What is Last Mile Logistics, and How Can You Cut Costs?
January 22nd, 2021
At a glance, last mile logistics looks simple enough if you frame it as companies only needing to transport goods from a warehouse or distribution center to end customers. However, a closer look will reveal its complexities and the fact that last mile deliveries account for a considerable amount of overall logistics costs. Fortunately for businesses, there is a way to cut down on last mile logistics costs.
What is Last Mile Logistics?
Last mile logistics is the movement of packages from one hub to the end destination. It is the final step in the logistics process and is the most expensive, too. Last mile deliveries may seem like a straightforward concept, but their execution is complex.
For one, last mile deliveries differ in terms of distances. Some goods may only require travel of a few blocks while others will have to be brought many miles away from the distribution center. What makes last mile delivery even more complicated is that not all routes are the same. Some deliveries will require drivers to navigate crowded roads in bustling cities, traverse major highways and roads, or go to isolated rural areas.
Transporting goods from one point to another is nothing new, but factors influencing transportation costs are evolving. It's beneficial for businesses to get a good grasp on last mile logistics, as doing so will lead to cost savings and provide the company with a competitive advantage.
The Importance of Keeping Last Mile Logistics Costs Low
Last mile deliveries account for roughly a third of the shipments’ overall costs, as they are the most complex part of the goods' journey. Cutting down on this cost will mean a higher revenue for the business.
Optimizing last mile delivery is more important than ever given that global shipments are continuously rising. Sales from e-commerce are growing exponentially since more shoppers are turning to online shopping for their needs while the threat of the COVID-19 pandemic continues. Nearly everything these days is being ordered online, from beauty products to electronics, which is why businesses must also prepare for the steady increase in sales and higher delivery volumes.
What Makes Last Mile Logistics Expensive?
There are different factors affecting last mile logistics costs. Here are the major ones
Demand for quick order fulfillment
There was a time when consumers would be pleased with being able to order online even if they had to wait for some time for the delivery. Those days are gone now as faster order fulfillment times have become the norm. On-demand orders are on the rise as well, and this means ensuring that products are moved at a much faster pace for shippers.
Time spent on the road
Drivers often have to use local roads as they are delivering multiple goods to various locations in a city. Unfortunately, many city roads require drivers to go at lower average speeds, increasing fuel consumption and forcing them to spend more time on the road for short distances.
Multiple stops mean more idling and downtime
Dropping off orders in urban areas that are filled with traffic lights and winding streets also lead to more idling. A delivery truck, on average, consumes 0.84 gallons per hour when idling.
Multiple stops can push drivers to find roads on their own and rack up higher mileages. Studies have revealed that out-of-route miles account for around 10 percent of the overall mileage of a fleet.
Missed and failed deliveries
Delivering products to end consumers means ensuring that the customer can sign-up for the package. Failed deliveries cost businesses a lot as, on average, a single failed delivery costs the business $17.78.
What's the Business Impact of High Last Mile Logistics Costs?
Sadly, around five percent of last mile deliveries are failed deliveries. High failed delivery rates will cost businesses a significant amount of revenue given that each failed delivery costs more than $17. Ignoring the cause of failed deliveries will end up in considerably higher operating costs.
Aside from inflating operating costs, failing to optimize last mile logistics also affects repeat business. Consumers expect to get their goods on time, and businesses that fail to meet this expectation will also fail to gain customers’ loyalty.
Plus, customers may also end up canceling their orders if they feel the company is taking too much time to deliver what they ordered.
How Can You Cut Down Last Mile Logistics Costs?
There are ways for enterprises to lower their last mile logistics expenses, and route optimization is one of the best methods. Optimizing routes can help a business manage their fleets more efficiently, reduce failed deliveries, and increase delivery capacity.
Route optimization is about finding the fastest and most cost-efficient routes so drivers can deliver more packages in a day. Optimizing routes can be done by investing in a dynamic route planner, which can handle the complexities of route planning better than any human planner.
Route optimization software factors in all the different variables when determining the most efficient routes and schedules for the drivers to follow. It helps businesses deliver the product as fast and with the least cost as possible with these features.
An advanced route planner uses GPS to track the location of drivers in real-time, thus allowing the business to provide the accurate ETAs.
Automatic customer alerts
The route optimization software also sends customers automatic alerts regarding the location of the driver. This capability is beneficial in reducing missed deliveries.
Planned deliveries are difficult to handle, but on-demand deliveries are even harder to manage. Fortunately, an advanced route planner can reroute drivers according to driver schedules, current location, package location, and planned destinations, to accommodate new orders for delivery.
Last mile logistics is not as simple as it looks. It’s a complex operation that eats up a large chunk of a business operating costs. Failing to address inefficiencies in last mile logistics will hurt the business’ profitability, as operating costs will increase continuously and consumers will take their business elsewhere. Fortunately, optimizing last mile deliveries is possible with the help of an advanced route planner, a software that can find the fastest and most cost-efficient routes.
Schedule a demo with DispatchTrack today and find out how our dynamic route planner can revolutionize your last mile logistics.
DispatchTrack is a leading provider of SaaS solutions that enable end-to-end optimization of operations and customer experiences in last-mile delivery. The company's platform includes modular tools for self-scheduling, route optimization, customer communication, real-time tracking and ETA, proof of delivery, and delivery network intelligence and analytics. With customers across North America, Europe, South America, and Asia, DispatchTrack is used by thousands of businesses of all sizes and many multi-billion-dollar enterprises across a wide range of industries, including furniture, appliances, building supplies, food, and beverage. More than 60 million scheduled delivery experiences are powered by DispatchTrack each year. For more information, contact us now.