Today's buyers expect quality delivery services — whether you're shipping lumber to their job site or packages to their door. Last mile delivery services must be quick, easy, and predictable. Customers expect an experience that is transparent and informative in real-time to keep up with industry standards. Customers can (and will) turn to other sellers that provide quick and reliable delivery if they are not satisfied.
The high demand for urgent shipping comes from a growing emphasis on convenience for today’s consumers. With a steady rise in e-commerce sales and increased competition, retailers have found that their tried and true (traditional) parcel delivery services are negatively impacting the bottom line and not able to deliver their full range of products, often leaving bigger items with no delivery option. Even outside of retail, exceptional and fast delivery is the new normal for both personal and business items, whether they’re big or small.
The reason for inefficient deliveries is not one specific issue, but many. For example, traditional delivery partners, like the postal service or UPS, are not prepared for efficient delivery of big and bulky items. Another reason is speed — Same Day is the new normal (not an option). Another is the predictability of service and the ability to get information on their delivery. Another one is the ability to create tailored solutions that focus on the customer-centric world of online shopping. Because of these challenges, and others, many retailers are searching for alternative last mile delivery solutions to satisfy their customer’s shipping expectations.
What is Last Mile Delivery?
Last mile delivery refers to a parcel’s shipment from a warehouse, manufacturer or retail store to the final customer in a product's journey. The final customer may be located at their doorstep, retail store, or local carrier’s pickup station (i.e. a post office, Pak Mail, UPS, or a FedEx store). Last mile delivery contends with not only a variety of pickup locations but the increasingly complex tracking and locating of the final customer.
For many direct-to-consumer and e-commerce sellers, outsourcing last mile delivery is a necessity. But which service should they establish a partnership with? And how will it impact the bottom line?
Traditional Delivery Practices
Post Offices and Multinational Delivery Companies
Traditional delivery suppliers like post offices and multinational delivery companies (FedEX, UPS) have been, and still are, an excellent way to ship goods long distances. However, when it comes to last mile fulfillment and the customer experience, sellers using these services are lost in the weeds. There’s a much higher chance of carelessly damaged packages, delayed deliveries, and bad customer experiences when you are just one of many.
Working with a wholesaler used to be the best delivery option for certain sellers and manufacturers. This system made shipping easy by outsourcing the delivery process, but it has a few notable drawbacks when compared to today’s logistics processes.
Most specifically, wholesale distribution requires a lot of bulk inventory that could be sitting around for months at a time. Bulk inventory is typically discounted, as well, given the large volume. This can negatively impact the manufacturer’s bottom line.
The Costs of Last Mile Delivery
A lot has to be considered when we talk about the cost of delivery services. At the heart of the cost equation is where the inventory is stored and the distance that the product must travel before it reaches the final customer. Along with the location of speed of service and product size and weight need to be considered. The average costs of a typical last mile delivery can be broken down as follows:
- Incurred By Company: $10.1
- Charged to Customer: $8.08
- Customers Are Willing To Pay: $1.4
Brick and mortar retailers are now creating omnichannel solutions that leverage store inventory to satisfy an online order, making delivery faster and easier than ever before, but also lowering costs.
The New Approach to Last Mile Delivery
Alternative delivery networks like GoFor are quickly replacing the wholesale delivery process, thanks to a more direct, hands-on approach and less inventory management concerns. By eliminating the wholesale distributor, sellers can maintain direct, meaningful relationships with customers.
One unique example of this new approach to last mile delivery is the use of malls as limited distribution centers. In order to reach customers within quick timeframes, many retailers are allowing their mall locations to act as fulfillment centers for online purchasing and distribution. This type of opportunity hasn’t been possible until the advent of last mile delivery specialists like GoFor.
More brands are understanding the importance of owning their relationships with their customers and they need last mile providers to be extensions of their brand.
B2B Last Mile Delivery
For many B2B sellers, they have had the ability to own their own vehicles, hire their own drivers, and maintain complete control over the shipping process. However, owning your last mile process can also have some major drawbacks.
Can Your Own Transportation Keep Pace with Customer Demands?
By insourcing last mile delivery, you will need to invest in, maintain, and update your entire infrastructure as your resources age. This can get expensive quickly and not to mention less productive/not environmentally sustainable when compared to the optimization of a dedicated service provider.
