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5 Last Mile Delivery Optimization Methods That Really Work

Last mile delivery optimization methods that really work
Featured image credit: Andrii Yalanskyi/istockphoto.com

With consumers expecting same-day delivery from all companies, and especially those with an ecommerce presence, the majority of consumers are continuously dissatisfied with their delivery experience.

The top causes of dissatisfaction- as highlighted in a Capgemini report– are (1) no same-day delivery, (2) high delivery prices, and (3) late deliveries.

So as a business owner or operator, shouldn’t you invest time and effort to keep your customers happy through last-mile optimization? 

But what is last-mile optimization?

Last-mile optimization is about optimizing the final step of an item’s journey from the warehouse to a customer’s door. Optimizing last-mile deliveries is critically important for any business that has a delivery component, and simultaneously wants to reduce greenhouse gas emissions.

Why? In addition to being key to the customer experience, last-mile delivery is also the most expensive and time-consuming part of the entire supply chain. 

According to the same Capgemini report, 55% of customers will switch to a competing brand if it offers faster and safer delivery.

The high costs of last-mile deliveries are eating into profits because many eCommerce-enabled companies accidentally charge less than what it actually costs them to deliver orders, because true delivery costs  are complex to compute when a business does its own deliveries.

To reduce costs, expedite deliveries, and improve customer satisfaction, businesses need to look for ways to optimize last-mile delivery operations, since last mile delivery costs contribute to over 53% of the total cost of delivery (not forgetting about fulfillment, storage, scheduling, preparation, packaging, etc.).

And this problem is only getting worse – the rise of online orders has resulted in a dramatically higher demand for parcel delivery.

In addition to reducing your transportation expenses, solving the last mile problem will also help you increase your top line revenue. According to a Capgemini report, 75% of customers will buy more of a retailer’s products if they are satisfied with the retailer’s delivery service.

This is why it’s really critical to track (a) customer satisfaction (b) driver ratings (c) delivery time window SLA compliance (d) customer NPS metrics.

Is final mile delivery optimization the same thing as last-mile optimization?

Yes

Here are at least 5 Ways To Tackle The Last Mile Delivery Problem

The challenge with last mile logistics is that you need to lower the per-delivery cost while also showing up on time consistently and keeping your customers happy. The cost to deliver to or service an individual location can increase 2x-4x based on how narrow the promised time windows are.

Retailers have been experimenting with many different logistics optimization techniques, including expanding the last-mile network to improve the delivery experience, adding more drivers, partners, and part-time contractors. However, building a larger network is expensive and has very high upfront costs, a long time to market, and high ongoing fixed costs.

The following five techniques have proven to be especially effective for making last-mile delivery more efficient:

1. Crowdsourcing Delivery Drivers

Walmart, the world’s biggest retailer, recently launched Spark Delivery, a pilot run of its last-mile grocery delivery service. Spark Delivery is a crowdsourced delivery platform where independent drivers collect orders from Walmart stores and warehouses and deliver them directly to customers.

The financial benefits of this arrangement are obvious. Finding freelancers for delivery is more affordable than hiring in-house delivery staff, which have significantly higher overhead associated with employee related taxes, insurance, and benefits.

Very large multinational mega-corporations like Walmart can afford the cost and complexity of directly recruiting drivers in high density client markets, but 99% of the world’s other businesses typically go through an intermediary platform like Postmates, Shipt, Instacart, Uber, and others.

This business model has been proven unsustainable in the long run, but consumer appetites for same-day, self-service delivery is off the charts. Investors have been pouring fuel on the fire of the world’s most unprofitable last-mile fulfillment companies.

Independent drivers also provide their own vehicles and are responsible for their own vehicle repairs, which will save you a lot of money as well.

Another benefit to crowdsourcing is that it allows you to dynamically adapt to customer demand without increasing ongoing fixed costs, so you’ll have no problem bringing on extra drivers during peak seasons and scaling back when business slows down. Some companies call this flexing routes or flexing territories.

While a very limited market segment in terms of total drivers, a small number of large corporations that compete directly with SMB and middle-market companies, choose to deploy their own internal Uber-like platforms using very complex, very hard to configure, high upfront setup fees, and extremely overpriced platforms.

Although a solution may largely target “enterprise” businesses, it is not an indication that they have platforms that can solve the unique and complex needs of every business.

They are primarily driven by their marketing positioning as looking for larger, multi-national oligopolistic types of clients. These types of platforms have steep learning curves and complex setup processes that are focused primarily on compliance, governance, and a risk-averse corporate environment.

In our opinion, these types of solutions are not designed to bring cutting-edge, best-in-class last mile optimization capabilities. Instead, they are designed to sell “value” in the form of banker style proforma budget savings and future ROI wins.

