Carriers

Discover how to navigate the complexities of last-mile delivery and explore the role of technology in shaping the future

What is last mile delivery? Last mile delivery is simply the final step in the e-commerce package delivery process. As the product moves from the vendor to the end consumer, it goes through many phases: shipment preparation by the vendor, hand off to carrier, the sorting and processing by carrier, actual movement from the local sorting hub at origin to regional hubs, and finally delivery to the local hub at destination. Last mile is the stage of delivery that takes place at the local destination hub to the endpoint delivery, aka, your doorstep or porch.

If we think back to the days when we were all working in office buildings, many of us simply had our packages delivered to the office. In the office I worked at, the UPS delivery showed up at lunchtime and dropped off a cart full and even more during peak season. Today, most of us are working remotely, that same delivery driver that was delivering a cart full of packages to one location is now delivering each of those packages to someone’s home. Imagine going from one stop to drop off many packages to now having many stops to drop off one package at a time. You don’t have to be a mathematician to see the stress this puts on the whole system, not to mention the cost escalation.

We are living in interesting times; it’s been a crazy ride the past few years. We had the shift in where parcels are being delivered to, the boom of packages in 2020 through 2022, followed by a bit of a cool off since then. So, there was a lot of investment in the logistics infrastructure during the boom and now it’s not being used to full capacity. Luckily, the cool off isn’t here to stay, most studies are showing a steady increase in volume for the remainder of the decade.

Shifting Consumer Preferences and Carrier Strain

At the start of the pandemic, we saw an explosion of eCommerce growth. During the first few months, the industry experienced over 70% growth and a 3% increase in first-time shoppers. Most first-time pandemic shoppers have become regular online shoppers. These and other factors have created more home deliveries. In a recent survey, 83% of U.S. consumers expect a home delivery is supported by the online retailer and 64% prefer home delivery.

The combination of consumers’ preference for home delivery, their expectation of free delivery, and their willingness to prioritize cost over speed (68%) is putting significant strain on carriers. Hence, carriers are looking for ways to reduce their last mile delivery costs. I would assume one of the top questions being asked is “how can you get a delivery driver to double the packages being delivered per shift”. This is easier said than done.

eCommerce - United States | Statista Market Forecast

Innovative Solutions

There are a number of solutions being implemented to address last mile delivery.

Parcel Lockers

There are a number of solutions being implemented to address last mile delivery. In Europe and Asia, parcel lockers are very popular and seem to be an answer, although not the answer. Lockers mimic the office situation I started with, the driver can deliver many packages at a locker and move on to the next, reducing the number of stops while increasing the number of deliveries, which leads to cost cutting.

However, Americans, in survey after survey, prefer a doorstep delivery by 64%. How do you change this behavior? With the continuing focus on the cost of shipping, will we see free delivery eventually go away? As shipping costs continue to rise, we're witnessing a shift towards strategies like limiting free returns, increasing minimum order quantities for free shipping, and promoting slower ground shipping options. While large online retailers with high margins may continue to offer free shipping, many smaller businesses are finding it increasingly challenging to absorb these costs.

When consumers are forced to pay for shipping, they are more likely to choose the least cost option. If an alternate delivery, such as parcel lockers, can offer significant savings, they may quickly become a popular choice. It will be interesting to see how lockers play out in the U.S. over the coming years. All major carriers [UPS, FedEx, USPS] are looking at locker solutions. Lockers are good in densely populated cities, but not a good option in rural America.

Micro Fulfillment Centers (MFCs)

Micro fulfillment Centers (MFC) are another solution being used to address and reduce last-mile costs. MFC basically brings the product closer to the consumer. However, it isn’t a one-size fits all solution. But if your business fits the MFC models, it can help reduce costs and speed up delivery. They can be particularly effective for businesses with high-demand products, seasonal spikes, or concentrated customer bases. For example, retailers often utilize temporary MFCs during peak periods, such as Halloween, to ensure timely delivery of seasonal items. MFC operations are ideal for fast turn-over SKUs and a concentration of demand near the MFC. For companies that have high demand products and a large customer base in specific areas, setting up an MFC is easy, fast and cost effective. Again, while MFCs are great, it’s not a solution for every online retailer, and you need a few MFC locations to really make it work.

Emerging Technologies

I am very excited about the future of last-mile deliveries. I think we are in for some really big changes. AI will allow carriers to process massive data faster and will result in better decisions. For example, AI may help aggregate pick-ups and deliveries. Maybe delivering a day earlier or a day later will reduce the number of stops while increasing the number of deliveries per stop. I am also interested in seeing what happens with autonomous driving vehicles. Elon Musk is promising RoboTaxis and robots this decade. I wouldn’t bet against a man that put a rocket in space. How will these technologies change deliveries?

While new technologies make big promises, we wait to see how easy they are to implement, and if they are scalable for small, medium and large shippers. We are seeing the heavy investment being made in AI by very deep pocket companies, while smaller companies operating on low margins are limited in the dollars they can invest in one area. Luckily, for small and medium and even large retailers, the need for heavy investment will not be necessary. They have the option to partner with a solution like ProShip, which delivers significant and cost-effective improvements to consumer delivery experiences using advanced algorithmic models and incorporation of AI-generated data. I think these technologies will dramatically change local deliveries and C2C shipments.

Looking Ahead

I am sure we all agree shipping costs will continue to increase unless big changes are implemented. New technologies are on the horizon, and it will be exciting to see what is around the corner. I imagine a day when I get a message letting me know my package has arrived, I walk up to an autonomous vehicle and pick up my package. After 2030, yeah, I totally see a robot coming to the front door. I wonder if the robot will also assemble that Ikea entertainment center?

As the challenges of last-mile delivery persist, businesses must seek innovative solutions to streamline their operations and stay competitive. Advanced shipping software can be a game-changer, offering features like business rule automations, real-time tracking, and automated notifications. By investing in the right technology, companies can improve efficiency, reduce costs, and enhance customer satisfaction.

Are you ready to explore how shipping software can transform your last-mile delivery? The ProShip solution has all the features online shippers need to manage their last-mile needs, including managing one or many MFCs to really offer a seamless omnichannel fulfillment solution. Contact ProShip multi-carrier shipping software to learn more in a no-pressure discovery call.