For B2B and smaller merchant locations, you’ll want to understand the pros and cons of owning your last mile delivery process:
Pros of Owning Your Last Mile Delivery Process
Complete Control (and finite capacity)
By having complete control, you are fully responsible for your service quality and speed decisions You can set the tone and pace to ensure each consumer gets the customer service experience you can support. That may include branded delivery trucks, or other tailored services to help your company represent its brand.
An in-house transportation and logistics team should help with understanding the organization’s goals, values, systems, and support the right communication to customers as you manage the last mile delivery.
Cons of Owning Your Last Mile Delivery Process
Keeping Pace with Today’s New Normal
Is this even possible? Customers have shifted to a delivery first world.
It is essential to understand the costs your organization must absorb to retain full ownership and control of your last mile process. You are purchasing a finite capacity and demand increases will need to invest at each step of your growth. Among these costs, you will be responsible for:
- Fleet Purchasing
- Vehicle Insurance
- Vehicle Registrations
- Vehicle Maintenance
- Vehicle Replacements
- Warehousing Costs
- Driver Training
- Internal Personnel
- Driver Wages
- Driver Health Insurance
- IT Management
- Software Purchases
Accountability of A Complex Process
Complete control can be advantageous for a customized shipping experience, but it has its downsides. Since your shipping process will be the face of your company, any negative customer experiences will be directly associated with your brand. Across your supply chain, you must assume complete and total responsibility, especially in the area of delivery and customer satisfaction.
Logistics Management Requirements
Logistics management can be complicated, and often requires a specialist or a team of specialists to internally optimize the process. Understanding route optimization, providing tracking transparency, and catering to unique customer preferences can be a challenge, especially as your business grows. If you are insourcing last mile delivery, odds are you’ll have less time to focus on core business needs.
Lack of Flexibility & The Ability to Maintain Service Level
A finite capacity means you can not support growth when required and during this period service will suffer. Or you are forced to have excess supply and this is costly.
Choosing the Right Partner for Last Mile Delivery
When you outsource your last mile delivery service, you will likely use a third-party logistics and supply chain service (3PL) or a last mile delivery partner like GoFor. This partner’s sole responsibility is to optimize operational logistics from warehousing to final delivery.
With the right partner you ensure that you are keeping pace with the changing world that customer are appreciating including:
- Improved Scalability
- Zero Capital Costs
- Delivery Options that meet your customer expectations
- Options for brand extension
- State of the art technologies
- Service levels that can not be matched by in-house solutions
By utilizing the benefits of a last mile delivery partner, you still retain some control over the shipping process and you can eliminate a sizable investment, additional staffing, and infrastructure maintenance.
Pros of Outsourcing Your Delivery Process With a Last Mile Partner
When outsourcing your last mile delivery, the upfront costs are almost always lower.
As a B2B seller, you do not have to hire drivers and warehouse personnel or own/lease any warehouses. There is no buying, maintaining, or replacing delivery vehicles. The delivery partner provides those items and the needed staffing.
As a B2C seller, you are able to deliver goods fast and efficiently without worrying about delays, damaged goods, or a misrepresented brand.
Last mile delivery partners maintain strong relationships with a distribution network of shippers across various platforms and industries. Since their fleet is their business, they offer cutting edge hardware and modernized delivery solutions. Their improved resources provide most companies with higher-end capabilities.
Becoming an expert on supply chain logistics can take a lot of time, effort, and energy. Third-party delivery partners like GoFor have better processes to streamline your logistics with specialized experience and distribution networks. With the assistance of a last mile delivery partner, challenges can be reduced, and best practices are streamlined, providing cost-cutting insights and more time for core business needs.
Easy to Scale
For any organization with a growth plan, scalability is a necessary consideration. One of the best ways to scale your shipping and customize day-to-day operations is by partnering with a last mile delivery company. With on-demand resources, you won’t have days when trucks are sitting around gathering rust and, conversely, you won't have days where you wish you had more vehicles.
Cons of Outsourcing Your Last Mile Delivery Process
When you sacrifice complete ownership over the delivery process, your drivers aren’t your direct employees anymore. You’ll have more limited capability when it comes to direct consumer interaction, upselling, responding to questions, and other on-site opportunities. However, you can always communicate your preferences with a last mile delivery partner to establish them as an extension of your brand.
It’s important to be able to trust your outsourced delivery provider, however from time-to-time, communication can, and does, break down. A dedicated account manager and live support can help reduce communication breakdowns and ensure problems are resolved quickly.
