How to Reduce Last-Mile Delivery Time & Cost

Joao Vieira

CRO at CARRIYO

Last Mile Innovation

May 6, 2024 - 8min read

ARTICLE

How to Reduce Last-Mile Delivery Time & Cost

With the rapid growth of e-commerce and the ever-increasing demand for faster and more reliable deliveries, last-mile delivery has become a critical challenge for businesses. Last-mile delivery costs, which encompass the final leg of the delivery process from a distribution center to the customer's doorstep, account for a significant portion of total logistics costs and can greatly impact a company's profitability, customer satisfaction, and environmental sustainability. In this article, we will explore the various factors contributing to the rise in last-mile delivery costs and provide practical strategies that businesses can implement to effectively reduce last-mile delivery time and costs, ensuring improved operational efficiency and enhanced customer experiences.

What are Last-mile delivery costs?

In the realm of logistics, last-mile delivery costs hold significant importance, encompassing the expenses incurred during the final and crucial stage of the delivery process. This phase involves transporting goods from a distribution center or warehouse directly to the doorstep of the eagerly awaiting customer. These costs are not to be taken lightly, as they can profoundly impact a company's bottom line, customer satisfaction, and even environmental sustainability.

Understanding the composition of last-mile delivery costs is paramount. They encompass a multitude of elements, including fuel consumption, driver wages, vehicle maintenance, and the intricate operations within the warehouse. Each of these components contributes to the overall cost of delivering goods to the customer's doorstep.

Various factors come into play when determining last-mile delivery costs. The distance between the distribution center and the customer's location is a primary consideration. Longer distances naturally translate to higher costs, as they require more fuel, driver time, and potentially specialized transportation. Additionally, the size and weight of the shipment can significantly influence costs. Larger and heavier items may necessitate special handling, specialized vehicles, or even additional personnel, all of which add to the overall expenses.

The chosen delivery method also plays a pivotal role in shaping last-mile delivery costs. Standard delivery options, while more economical, may not meet the urgent demands of customers seeking expedited or same-day delivery. These premium delivery options come with a higher price tag, as they require swift and efficient logistics operations to ensure timely delivery.

For businesses aiming to optimize their logistics operations and enhance customer satisfaction, meticulously analyzing last-mile delivery costs is crucial. By gaining a comprehensive understanding of these costs and implementing effective strategies, companies can significantly reduce delivery times and associated costs. This, in turn, leads to improved operational efficiency, increased profitability, and ultimately, delighted customers who receive their orders promptly and efficiently.

Why last-mile delivery costs are increasing

The surge in e-commerce and parcel delivery demand has had a profound impact on last-mile delivery costs. The rapid growth of online shopping, coupled with the convenience of home deliveries, has resulted in a significant increase in the volume of parcels that need to be delivered. This surge in demand has put a strain on delivery networks, leading to increased pressure on resources and higher costs.

Congestion and traffic growth in urban areas have further exacerbated the challenges of last-mile delivery. The influx of vehicles on the roads, coupled with the complexities of navigating dense urban environments, has resulted in slower delivery times and increased fuel consumption. As a result, delivery companies are incurring higher costs to meet the demands of customers in these areas.

Rising fuel and labor costs have also contributed to the escalation of last-mile delivery expenses. The volatile nature of fuel prices, coupled with the ongoing demand for skilled delivery personnel, has put upward pressure on delivery costs. Delivery companies are faced with the challenge of balancing their operational costs with the need to provide competitive pricing to their customers.

The growing demand for faster and more reliable deliveries has added another layer of complexity to last-mile logistics. Customers expect their orders to be delivered quickly and efficiently, placing pressure on delivery companies to enhance their services. This has led to investments in technology, such as real-time tracking systems and route optimization software, as well as the adoption of innovative delivery methods, such as drones and autonomous vehicles. While these advancements can improve delivery efficiency, they also come at a cost, further contributing to the rise in last-mile delivery expenses.

