What Is Last Mile Logistics & Why Are More Shippers Looking at This Transportation Function?
Last mile logistics is among the most misunderstood parts of transportation networks. On the surface, last mile may not seem very important, but it can make up 28 percent of a shipment’s total cost. In addition, growth in e-commerce is radicalizing how shippers view last mile logistics. To understand wide-ranging benefits and key concerns inherent in last mile logistics, your organization needs to understand what constitutes last mile logistics, and it’s challenges, how it impacts e-commerce and omnichannel supply chains, why it is evolving, and how new technology improves it.
What Is Last Mile Logistics?
Last mile logistics refers to the final step of the delivery process from a distribution center or facility to the end-user. Although the name implies it, it is the final mile of delivery, but actual last mile delivery can range from a few blocks to 50 or 100 miles, explains Carrie Mantey of Supply and Demand Chain Executive. Most often, last mile logistics involves the use of parcel or small package carriers to deliver products to consumers. According to McKinsey and Company, parcel shipment is valued at more than $83 billion, and the growing e-commerce market will double in value in roughly ten years in mature markets. Moreover, shippers of all sizes have identified last mile logistics as the cornerstone to driving growth and profitability.
Last Mile Logistics Are Crucial to Modern E-Commerce and Omnichannel Supply Chains
Last mile logistics allow shippers to get more products to consumers faster and cost-effectively, both critical concerns in the e-commerce and omnichannel supply chain. In fact, consumers are willing to pay premiums for better last mile delivery services, such as same-day or instant delivery. As explained by John D. Schultz of Logistics Management, e-commerce sales are expected to reach $2.4 trillion wide by 2019, and demand on last mile logistics will grow. While established e-commerce giants, like Amazon, have perfected last mile logistics, small and midsized shippers can still take advantage of this growing market, provided they meet the challenges in last mile delivery.
Last Mile Comes With Unique Challenges
There are growing pains in last mile logistics. Urban delivery may be difficult with navigating traffic and parking regulations, and global delivery challenges may dramatically increase last mile logistic costs. One of the top challenges is getting products to consumers at the Amazon-esque rates, and more retailers are starting to offer deliver-from-store last mile services, including The Home Depot and J.C. Penny Co, reports William B. Cassidy of the Journal of Commerce.
Another challenge in last mile delivery goes back to complexity. Large products may require assembly and skilled unpacking upon delivery, so shippers must rethink how they can ensure the final product is an accurate reflection of what was sold. While hundreds of last mile carriers exist, not all offer assembly options, which might be categorized as an added service. Other products may require specialized installation by skilled technicians. Yet, more bulky items are moving from traditional retail to consumer direct shipping models, and consumers want speed and visibility in every stage.
Capacity reflects another problem in last mile delivery. Previous blogs have touched on the importance and fears surrounding the capacity crunch and the driver shortage, and these problems are not going away. Shippers must find ways to overcome these challenges and meet the new challenges in last mile delivery to remain competitive.
Some possible ways to overcome these challenges include the following:
- Delivery lockers could hold products for consumers seeking to pick up products at set locations, like Amazon’s storefront pickup locations.
- Drone and robots can aid in delivery too, but they are not quite ready for prime time.
- Better route optimization technologies can also help reduce woes over last mile capacity while cutting last mile costs.
- Shippers may also offer better incentives to truckers looking for career opportunities and positions with fewer regulations and rules.
Modern Shipping TMS Must Handle Last Mile Delivery Too
The key to visibility lies in asset and shipment tracking, and new systems, including transportation management systems (TMS), must be able to handle the increased level of services and frequency found in last mile delivery as e-commerce grows. In fact, a modern TMS can help shippers manage last mile delivery through automated asset tracking and alerts to both shippers and consumers. This improves visibility from end to end and reduces risk.
Existing Companies and Startups Seek to Take a Marketshare, So Shippers Must Act
Amazon’s recent purchase of Whole Foods Market alludes to a growing trend in last mile logistics; all industries and shippers must be aware of the forthcoming Amazon-Effect, reports Daniel Gross of Slate.com. This will bring products not typically purchased online to the last mile conversation, along with new expectations for last mile delivery and service. Unfortunately, last mile logistics continue to dominate costs for shippers, and more startups are looking for ways to take advantage of this often-underappreciated marketplace. Shippers must act to ensure their companies continue to thrive as more consumers demand better, faster service in last mile logistics.