Last Mile Software for Reducing Logistics Costs

Last mile deliveries are often the most costly aspects of logistics. According to the 2019 Annual State of Logistics Report, the cost of transportation alone totals $1.04 trillion. And the last mile is a huge fraction of that. This can be a hurdle for modern businesses, but it also tells you that there’s room to optimize costs.

But how does transportation come to be such a huge expense? And what steps can you take to minimize these costs? The answer to both questions ultimately comes down to last mile routing. 

Understanding Shipping and Transportation Costs

Ecommerce has become an increasingly important cost center for businesses as more and more people use it for shopping. Final mile delivery is inherently less efficient than the first or middle miles. This means that the e-commerce explosion is putting new cost pressures on transportation networks of all stripes. 

Where do these costs come from? For starters, there’s fuel and labor costs, which will necessarily go up as you add more deliveries. And they'll go up substantially if you’re adding more deliveries in an inefficient way.

Then there’s back-office time and effort, software subscriptions, and assets like trucks and vans. On top of all that, it can be costly to communicate with customers. Of course, it's even more costly not to communicate with them, since it leads to failed deliveries. 

Other Factors Affecting Last Mile Costs

There are a number of factors relating to particular delivery parameters that can have a big impact:

• Distance: How long is the distance from your delivery hub to the customer’s address? How far are the drop-off points among the different stops? Are your distribution centers positioned optimally relative to order volumes in different geographies? 
• Urgency: Urgency is another significant factor that affects last mile delivery costs. For example, same-day and next-day delivery are typically more expensive than three-to-five day shipping.
• Handling: Are you shipping any sensitive goods? Do the goods need special handling and care? If you are, you might need higher-skilled drivers and technicians. 
• Delivery success rates: If delivery fails, your delivery drivers will have to make an extra effort to make the delivery again. This can effectively double the effort and cost.

Route Planning and Dispatching: The Hidden Last Mile Delivery Costs

When you’re starting a new operation, doing things manually often isn't an issue. If you're only making a few deliveries daily, scalable route optimization isn't hugely paramount. But the situation changes as your last mile delivery operations grow.

Doing things manually at scale can make it seem like you have to hire more planners to plan routes and schedules. Conventional last mile delivery processes that maximize the number of deliveries you can carry out per driver per day can result in higher fuel and labor costs and slower deliveries. Late or missed deliveries will then affect customer loyalty and future purchases

That’s why it’s so crucial to have the right system in place for last mile delivery routing.

How Last Mile Routing Software Helps Lower Logistics Costs

Last mile delivery solutions help you lower logistics costs by increasing operational efficiency at a number of different touch points. In other words, it’s about a lot more than just shaving miles off your routes. Here’s how that work in practice:

Increasing route efficiency

By reducing the amount of driving time, you can save money on fuel and reduce on overtime and driver expenses.

With last mile route optimization software, you can save time and effort in both the planning and execution stages. The right last mile delivery platform can plan complex routes quickly and efficiently, taking into account real-world factors such as traffic and weather conditions, driver skill, delivery service time, and more. On top of that, the right tool gives you the ability to modify routes on the fly.

In this way, you save time and money for dispatchers and planners in addition to drivers. 

Live ETAs and real-time tracking

Any failed delivery adds to the delivery cost and hurts your relationships with your customers. Luckily, last mile routing software can help you decrease the odds of a late or failed delivery. How? By allowing delivery stakeholders to view orders in real-time and see a constantly-updating delivery estimated time of arrival (ETA).  

Likewise, real-time tracking enables customers to track the delivery statuses without having to call the customer service team. In just a few clicks, customers will know where their packages are and prepare to receive them. This means they’re more likely to be home when the truck arrives, reducing the odds of a failed delivery. 

The key here is to find last mile logistics software with ETA calculations that are actually accurate. 

Streamlining IT

We've talked a little bit already about how much software and IT spending can contribute to overall last mile costs. But these numbers can get a lot higher when you don't have the right solution. Specifically, you can wind up spending money on redundant IT solutions when your last mile software doesn't cover the whole process from end to end.

Conversely, when your software covers routing, dispatching, customer communication, delivery tracking and more, you can actually cut out other solutions. Instead of using multiple costly platforms for planning deliveries, tracking trucks, and notifying customers, you can streamline those process into connected workflows. The result is that you're actually able to decrease your overall IT spending while actually achieving more connected workflows.

Improving visibility

The right technology gives you strategic visibility into last mile deliveries as they unfold. That means that the data you need is available to you at the right time, without you having to hunt for it. Last mile delivery visibility isn't always associated directly with cost savings, but the kind of visibility we're talking about can actually have a real impact on your bottom line.

For one thing, one you can easily track every delivery route in real time, you can more easily manage exceptions. If a truck is running late, you can reach out to the customer to let them know and potentially arrange a new time. This has the potential to prevent failed deliveries and thereby reduce costs.

By the same token, you can use real-time visibility spot exceptions that require follow-up. Let's say a driver was unable to complete a job because one of several items being delivered was damaged. Without visibility, this is another area where you don't know there's a problem until the truck comes back with the damaged item at the end of the day. The result is that you're not able to deal with it quickly, and the back-office time and costs mount up.

But if you can see the exception as soon as it occurs, you can address the exception right away. The result is that you may be able to reduce delivery costs by streamlining the process. For instance, you might be able to manage the returned item as soon as it arrives, rather than letting it take up expensive warehouse space.

Automating dispatch

Assigning tasks and dispatching drivers manually is very time-consuming, and is susceptible to human error. It's more difficult to assign new orders to drivers if the original delivery assignments have been done manually. 

If you need to reach out to your drivers whenever you make a change or want an update, the result is a lot of phone time. You can save considerable amounts of money with a driver mobile app that combines routing and dispatching into one step. This can help ensure seamless integration between planning and execution. 

Maximizing fleet productivity

Route optimization software doesn't just find the most efficient and cost-effective fleets. It also helps you maximize vehicles and increase productivity. Often, when delivery businesses lack effective route optimization, it seems like they simply don’t have enough delivery capacity.

With effective route optimization, however, you can get a clear picture of your actual delivery capacity. This helps you do more with your current assets and drivers. Utilizing your fleet to its full potential in this way will allow you avoid adding new vehicles that you don't need.

In the end, if you’re looking to cut down your logistics costs significantly, last mile delivery routing software is your go-to tool. Besides optimizing routes for your drivers, the right last mile delivery management software also minimizes human error and reduces missed and failed deliveries via real-time tracking features—all of which can help you cut down on logistics expenses.