Why is it important to reduce last mile delivery cost

Reducing last-mile delivery costs is crucial for businesses looking to improve their profitability, enhance customer satisfaction, and boost environmental sustainability. Here's why it holds such significance:

Impact on Profitability:

Reducing last-mile delivery costs can significantly contribute to a company's bottom line. By optimizing logistics operations and minimizing expenses associated with the final leg of the delivery process, businesses can increase their profit margins. This is particularly important in competitive industries where even small cost reductions can provide a significant advantage.

Enhanced Customer Satisfaction:

Customers increasingly expect fast, reliable, and affordable delivery options. By reducing last-mile delivery time and cost, businesses can meet these expectations and improve customer satisfaction. This can lead to increased customer loyalty, repeat business, and positive word-of-mouth marketing.

Environmental Sustainability:

Reducing last-mile delivery costs also contributes to environmental sustainability. Optimizing delivery routes, consolidating shipments, and utilizing smaller, more fuel-efficient vehicles can significantly reduce carbon emissions and the environmental impact associated with last-mile deliveries. This aligns with the growing demand for sustainable business practices and demonstrates a commitment to environmental responsibility.

By prioritizing the reduction of last-mile delivery costs, businesses can achieve multiple benefits that positively impact their financial performance, customer relationships, and environmental footprint.

Optimize warehouse locations

Businesses can significantly reduce last-mile delivery time and cost by optimizing their warehouse locations. Choosing the right warehouse location is crucial to ensuring efficient and cost-effective last-mile delivery operations. Several key factors need to be considered when selecting a warehouse location:

Proximity to major transportation routes and customer hubs: The warehouse should be situated near major highways, airports, and seaports to facilitate easy movement of goods. Being close to customer hubs, such as densely populated areas or commercial districts, reduces the distance that deliveries need to travel, resulting in faster delivery times and lower transportation costs.

Availability and cost of labor: The availability and cost of labor in the chosen location play a significant role in optimizing warehouse operations. Areas with a sufficient labor force and competitive wages can help businesses control labor costs, a major component of last-mile delivery expenses.

Ability to accommodate current and future inventory needs: The warehouse should have adequate space to accommodate current inventory levels and allow for future growth. Considering factors such as the types of goods stored, inventory turnover rates, and seasonal fluctuations is essential to ensure efficient warehouse operations and prevent stockouts.

Infrastructure and facilities: The warehouse location should have the necessary infrastructure and facilities to support efficient last-mile delivery operations. This includes access to reliable utilities, proper loading and unloading facilities, and security measures to protect inventory and ensure the safety of employees.

Zoning regulations and permits: Businesses must comply with local zoning regulations and obtain the necessary permits before setting up a warehouse. Understanding the zoning restrictions and permit requirements in the chosen location is crucial to avoid delays and legal issues.

By carefully considering these factors and selecting an optimal warehouse location, businesses can streamline their last-mile delivery operations, reduce delivery time and cost, and enhance customer satisfaction.

Use smaller vehicles

Utilizing smaller vehicles is another effective strategy to reduce last-mile delivery time and cost. Smaller vehicles offer several advantages over larger ones in the context of last-mile deliveries.

Firstly, smaller vehicles can navigate narrow streets and congested areas more easily, allowing drivers to reach customers' doorsteps more quickly. This is particularly beneficial in dense urban areas where larger vehicles may face difficulties in maneuvering through tight spaces. By using smaller vehicles, businesses can reduce the delivery time and improve the overall efficiency of their last-mile operations.

Secondly, smaller vehicles can often park closer to the delivery location compared to larger vehicles. This reduces the distance that drivers need to walk to deliver packages, saving time and effort. As a result, businesses can optimize their delivery routes and reduce the overall delivery time.

Finally, smaller vehicles are generally more fuel-efficient than larger ones. This can lead to significant cost savings for businesses, especially those with large delivery fleets. By using smaller vehicles, businesses can reduce their fuel consumption and lower their operating costs.

In summary, using smaller vehicles offers a number of benefits for last-mile deliveries, including improved navigation, reduced parking distance, and increased fuel efficiency. By leveraging smaller vehicles, businesses can effectively reduce last-mile delivery time and cost, leading to improved operational efficiency and cost savings.

