5 Steps to Achieving Last Mile Optimization 

Between 2018 and 2023, last mile delivery costs went from 41 percent of total shipping costs to 53 percent. Reliable data for 2024 and 2025 won’t be available for a while, but anecdotally we can say with some confidence that the situation isn’t getting any better from a last mile cost perspective.

One reason for the high costs is that the last mile (also known as the final mile) is famously hard to optimize. Truck routes can get complicated extremely quickly, making it difficult to minimize mileage without causing chaos. Meanwhile, a single traffic jam in the morning can create a cascade effect of late deliveries and customer-not-at-homes—in the latter case your cost-per-delivery potentially doubles, since you have to make a redelivery attempt. 

But delivery businesses have tools and tactics available to them now that simply didn’t exist even a few years ago. The advent of cloud computing means that deploying best-in-class delivery software is an option that’s available to most players in the industry—and this technology is getting better every day as AI and machine learning come into their own. 

This means that there’s never been a better time to look at your last mile logistics costs with an eye towards optimizing them.

How to Achieve Effective Last Mile Optimization

At a high level, here’s a rundown of the top sources of costs that delivery organizations need to grapple with when optimizing their last mile logistics:

• Fuel costs
• Driver pay
• Assets/asset maintenance
• Inventory storage/warehouse space
• IT/technology spend
• Back-office labor (e.g. routing, dispatching, customer support)
• Item damage/wastage

How do you achieve last mile optimization in the face of such a wide variety of cost factors? It may sound daunting, but we can offer a step-by-step guide to making it happen, beginning with a foundational element of more effective logistics: end-to-end visibility.

1. Digitize and Standardize

It’s a cliche at this point: you can’t optimize what you can’t measure. But we’ll add an addendum: you can’t measure what you haven’t standardized. 

That’s why the first step to optimization is to solidify standardized and digitized processes across your logistics operations. Here’s how and why:

• Digitization: Paper and spreadsheets are the enemies of real last mile optimization. That’s why you want everything from proof of delivery to route manifests to pre-delivery checklists to customer time window preferences to truck sizes and shapes to be part of a digital process within some kind of software system. This way, you can begin to establish one piece of technology as a digital single-source-of-truth. As a bonus, you’ll also save money right off the bat by reducing paper usage. 
• Standardization: This goes hand-in-hand with digitization. When you’re collecting proof of delivery, for instance, digitally, you can effectively codify the process so that your drivers are giving you the right information in the right format, every time. Once you’ve achieved that, you can be sure that you’re making apples to apples comparisons across the board. This puts you in a strong position to tackle the next stage of the process: gaining visibility into your actual last mile costs. 

2. Gain Visibility Into Logistics Costs (Including 3rd Party Deliveries)

Again, data is the most important part of this kind of initiative, at least to start with. Once you’ve standardized your processes, the next step is to make sure that your relevant delivery data is centralized in one system where you can access the information you need, when you need it.

This should cover everything from miles driven per route to cost per stop and cost per case, as well as things like customer schedule confirmation rates, planned vs unplanned returns, not-at-homes, on-time delivery rate, and customer satisfaction scores. 

When this information—specifically the data pertaining to delivery costs—is in the right place, you should be able to establish your baseline cost metrics:

• Cost-per-case/cost-per-delivery
• Cost-per-route
• Total cost-to-serve

Once you have these metrics, they can form your initial benchmarks, and you can set cost reduction and optimization targets from there. 

Crucially, whatever platform you’re using to create a single source of truth here should also give you visibility into third party deliveries, e.g. any deliveries carried out by your 3PLs or by contractors. 

3. Optimize Your Last Mile Delivery Routes

If you’re not currently using a modern route optimization platform, one of the quickest wins available in terms of last mile optimization is to adopt one in order to decrease your total miles driven. Following this playbook doesn’t require you to leverage any specific technology solution, but routing is one area where digitizing your process is non-negotiable if you want to optimize costs.

For B2C businesses:

With dynamic route optimization, you can reduce your number of miles driven per route by around 10% at a minimum. This results in a significant, immediate reduction in fuel costs and driver hours. Using a modern software solution will also be quicker than routing by hand or leveraging a legacy solution, so you’ll save time on back-office processes as well. 

For B2B businesses:

If you’re making recurring stops every week, dynamic route optimization won’t necessarily work for you on its own. But if you leverage a hybrid of static and dynamic routing you can increase efficiency without causing chaos and destabilizing the service you offer to customers. Here, you can expect some efficiency gains, but much of the cost savings will come from a much faster routing process. This will save time for route planners and enable you to roll out new, more efficient routes more quickly.

4. Enhance Customer Experience Across the Board

We don’t often think of it this way, but improving customer experience can actually be a big part of optimizing costs. How? By preventing unplanned returns, damage, and wastage—as well as the driver hours and fuel costs that come with redelivery attempts. 

Here, the key to optimizing the process is to reduce unplanned returns and failed deliveries and to improve connectivity between your team and your customers. 

The exact cadence of communications may be different depending on your customer profile and your industry, but the key is to have a wraparound delivery experience that delights the customer at every stage: 

• Pre-delivery alerts with schedule information
• Route start and next stop alerts on the day of delivery
• Live ETA notifications
• Post-delivery surveys and receipts with proof of delivery included

Nowadays, this can also include the use of AI-powered chat agents that can instantly handle simple customer queries at any time of day or night and escalate to a human as needed. 

How does this impact costs? A few important ways:

• Reduced damage from loading product that doesn’t get delivered
• Reduced mileage and driver pay for redelivery attempts
• Potential for reduced inventory needs due to decreased returns
• Less wear and tear on assets

5. Bring Optimization to the Warehouse as Well

The last mile doesn’t exist in a vacuum. You can optimize it to your heart’s content, but if you do so in a way that leaves out other crucial parts of the logistics process, you may just be moving the problem around. At the very least, you won’t be able to capitalize on your optimizations to nearly the extent you’re hoping for. 

Let’s take warehouse management as an example. Most last mile delivery runs start at a warehouse or distribution center. You might have the driver loading the truck first thing before they start on their route, or you might have a warehouse loader doing it before the driver arrives. The trick here is to make sure that the process is the same either way from a documentation perspective. 

That means ensuring that warehouse loaders have access to the same mobile app as drivers, with the ability to scan items onto (and off of) trucks and have those scans be reflected in the correct order details. 

When you have last mile optimization software that supports this kind of workflow, you can improve your data visibility even further and speed up the handoff between the middle mile and the last mile. The result is a smoother, more connected, more cost-efficient process across the board. 

The Power of Last Mile Optimization

By this point, you may be getting the impression that last mile optimization is a little bit of a misnomer—what you’re really optimizing is an entire connected logistics process. And that means connectivity is the absolute most important key to success. When you’re able to implement a highly connected, agile, and intelligent last mile logistics solution that seamlessly connects all the disparate parts of the fulfillment process under one roof, you’re well on the path to last mile optimization. 

Cost savings, streamlined operations, and happier customers won’t be far behind. Given all of the challenges that delivery organizations are facing right now, it’s hard to overstate how valuable that can be. 

Want Tips on Reducing Last Mile Costs? Read The Last Mile Cost Reduction Playbook: