When you think of all the moving pieces that go into delivering a package or providing a service, many things need to happen before the goods and/or services reach the point of last mile delivery. A lot of time and effort goes into producing a quality product or service before it gets out the door, but for your customers, they don’t see all of that.
Their experience is usually something like:
- Order or service placed
- Order processed
- Order shipped or dispatched
- Order is in transit and no one quite knows where or how long it’s going to take to arrive, for a few minutes, hours, days, or weeks
- Order or person magically arrives at your customer’s doorstep
In all seriousness, that fourth step is incredibly important and plays a starring role in last mile delivery and how to get to step five. If your process looks anything like the one described above, then there’s some definite room for improvement. Unfortunately, far too often, that’s the experience people are getting. Before we can improve last mile delivery though, we need to first understand what it is.
What is last mile delivery?
According to Business Insider, last mile delivery can be defined as, ”the “last mile” of delivery. It is the final step of the process — the point at which the package or person finally arrives at the buyer’s door. But in a larger sense, last mile delivery is so much more than that.
Why focus on last mile delivery?
You might be asking yourself, “Why should I be concerned with last mile delivery?” To answer that question, it’s important to understand the true benefits of perfecting, or at least trying to perfect the process, both for you and your customers.
The demands and expectations of consumers are on the rise:
- 25% of customers are now willing to pay additional money for same-day delivery
- By 2025, same-day delivery is expected to reach a 25% market share
- In 2018, last mile logistics and same-day delivery were valued at over $1.35 billion
- Experts estimate there are over 20 million field service professionals globally, with the field service management market expected to grow to $5.9 billion dollars by 2024
- Consumer spending was up by 15% in 2018 from the year before. Accounting for over $517.36 billion
- When surveyed, 37% of respondents said the 8-hour appointment window is still their #1 complaint
If customer satisfaction isn’t a driving force for you (hint: it should be), perhaps the billion-dollar value is incentive enough to take a good hard look at your logistics. Customers have spoken and companies are listening. With the introduction of Amazon Prime, Target 2-day shipping, and more and more places adopting the same or next-day delivery structure, gone are the days of people willing to wait 5-10 business days for their online purchases. Or wait an hour or more for their pizza deliveries. With the introduction of things like GrubHub and Uber Eats, there’s a level of expectation that we haven’t seen before when it comes to how quickly people want their goods and services. It’s instant gratification at it’s finest, and if companies aren’t keeping up, they’ll get left behind. That’s why last mile delivery is so important.
You might have a fantastic product or service, an easy-to-use ordering process, and excellent customer service. But if it takes forever for your customers to get what they ordered or they have no clue where it is, then the rest of it won’t matter as much. Especially if they can get the same or similar product and/or service somewhere else, faster, with better visibility, they’ll take their business elsewhere.
Last mile delivery costs and challenges
While the pros far outweigh the cons, there are still costs and challenges within the process. For instance, last mile delivery is both the most expensive and time-consuming part of the shipping process. It is considered a share of the total cost of shipping and at 53% of that cost, it’s pretty substantial. With a rise in the “free shipping” demand from customers, they are no longer willing to take on the cost of the delivery fees. So who covers those costs? If you guessed the retailers and logistics partners, you’re correct. This is why this is a great area of opportunity to find efficiencies and improvements.
Cost aside, communication plays a large role in the challenges during this leg of the product or service journey. Both internal and external communication are important and need to be thoughtfully planned out to ensure things go as seamless as possible.
Last mile delivery customer communication
Customer communication is important throughout the entire process, but especially during that last mile. Have you ever ordered something and as soon as you get the “track shipment” information you check to see where your order is and what’s the estimated time of arrival? Well, that’s exactly what your customers are doing too. That’s why it’s so important to communicate with them throughout that last leg of the journey. Whether it’s a shipment or a service technician coming their way, transparency and communication are key.
In a survey conducted, 70% of companies stated that it was either crucial or very important that they improve their “bidirectional communication” with customers. This means the way they communicate about their delivery expectations, package tracking and resolution of delivery options. They also agreed that there was room for improvement when it came to communicating with carriers and being proactive about in-transit issues. Things like rerouting or expediting shipment or communicating efficiently with carriers. Miscommunication between company and carrier can create a clear bottleneck in last mile logistics.
Last mile delivery tracking
In today’s digital age, data drives so much of what we do and how we do it. Logistics and supply chain management are no exceptions. By collecting the right kind of data, companies can use it to make improvements, track customer demographics, and even work to identify future trends within the industry. So, how can this data be applied to last mile delivery? If you’re able to track and analyze delivery data, customer demographics, and the likes, that can be used to:
- Improve service levels: When it comes to last mile deliveries, customers have high expectations. There’s a reason that people spend so much time tracking their packages or services once they’ve ordered them and that tracking information becomes available. Knowing how invested customers are and the level of expectations they have, by improving your service levels, you’ll, in turn, improve your customer satisfaction, which should result in increased sales for your company.
- Improve operational efficiency: An area that is valuable in improving operational efficiency is delivery pattern data. By studying the GPS tracking from previous deliveries, you can find information that will help you make decisions that can enhance operational efficiency. According to one study, by switching field management software, one company was able to reduce its fuel costs by 86%.
