Last mile delivery in a supply chain is an important part of the customer experience. In addition to providing customer satisfaction, there are a lot of financial and logistics concerns that affect retailer operations and the bottom line.
Understanding last mile delivery best practices can help your company improve customer service while making deliveries more efficient and gaining a competitive advantage. Solutions like contract optimization can help in this area, but continue reading to learn what other options your business might have to maximize its shipping spend.
What is last mile delivery?
Last mile delivery can include different components depending on who is defining it. But the basic explanation is that last mile delivery is the process of moving goods from a hub (e.g. a warehouse, retail location or even the manufacturing site) to the final destination and end user. That final destination can be a business customer or a consumer, or even a retail location.
Why is last mile delivery important?
Why is last mile delivery important? Let’s start with numbers. The last mile can include up to 28% of total logistics costs, according to the Bureau of Economic Analysis, or up to 41% of supply chain costs according to another source. Yet a third source estimates that last mile delivery costs are 53% of overall shipping costs. Worldwide, the average cost of last mile delivery to the shipper was $10.10. This step is also the most complicated as inventory is sent out to individual end users, often in small quantities compared to the larger portion of the retailer’s inventory.
As Amazon and other companies offer free shipping, to stay competitive, many shippers offer it as well. That means it’s a tighter economic squeeze to ensure operational efficiency. Customers want more than just free shipping, though. They want next day or same day delivery and other delivery service options.
Consumer demand for fast delivery and rising internet purchases means that finding a good last mile logistics solution continues to be not only relevant, but mandatory to keep businesses afloat. A 2018 survey of supply chain professionals showed they were experiencing a 50% increase in demand for last mile solutions over an 18 month period. Not surprisingly, much of the growth was from the consumer market, and that growth has continued as ecommerce has exploded, especially during the COVID-19 pandemic. But no matter whether growth is from consumers or businesses, the customer expectation is still there.
Challenges in last mile delivery
A successful last mile delivery strategy involves more than just getting the inventory from point A to point B. The customer expectation in the delivery process is more important than ever. Here are some of the challenges your company may face with optimizing the last mile delivery process.
Tracking: Customers want visibility into the delivery process. Even the USPS is providing this more and more these days, for Priority Mail and other service levels using tracking numbers. Tracking in real-time with automated shipping gives your customers more information into delivery times and improves the overall delivery experience. This can also decrease the amount of effort your company spends on customer service, in answering questions about where the delivery is and when they can expect to receive it.
Delivery options: You may see a customer demand for personalized delivery options like a specific delivery window, or the ability to schedule a delivery at a specific time. They may want contact information for the delivery driver.
Maintaining margins: For supply chain management professionals, it’s important to maintain profit margins, as the delivery cost could easily rise with higher service levels and greater demand. The previously referenced survey showed that 42% of supply chain management professionals said their last mile margins decreased over the previous 18 months, 17% said they increased, and 41% said they stayed the same.
Faster delivery: The speed of expected delivery time has changed, with same day delivery or next day delivery expected in return for customer loyalty. That can increase the delivery cost and make delivery operations more complex. The order fulfillment must also be completed quickly to maximize the possibility of delivery success within this timeframe.
How can I improve my last mile delivery?
Here are 8 ways to improve last mile delivery.
- Omnichannel fulfillment: Bringing the goods closer to the consumer makes it easier, faster and less expensive to ship that last mile to the customer. To do so successfully, consider an omnichannel order fulfillment strategy, where you can ship from the retail store and distributed warehouses in parts of the country closest to your customers. That means spreading out the inventory. Some inventory may be able to be sent directly from the manufacturing facility to the final customer, bypassing the distribution center or warehouse completely. This can save time and logistics costs in some cases.
- Work with the right logistics companies: If you are outsourcing your delivery experience, choose one that can provide the service levels that will meet your consumer expectations. That may mean working with a delivery company that can provide contactless delivery, visibility into the driver location and a specific delivery window. Even if you are working with an outside logistics company, consumers will think of them as an extension of your brand, so it’s imperative to find a high quality company that can represent your organization and offer a logistics solution that is right for you.
- Manage your delivery truck fleet: In some cases, it may be cost effective to manage your own delivery vehicle fleet, depending on your service area. Using transportation management software, your company can use route optimization to ensure that the route planning is efficient and factors in customer demands.
- Ensure correct addresses: One of the biggest problems in residential delivery is an incorrect address. Using software to double check addresses when customers place their orders can minimize these delivery problems.
- Alerts: Providing recipients with alerts via text, email or on a software platform is a good way to ensure the customer knows the package is coming. This tracking information can save customer service time on your end, as customers won’t need to call or email about its status. The more information your tracking can provide, the more assured the customer will be about where the package is and when it will arrive. If there is a customer problem with a specific delivery time, the customer can then reach out to the delivery company or your company before a delivery attempt is made. An altered delivery route might work instead.
- Visibility: If your company leverages shipping data and has visibility into the logistics company’s delivery vehicles as well, it’s easier to track deliveries to ensure they are providing the service promised and to deal with issues before they become bigger problems.
- Reverse logistics: Consumers want more options to return their items as well. Providing them with reverse logistics information up front makes the process smoother for everyone. The consumer knows exactly how to return an item, whether it’s shipped or returned to a store in person. The company doesn’t have to deal with phone calls and emails about returns. By providing shipping labels, even if they are self-paid, the consumer customer experience is better.
- Invoice audit recovery: You can save money on last mile delivery with invoice audit recovery as well. Your carrier agreements may include service level guarantees, like delivery by a specific time, or at a certain discount. Unfortunately those guarantees aren’t always met, and the carrier isn’t going to point that out. It pays for the shippers to stay on top of their invoicing, reviewing the invoices in depth. That is hard to do manually, and it’s time consuming, especially with a high volume of shipments.
Shipware offers an invoice audit recovery service that could not be easier for the retailer. Using proprietary software, the shippers’ invoices are reviewed nightly and any discrepancies are sent to the carrier for credit. More than $2 billion goes unclaimed each year from UPS and FedEx eligible refunds. Our clients save 1-9% on their invoices using our invoice audit recovery service.
The invoice audit recovery service costs nothing up front. The fees are paid with a portion of the savings we earn for you through our multi-point audit of review. The software can be set up in minutes, running behind the scenes with no involvement by your staff. Your carrier account is connected to our software and review and crediting happens automatically.
Invoice audit review is one part of a larger plan to lower shipping costs, including last mile delivery costs. To learn more about how Shipware can help you lower your carrier costs, including by capturing invoice audit savings, contact us online or at (858) 879-2020.