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5 Last Mile Delivery Optimization Methods That Really Work

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Last-mile delivery optimization is critically important for any business with a delivery component and simultaneously wants to reduce greenhouse gas emissions. Because 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.

Last-mile delivery costs contribute to over 53% of the total cost of delivery, and around 28.2% of greenhouse gas (GHG) emissions are caused by fossil fuel burning for transportation.

The high costs of last-mile deliveries eat up profits because many eCommerce companies accidentally charge less than what it actually costs them to deliver orders. And that’s because actual delivery costs are complex to compute when a business does its own deliveries.

Also, the challenge with last-mile logistics is that you need to lower the delivery cost of each order 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.

And this problem is only getting worse as the rise of online orders has resulted in a dramatically higher demand for faster deliveries.

Also, according to World Economic Forum, by 2030, there will be a 36% increase in delivery fleets in 100 major cities in the world which will cause carbon emissions to rise by 30%.

So to reduce carbon footprint and transportation expenses, expedite deliveries, and improve customer satisfaction, you need to look for ways for optimization of last-mile delivery.

Plus, the last-mile delivery route optimization will help you increase your top-line revenue.

According to a Capgemini report, 75% of customers will buy more of a retailer’s products if satisfied with its delivery service.

Long story short, you should invest time and effort to keep your customers happy by optimizing last-mile delivery correctly, as it can lead to repeat business and loyal customers.

Many online retailers have experimented with different delivery logistics optimization techniques, including expanding the last-mile network to improve the delivery experience and adding more drivers, partners, and part-time contractors.

However, building a more extensive 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. Crowdsource Delivery Drivers

In 2018, Walmart launched Spark Delivery, a crowdsourced delivery platform where independent drivers collect orders from Walmart stores and warehouses and deliver them directly to customers.

These days those who would like to conduct deliveries with their car can also become Amazon Flex drivers.

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

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.

Another benefit to crowdsourcing is that it allows you to dynamically adapt to customer demand without increasing ongoing fixed costs.

Therefore, 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.


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2. Use Route Optimization Software for Last-Mile Delivery Optimization

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 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 severe 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.

Route4Me route planner even reduces the 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. Use A Route Planner with GPS Tracking Software

Do you know what your drivers are doing?

Hopefully, they’re working hard and doing what they were instructed to do whenever they’re on the clock.

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.

Plus, a commercial GPS tracker helps you know immediately if there’s an emergency like an accident or a vehicle breakdown during delivery.

You can then jump into action and resolve such issues within the shortest time, thus minimizing loss.

Route4Me’s trucking GPS app even comes with a re-optimization feature that helps you reroute routes to ensure another driver nearest to the affected customer deliveries can still make the deliveries on time.

4. Use A Customer Delivery Tracking Portal

One indirect 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 you keep them 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 primary reasons they have been so disruptive.

Route4Me’s multi-stop route planner has a customer portal that will help you stop this from happening. It enables your customers to check the statuses of their inbound deliveries on their own.

Customers can simply log in to Route4Me, using a tracking number or their Account ID and track the statuses of their packages.

Also, Route4Me’s route optimizer comes with a customer alerting and notification feature that helps you notify your customers about their delivery statuses.

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. Start or Increase Dark Stores

The aforementioned Capgemini study also found that 25% of businesses use dark stores for same-day delivery. With this method, these businesses have reduced 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. It will save 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 you increase dark store deliveries by 50%, your profit margin may increase by 70% due to higher delivery volume and lower costs.

In fact, dark stores are the future of post-pandemic retail, according to a Forbes article. Learn more about why click and collect is the new normal of delivery.

So do you have any questions about last-mile delivery optimization? Please feel free to leave your comments below.


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 author: Rahul Dasgupta

Rahul Dasgupta is a content writer with over 20 years of work experience. He holds a master’s degree in computer science and has written thousands of blog posts on route planning and scheduling, making it easy for readers to learn about these complex topics. Rahul enjoys playing tennis in his spare time and loves cuddling with his pet labrador Shinu. Rahul is a big fan of Roger Federer, Messi, and Bill Gates - he admires their drive to be the best at what they do and their philanthropic efforts.


About Route4Me

Route4Me has over 35,000 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.