Route intelligently

Routing deliveries intelligently is crucial for reducing last-mile delivery time and cost. Several factors need to be considered when planning delivery routes, including traffic patterns, road conditions, and weather. Businesses can use route optimization software to create efficient routes that minimize travel time and distance. Real-time tracking systems can also be used to adjust routes as needed, based on changing conditions.

Providing incentives for drivers to take the most efficient routes can also help reduce last-mile delivery costs. This could include bonuses for completing deliveries within a certain time frame or fuel-saving incentives. It's also important to plan for contingencies, such as accidents or road closures, which can disrupt delivery schedules.

By intelligently routing deliveries, businesses can significantly reduce last-mile delivery time and cost, while also improving customer satisfaction and environmental sustainability.

Leverage technology/Implement Real-time Tracking

Leveraging technology can significantly reduce last-mile delivery time and cost. Implementing GPS tracking systems in delivery vehicles can provide real-time visibility of the vehicle's location, allowing businesses to monitor and optimize delivery routes. This information can be used to identify the most efficient routes, avoid traffic congestion, and adjust routes in real time based on changing conditions.

Providing real-time tracking information to customers enhances transparency and customer satisfaction. Customers can track the progress of their deliveries, reducing the number of customer inquiries and improving the overall delivery experience. Real-time tracking also enables businesses to proactively manage customer expectations and provide accurate estimated delivery times.

Artificial intelligence (AI) and predictive analytics play a crucial role in reducing last-mile delivery time and cost. AI algorithms can analyze historical delivery data, traffic patterns, and customer preferences to predict delivery demand and optimize routes accordingly. This helps businesses allocate resources efficiently, reduce the number of vehicles required, and minimize delivery time.

Telematics systems can provide valuable insights into driver behavior and vehicle performance. These systems collect data on factors such as speed, idling time, and fuel consumption, enabling businesses to identify areas for improvement and coach drivers on efficient driving practices. By optimizing driver behavior and vehicle performance, businesses can reduce fuel costs and improve overall delivery efficiency.

Outsource to 3PLs

Outsourcing to 3PLs can help businesses reduce last-mile delivery costs by leveraging the expertise and resources of third-party logistics providers. 3PLs can provide a number of benefits to businesses, including optimized delivery routes and processes, access to a wider range of resources and technologies, and economies of scale.

By outsourcing to a 3PL, businesses can focus on their core competencies and leave the logistics to the experts. 3PLs have the experience and resources to efficiently manage the last-mile delivery process, including route optimization, vehicle management, and customer service. This allows businesses to focus on their core operations and improve their overall efficiency.

Additionally, 3PLs can provide businesses with access to a wider range of resources and technologies. This includes access to specialized vehicles, such as temperature-controlled trucks or vehicles with lift gates, as well as technology solutions for tracking and managing deliveries. This allows businesses to meet the specific needs of their customers and ensure that their products are delivered safely and efficiently.

Outsourcing to a 3PL can also help businesses achieve economies of scale. By consolidating their deliveries with other businesses, 3PLs can negotiate lower rates with carriers and suppliers. This can result in significant cost savings for businesses, especially those with high volumes of deliveries.

In conclusion, outsourcing to a 3PL can be a strategic move for businesses looking to reduce last-mile delivery costs and improve their overall logistics operations. By leveraging the expertise and resources of a 3PL, businesses can focus on their core competencies and achieve greater efficiency, cost savings, and customer satisfaction.

Utilize Crowdsourcing

Harnessing the Power of Crowdsourcing for Efficient Last-Mile Deliveries

In today's fast-paced e-commerce landscape, businesses face the challenge of managing fluctuating demand and ensuring timely deliveries. Crowdsourcing has emerged as a game-changing solution that empowers companies to meet these demands cost-effectively and efficiently.

Crowdsourcing allows businesses to tap into a vast network of freelance drivers, local courier services, and specialized crowdsourced delivery platforms. This flexible workforce provides businesses with the ability to scale their delivery capacity quickly and efficiently, without the need for long-term commitments or investments in additional vehicles and infrastructure.

One of the significant advantages of crowdsourcing is the local expertise of the drivers. Their familiarity with local traffic patterns and routes enables faster and more efficient deliveries, ensuring that customers receive their packages promptly. Additionally, businesses gain access to a diverse pool of drivers with varying skill sets and vehicle types, increasing the likelihood of finding the right fit for specific delivery requirements.