The truth is, if your business isn’t getting a return on investment the same day when it is deployed to optimize your routes – it’s just simply isn’t worth your time. And committing to a long-term (12 months or longer) contract is not going to solve that.

Believe it or not, but in 2021, the world’s most successful SaaS businesses are 100% self-service. You go on the website, signup for a trial, and get up in running in minutes. If it’s not that easy to setup and deploy in your organization, then one can assume it’s not going to be easy to use in the future.

But no matter how much value these types of solutions promise, they still don’t solve the most difficult last mile problem – where to recruit and retain drivers.

Want To See For Yourself How Route4Me Can Boost Your Profits?

Whether you want to slash the time it takes you to plan routes for your drivers, increase the number of stops they can make, or keep your customers satisfied knowing that your drivers show up on time… Route4Me helps you achieve that!

Start Free 7 Day Trial

2. Self-Service Route Optimization Software

If you still use pen and paper to plan your routes, you’re making last mile delivery harder than it needs to be.

There are many obstacles you need to anticipate in order to plan optimal routes, such as traffic congestion in high-density areas, construction closures, and more. Then, there’s the added issue that each customer is only available at certain times. Route planning is so complicated that it can take hours to do by hand, and after all that effort the routes you create still won’t be as efficient as they could be. You could even make a mistake that ends up with your driver getting lost, which would lead to serious delays and upset customers.

That’s why you need last mile delivery optimization software. Such software makes your routes much more efficient, so you’ll save on standard last mile delivery costs like fuel and wages. Also, route optimization software reduces the amount of time it takes to plan routes from hours down to just 30 seconds, giving you more time to dedicate to other tasks.

To learn more about how you can leverage the benefits of routing optimization software, read our article on how route scheduling software can make last mile deliveries more efficient.

3. GPS Tracking Software

Do you know what your drivers are doing? Hopefully, whenever they’re on the clock, they’re working hard and doing what they were instructed to do.

There’s a possibility, though, that some members of your team have bad habits you aren’t aware of. If that’s the case, your last mile delivery costs will be inflated from wasteful time and fuel usage. And of course, your customers will likely be furious.

The best route planners come with a GPS tracking app that shows you the real-time location of everyone on your team. That way, you can always confirm that your drivers are doing what you want them to do.

4. Customer Delivery Tracking Portal

One indirect, and yet significant, way to lower delivery costs is to introduce more transparency into the delivery process.

Customers like to get updates while they’re waiting for deliveries to arrive, especially if there’s a delay. If they’re kept in the dark, they might cancel their order. Worse yet, this one bad experience could convince them to switch over to one of your competitors. Uber and Amazon have been doing this for years, and it’s one of the major reason’s why they have been so disruptive.

Route4Me has a customer portal that will help you stop this from happening.  Customers receive alerts based on the notification settings you define. This will give them some peace of mind and improve your long-term delivery success rate.

5. Dark Stores as a last mile delivery hack?

The aforementioned Capgemini study also found that 25% of businesses use dark stores for same-day delivery. With this method, these businesses have been able to reduce their delivery costs by an average of 23%.

Dark stores are retail outposts with store-like layouts that serve as transportation hubs for online orders. These stores can process high delivery volumes and provide convenient pick-up locations for end-customers, saving you from the trouble of arranging last mile deliveries.

Last mile delivery alternatives like dark stores allow you to forgo the cost of the last mile entirely. If a business increases dark store deliveries by 50%, their profit margin may go up by as much as 70% due to higher delivery volume and lower costs.

Hope On Conquering The Last Mile

There is no one-size-fits-all solution to last mile delivery. What works for one business might not work for another. You’ll need to try out different techniques to find the best approach for your business. Once you find the right approach, you’ll be able to make your business much more profitable.

If you have any questions about lowering last mile delivery costs or last mile delivery alternatives, please let us know in the comments section below.

Finally, answering the following three questions correctly will confirm that you know how to reduce last mile delivery expenses:

  1. How can route optimization software help you reduce last-mile delivery costs?
  2. What are dark stores?
  3. How can a route planner help you improve customer experience and control last mile delivery costs?

Want To See For Yourself How Route4Me Can Boost Your Profits?

Whether you want to slash the time it takes you to plan routes for your drivers, increase the number of stops they can make, or keep your customers satisfied knowing that your drivers show up on time… Route4Me helps you achieve that!

Start Free 7 Day Trial

About Route4Me

Route4Me has over 34,000 customers globally. Route4Me's Android and iPhone mobile apps have been downloaded over 2 million times since 2009. Extremely easy-to-use, Route4Me's apps create optimized routes, synchronize routes to mobile devices, enable communication with drivers and customers, offer turn-by-turn directions, delivery confirmation, and more. Behind the scenes, Route4Me's operational optimization platform combines high-performance algorithms with data science, machine learning, and big data to plan, optimize, and analyze routes of almost any size in real-time.