Industries Impacted by Last Mile Delivery Challenges
Across every industry, there are unique last mile delivery challenges that can affect consumers negatively and damage the reputation of fair and honest sellers.
Here are a few brief examples below from different sectors.
If customers place orders online, they expect free or rushed delivery. When they get to the cart, and those options are not offered, they typically leave and go to another website.
Fall sales for stores have been around for many years. When a store’s inventory doesn’t arrive by the sales dates, consumers will leave and shop elsewhere.
Food and Grocery
On-time shipping for specialty food and fresh produce can make or break the bottom line for grocery stores and restaurants.
Home Decor and Furniture
Retailers have annual furniture sales and advertise their new inventory lines. When the stock does not arrive as advertised, customers lose interest and rarely return.
Once heating and air conditioning contractors order a new unit, prompt arrival at the job site is expected to quickly set up a comfortable living or working environment.
Plumbing and Electrical
Different trades rely on distributors to deliver construction material for projects and repairs. When the parts don’t arrive on time, the tradesperson has to notify their customer that there’s been a delay, which could lose the project.
Painters working on exterior projects often have to work within a weather window and avoid rain. If they need more paint, they’ll need it quickly. Paint often needs to be delivered early in the morning so painters can get on with their day. It also can't be left outside when it's cold or the paint can freeze.
Home improvement items can be bulky and cumbersome. Delivery of these items needs to be streamlined so that the items arrive undamaged, on-time.
Landscaping/Lawn & Garden
From Spring until Fall, homeowners order outdoor products because weather conditions are better for working in the yard. If the material arrives too late in the season, the homeowner becomes upset and might return the item.
Outdoor equipment retailer, Yarmand, has partnered with GoFor to deliver products during peak buying seasons impacted by blizzards and snowstorms. Thankfully, we were able to consistently guarantee delivery times of less than 2 hours, despite inclement weather hurdles.
Lumber and Building Materials
Building contractors need these supplies and work on tight schedules. If the delivery gets delayed, it can push a project back, sometimes by months.
New car dealerships expect the latest models to arrive on their lots before the end of summer. When the delivery is delayed, customers will go to another dealership.
The Future of Last Mile Delivery
What does the future hold for the last mile delivery industry? With greater interest in on-demand and outsourced delivery services, the logistics and supply chain industry is in the midst of a transformation.
Here are some trends to look out for.
Autonomous Vehicles and Trucks
The autonomous last mile delivery market has much to offer. According to TechHQ, many self-driving startups are targeting the commercial market to transport goods.
Drone delivery is a hot topic with real potential. Drones can automate last mile logistics for light package delivery to create what some people are calling the next normal. Some companies, like Aurora Aerial, have already made this a reality by testing out fleets of drones for last mile delivery.
Smart Tracking Technology
Smart tracking technology has already improved to the point where customers now have complete transparency as to where their package is on a map. With advancements in route optimization and transit predictions, this software is only going to become more accurate.
Crowdsourced delivery is a unique model that is gaining popularity — it leverages local, nonprofessional couriers to get packages to customers’ doors, sometimes in less than an hour. This model shows potential in the coming years for customers who want faster online delivery.
An Increase in Supply Chain Disruptors
Today’s consumer demand is putting more pressure on e-commerce retailers to evolve in order to retain customer retention, satisfaction, and cost-effective deliveries. Competition is creating more opportunities, and normalizing high-tech, disruptive supply chain trends.
Methods of transportation are changing, and the last mile delivery market is no exception. By moving away from fossil fuel-driven delivery vehicles, operating costs can be reduced by over 50%. The evolution of electric vehicles is expected to eventually impact larger carriers like airplanes and shipping containers as batteries and efficiency improve.
Top Last Mile Delivery Providers
- Starship Technologies
- Amazon Flex
- Ship Hawk
We Recommend Optimizing Your Last Mile Delivery With GoFor
The successful journey of your package begins with a well-thought strategy and understanding of the logistics process. At GoFor, we live for last mile delivery and are here to make life easier for managers all across the country.
Our on-demand fleet of vehicles is ready to go, meaning you can easily scale your business and focus on fundamentals without worrying about fleet maintenance, driver wages, or insurance.
Thanks to a sophisticated suite of software, we can provide you with complete transparency of our process, including data that you can use for improved customer service and route optimization software to ensure that your parcel arrives as quickly as possible.