this is a trend worth paying attention to as companies look to handle their supply chain end to end themselves. This trend has inspired some 3PL providers to enhance their own, more robust last mile delivery operations to compete with insourcing.
9. Hybrid Fleet Model
Some retailers have adopted a hybrid fleet model — that is, a combination of their own insourced fleet with third-party providers and gig and crowdsourced delivery drivers. This can better allow them to scale their last mile operations with changes in demand.
A hybrid fleet method requires a transportation management system capable of coordinating all of the various aspects under the last mile delivery umbrella. This transportation management system must provide you with a centralized dashboard from which you can optimize routing, monitor vehicle location, and receive delivery updates. It should also provide robust analytics with historical reports and more.
With a hybrid fleet model, you can combine scalability and control, given that it is implemented effectively, making it one of the leading trends for last mile delivery today. While many companies are exploring this trend, it can be challenging to implement and difficult to manage all of the various moving parts. Because of this, outsourcing to a single third-party logistics provider is still the dominant method for last mile deliveries.
The technology being implemented to push the boundaries of last mile delivery is rapidly growing in complexity and scope. This is expected to continue with the growth of ecommerce and along with it the increased demand for fast and efficient last mile delivery. The solution to last mile delivery challenges is not one-size-fits-all. For some businesses, outsourcing to a third-party logistics provider may be the best combination of improved technology and analytics could be the solution to handle rising last mile delivery complexity while also lowering overall fulfillment costs. Regardless of what your fulfillment strategy is, the importance of optimizing last mile delivery is undeniable. It is important to stay on top of the trends we discussed and determine how they can best fit into your overall fulfillment strategy.
If you are looking for a 3PL to help with your logistics support we would love to hear from you. Send us a note to connect about how we can help your company grow. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support.