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6 Minute Read

6 Proven Ways to Reduce Your Last Mile Delivery Costs

Between 2018 and 2023, last mile delivery costs went from 41 percent  oftotal shipping costs to 53 percent. There’s a host of reasons for that, including fluctuations in fuel and labor costs, but whatever the reasons the upshot is the same: most last mile delivery organizations need to find ways of managing their delivery costs.

last mile delivery costsLike most things in last mile logistics, this is easier said than done. Without total visibility, connectivity, and control across your last mile, it can be difficult to even measure your delivery costs accurately, let alone optimize them. 

Luckily, there are ways to gain that measure of last mile visibility and control, and from there to optimize delivery costs across the board. It’s all a matter of spinning up the right programs and leveraging the right strategies—which is exactly what we’re going to go over in this article. 

1. Audit your existing costs

You can’t optimize what you can’t measure. That’s why it’s so important to start out by thoroughly auditing your existing delivery costs. This can encompass more than you think:

  • Fuel costs
  • Driver pay
  • Fleet assets/maintenance
  • Router/dispatcher/customer service team pay
  • Technology spend
  • Warehouse/hub space
  • Reverse logistics/returns
  • Wastage

To get a handle on these costs, and any others that may crop up, you need to start by gaining clarity into what’s actually happening on each of your delivery runs. You want to be able to pinpoint how much it costs you per route, per case, and per delivery to administer the last mile. 

When you can visualize this information in depth, you can pinpoint areas to focus on. 

2. Improve customer visibility and communications

One of the major cost centers that last mile delivery businesses encounter is unplanned returns and everything that comes with them. There are always going to be last minute cancellations, but the last thing you want is for a driver to load product into a truck and make it all the way to the customer site with it, just to have to turn around and haul it back to the warehouse. For one thing, it’s a recipe for damage. 

This kind of incident, and the associated costs, can be significantly reduced by upgrading your customer delivery experience. One DispatchTrack customer—Morris Furniture—was able to reduce unplanned returns by more than 30% by offering customers greater visibility into their deliveries. By sending schedule confirmations and reminders at multiple stages before the day of delivery, they managed to turn up likely not-at-homes and failed deliveries before the items were put into trucks—and sometimes before they were even routed. The result was significant cost savings.  

3. Leverage route optimization to decrease fuel and driver pay expenses

Fuel cost and driver pay scale linearly with miles driven. If you find that your fuel costs and driver pay expenses are an area that could be improved, the best thing to do is to find a way to reduce mileage and thus driver hours—this means optimizing your routes. 

Again, easier said than done. 

Paradoxically, driving fewer miles is about a lot more than the ability to find the shortest route from point a to point b. Why? Because truly efficient routes need to be fitted to the needs of your clients and drivers. They need to account for differing service times between different types of deliveries, differences in driver speed or skill, differences in customer priority, and potentially customer time window requests.

When you factor all these different variables in, your routes aren’t necessarily going to look like what Google Maps would spit out. Instead, they’ll be designed for efficient execution. In this way, you can roll out routes that aren’t just efficient on paper, they’re efficient when the rubber meets the road. 

4. Optimize IT spend

The right technology can be a huge driver of positive ROI when it comes to last mile delivery. The kinds of adjustments we’re discussing in this article don’t necessarily require a particular tool or platform, but by and large they’ll be easier and more impactful with the right technology. 

That said, more solutions isn’t necessarily better. For many in the delivery world, a best-of-breed approach to technology has predominated—resulting in disparate solutions for route planning and optimization, delivery execution, customer experience, delivery tracking, and other functions. There’s sound logic behind this, but too many solutions can actually be a hindrance. 

If you’re looking for ways to reduce overall last mile delivery costs, optimizing your IT spending by removing redundant solutions can be a big help. For instance, if you can combine route optimization with delivery execution, driver management, and last mile visibility into one solution, you can cut out the software fees for the redundant solutions. 

At the same time, this enables you to reduce silos and get more efficient overall in the way you execute your deliveries. By improving cross-functional coordination, you can optimize your last mile delivery costs even further. 

5. Digitize your proof of delivery

If we wanted to be nitpicky, we might not include this best practice under “cost reduction” per se. But improving your proof of delivery can help you get paid faster, and can even enable you to get paid on orders that the customer might otherwise have disputed—so we’ll go ahead and include it here. 

Numerous DispatchTrack customers have been able to realize more revenue, more quickly, simply by leveling up their proof of delivery. What does this look like in practice? Here a snapshot:

  • Equip drivers with a connected mobile app that sends instantaneous updates back to dispatchers.
  • Enable drivers to capture photos via the app—in addition to signatures and notes—for enhanced proof of delivery.
  • Timestamp and geostamp proof of delivery to ensure a reliable audit trail.
  • Enable drivers to take pictures to show context for delivery exceptions, e.g. a photo that shows that they reached the customer site but no one was home.
  • Make these photos instantly visible to dispatchers after they’re captured so that they can immediately follow up when there are exceptions. 
  • Send photographic proof of delivery in delivery receipts so customers have clear documentation of when and how their orders were delivered. 

When you put all these practices into place, your customers are less likely to dispute charges or claim damage that wasn’t the fault of your drivers. Even in cases where that’s not happening, it can still speed up your time-to-revenue, which can be a big help when trying to run your last mile logistics operations in a cost-effective way. 

6. Track your cost metrics and iterate

When you're talking about something as complex as final mile deliveries, you’ve got to leave room for trial and error. Not every tactic will work on the first go around—and even the tactics that work will need to scale up and evolve over time. 

That’s why it’s so crucial to track the success of your efforts via the right metrics and KPIs over time. This is another area where you can get a lot of value from the right tools and technologies—a highly connected solution that sits in the middle of your last mile logistics processes can help you gather the right data and make sure it’s always available to the right people. This way, you can turn cost optimization into an ongoing program as you work to set your organization for future success.

Want More Cost Optimization Tips? Read The Last Mile Cost Reduction Playbook:


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