To ensure successful collaboration, businesses should carefully evaluate potential crowdsourced delivery service providers based on their reputation, reliability, and industry experience. Establishing clear guidelines and expectations for crowdsourced drivers is also crucial, including delivery protocols, customer service standards, and data security measures.

Effective communication and coordination are paramount for successful crowdsourcing. Businesses should provide clear instructions, delivery schedules, and customer information to drivers. Real-time tracking technology can further enhance visibility, allowing businesses to monitor delivery progress and promptly address any issues that may arise.

By leveraging the power of crowdsourcing, businesses can optimize their last-mile delivery operations, reducing costs and maintaining high levels of customer satisfaction. This innovative approach not only addresses the challenges of peak seasons and unexpected surges in deliveries but also provides businesses with the flexibility and scalability needed to thrive in today's competitive e-commerce landscape.

Consolidate Deliveries

Businesses can reduce last-mile delivery costs by consolidating deliveries. This involves combining multiple deliveries into fewer trips, which can be achieved through careful planning and coordination. One effective method is to optimize delivery routes, taking into account factors such as traffic patterns, customer locations, and package sizes. Advanced delivery management software can assist in route planning by generating efficient routes that minimize travel time and distance.

Encouraging customers to consolidate their orders can also contribute to delivery consolidation. Offering incentives such as discounts or free shipping for larger orders can motivate customers to combine multiple purchases into a single delivery. Additionally, businesses can partner with other businesses in the same area to combine deliveries, reducing the number of vehicles on the road and lowering overall delivery costs.

Outsourcing last-mile delivery to a third-party logistics (3PL) provider can be another effective strategy for delivery consolidation. 3PLs specialize in logistics and have the expertise and resources to efficiently manage large volumes of deliveries. They can consolidate deliveries from multiple businesses, optimizing routes and utilizing their own fleet of vehicles, leading to cost savings and improved delivery efficiency.

By consolidating deliveries, businesses can reduce the number of vehicles required for last-mile delivery, resulting in lower fuel consumption and reduced emissions. This not only contributes to cost reduction but also aligns with sustainability goals and corporate social responsibility initiatives. Moreover, consolidating deliveries can improve customer satisfaction by ensuring faster and more reliable deliveries, enhancing the overall delivery experience.

Effective customer communication and engagement

is essential for reducing last-mile delivery costs and improving customer satisfaction. By providing accurate delivery ETAs, customers can better plan their day and reduce the likelihood of missed deliveries. Real-time package tracking allows customers to stay informed about the status of their orders, reducing anxiety and the need for customer service inquiries. Proactive communication about potential delays or issues with the delivery helps manage customer expectations and prevents dissatisfaction. Offering multiple delivery options, such as choosing a specific delivery time or location, empowers customers and increases their satisfaction with the delivery service. Lastly, providing excellent customer service and being responsive to customer inquiries demonstrates a commitment to customer satisfaction and helps resolve any issues promptly. A positive customer experience is key to building brand loyalty and increasing customer retention.

Conclusion

In this article, we have discussed the importance of last-mile delivery and some of the strategies that businesses can use to reduce last-mile delivery time and cost. We have also highlighted the environmental impact of last-mile delivery operations and the need for businesses to take steps to reduce their carbon footprint.

By optimizing warehouse locations, using smaller vehicles, routing intelligently, leveraging technology, outsourcing to 3PLs, utilizing crowdsourcing, consolidating deliveries, and effectively communicating with customers, businesses can significantly reduce last-mile delivery costs and improve overall operational efficiency.

Implementing these strategies can lead to increased profitability, enhanced customer satisfaction, and a reduced environmental impact. As e-commerce continues to grow and customer expectations for fast and reliable delivery rise, businesses that prioritize last-mile delivery optimization will be well-positioned to succeed in the competitive landscape.

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Faisel Azeez

Faisel Azeez

Co-Founder & CTO

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Joao Vieira

Joao Vieira

CRO at CARRIYO

03

Joao Vieira

Joao Vieira

CRO at CARRIYO

Automate shipping operations and elevate post-purchase customer experience

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