- Improve the quality and performance of deliveries: By analyzing the data you’re collecting, you can find trends to use to your advantage. That said, doing this manually and reviewing the data without an analytics system, could mean missing minute patterns that a system would otherwise easily spot. By identifying trends, you could reduce operating costs. Even a small shift could make a big impact, without having to make drastic changes in your company’s logistics.
Leading organizations are incorporating analytics into their last mile process and using the data to try and overcome the challenges faced. While utilizing data analytics in last mile logistics is relatively new and costs of both time and money may be higher, it has one of the highest ROIs (return on investments) in the industry!
Last mile delivery logistics
Now that you know the importance of improving the process and some of the difficulties, what are some ways that you can improve logistics and customer satisfaction?
- Let customers choose and change their delivery window: By allowing customers to choose, you increase the chances that someone will be home for their service appointment or delivery. Missed appointments are both a cost to you and the customer
- Optimize transport schedules with new orders: There is a need for omnichannel fulfillment system because customers are placing orders throughout the day
- Use advanced algorithms: The omnichannel fulfillment system will require algorithms designed for last mile delivery optimizations. This system should allocate loads to appropriate vehicles and drivers and use digital mapping to determine the most effective delivery route and time
- Link to order processing: A way to improve customer satisfaction is to give them insight into the order processing. This transparency gives them further detail about where and when they can expect their delivery or service provider
- Communicate, communicate, communicate: be sure to provide ongoing updates to your customers throughout the lifecycle of the order. This way the customer is kept up to date and they can feel better about where their order is at during the last mile delivery
- Track orders: Again, providing insight to the customer on where their order is at allows them to know where things are at in the process, thus increasing your customer satisfaction
- Automated notification on day of delivery: Keep real-time tabs on driver’s location on the day of delivery. This will allow you to provide more accurate updates to your customers. As a bonus, if the customer is alerted when a driver leaves or completes a previous job, it will increase the chances that the customer will be there when they arrive
- Use proof of delivery: This can function as a receipt, but it’s just confirming that the order was delivered or driver or service provider arrived and completed the service
Last mile delivery customer experience
While we want the last mile delivery to be cost-effective for you, our goal is also to ensure customers have the best experience possible. You want it to be seamless for them. As noted above, one way to ensure customer satisfaction is to communicate with them. Letting them know where things are at throughout the entire process, end-to-end can help boost their confidence during the final leg of their product or services journey. Providing updates and letting them know what to expect and when can make all the difference. Mistakes happen and delays occur, your process is never going to be perfect, but if you communicate the delays or changes, proactively, people are more willing to forgive. If a technician is going to be late, you have to let the customer know. In some cases, they likely took off work or rearranged their schedule to make this service window work. Customers don’t want any surprises, unless it’s a surprise discount or being pleasantly surprised with above and beyond service you provide. Be proactive in your updates. Communication is key! Learn Why Customer Experience is Your True Competitive Advantage
Last mile delivery industry trends
We’ve covered what last mile delivery is, why it’s important, the benefits and challenges, the logistics of it, how to improve the process, communication and the importance of the customer experience. So, what’s next? What should you be looking at to stay competitive?
Last mile trends:
- Faster Fulfillment
With more people demanding their goods and services faster than ever before, the turnaround time on fulfilling these orders needs to be faster without compromising quality
- Crowdsourcing apps
While picking up and delivering one-off items isn’t as efficient as delivering something where you have strong route management, the technology can be leveraged and those with cars or a means of transportation can help fulfill orders
- Increase visibility
Smartphone apps have made it possible for better visibility into the tracking process. Customers can now see where their driver or package is through the last mile
- USPS evolves
Times are changing and legacy carriers, like USPS (United States Postal Service) are changing too. With the decrease in typical “snail mail,” adding a package to a home delivery has a pretty incremental cost because USPS is going there anyway. Carriers like FedEx or UPS have to make a special trip, which makes it more expensive for them
- Insourcing deliveries
Third-party logistics companies may not have been in the business of transport business, but now many of them have their own local delivery services as well, adding their drivers and vehicles to the payroll
- City warehouses
Amazon is leading the charge here. With over 58 Amazon Prime Now hubs in the U.S. they’re able to offer same-day instant delivery. They aren’t just following this trend, they started it, as they have the first-to-market advantage with their two-hour delivery, while most other large box stores are offering two-day delivery just to keep up
- Carrier becomes salesman
When someone online shops, they’re usually offered other items the retailer thinks they might enjoy. Now, retailers, using Big Data, can try to predict what customers might want and load it up on the delivery trucks, which allows drivers to upsell during their delivery
- Smart technology and sensors
If you’re shipping frozen foods, alcohol or something that needs to be kept in a temperature-controlled environment, you might want the visibility at every point in the delivery and fulfillment process by adding probes and monitoring devices in the packages. That way an extra freezer pack or dry ice can be added if necessary
- Delivery by self-driving cars, drones, and robots
60% of last mile delivery costs come from labor. If that can be eliminated or drastically reduced by using drones and other robotic devices, then there would be tremendous cost savings and more opportunity to deliver around the clock and faster
The process has a lot of moving pieces, but knowing the challenges and how to overcome them can help you can set yourself up for success and ensure customer satisfaction. Last mile delivery should be a first priority.