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Last-mile logistics has always been a hot topic in the world of fulfillment. Today’s customer expectations demand fast and accurate shipping, no matter where they shop online.
And now, in 2023, ecommerce sales continue to accelerate. This year over 20% of purchases are expected to take place online, compared to 17.8% in 2021. This means there will be increased pressure, as well as new challenges, for retailers and shippers to deliver a positive last-mile delivery experience for online shoppers.
Same-day delivery and last-mile logistics in North America is estimated to grow by $62.71 billion between 2023-2027. And from delivery time to customer communication and ecommerce order tracking, expectations are only getting higher.
93% of customers expect visibility into the order process, from in-transit status to arrival date, while 47% of consumers will not order again from a direct-to-consumer brand that lacks order tracking visibility.
As technology advances and even more customers’ preferences shift in this direction, the last leg of delivery is one of the most challenging and important parts of supply chain management.
What is last-mile delivery?
Last-mile delivery is a logistics term that is defined as the transportation of a package from a fulfillment center to the package’s final destination, which is usually a personal residence. The goal of a last mile carrier is to deliver the item as quickly and cost-effectively as possible. Most last mile carriers have a fleet of vehicles that actually deliver the product(s) to the customer.
An example of a last-mile carrier is Amazon, who has increased their last-mile efforts in order to increase delivery speed and in turn, customer satisfaction.
What does a last-mile carrier do?
A last-mile carrier is responsible for moving a package to its end destination. It specifically focuses on delivering packages to get them into the hands of the person who ordered them.
Last-mile carrier tracking
Last-mile tracking pinpoints the location of a package from the time it leaves the fulfillment center until it reaches the customer’s door. The ability to track orders is crucial for ensuring packages reach customers in a timely manner and and to maintain customer satisfaction. A ProShip study found that 97% of customers expect the ability to monitor their orders throughout every step of the shipping process.
Last-mile tracking keeps customers up-to-date if unpreventable delivery exceptions occur.
ShipBob offers businesses real-time order tracking from the dashboard.
How much does last-mile delivery cost?
Last mile delivery is one of the most expensive aspects of retail logistics. 28% of an online brand’s bottom line comes from last-mile delivery costs and on average, businesses spend approximately $10.10 per order on last-mile delivery.
Another study stated that businesses can potentially experience profit declines by as much as 26% over a three-year period if last-mile delivery is not optimized.
That’s not to say that offering a great shipping policy (free, fast, or both!) that doesn’t cut into profits isn’t possible. Many brands have turned to a tech-enabled third-party logistics (3PL) company to help reduce costs by tapping into the technology and infrastructure needed to optimize the last-mile delivery phase.
The importance of last-mile delivery (and the problem with poor service)
Last-mile delivery is a crucial part of the delivery experience. This is a common complaint among customers, if not executed efficiently or cost-effectively. There are many areas in which last-mile delivery can go awry.
Most consumers are familiar with the waiting game between receiving the notification their package is out for delivery and the time it actually arrives.
There are several reasons for this lag time. Due to the boom in online shopping, more and more packages are being delivered to customers through last-mile carriers. As a result, these carriers have an increased number of stops. This constant stop-and-start requires more time and contributes to delivery inefficiencies.
This is true for both rural and metropolitan areas. In rural areas, there could several miles between delivery points, whereas traffic and congestion could be a blocker for deliveries in cities.
All of these factors slow down last-mile delivery, contributing to overall inefficiencies.
High operating costs
Thanks to Amazon, the rise of two-day shipping has become the new norm, and marketing fast or free shipping is now a common customer-centric marketing strategy for ecommerce businesses.
With the rising demand of free-shipping, consumers are footing less of the bill for last-mile delivery. More and more business are required to absorb this cost to stay competitive.
Generally, last-mile delivery is efficient and cost-effective last-mile delivery is important for maintaining customer loyalty and customer satisfaction. If your customers are not receiving their products fast enough, it’s easy for them to look for your products elsewhere with better delivery options.
Lower profit margins
To compete with large retailers and marketplaces like Amazon, DTC brands must invest in the technology, infrastructure, and manpower to fulfill and ship orders quickly while also keeping overall logistics costs low, so it doesn’t cut into gross profit margins.
Top last-mile carrier providers
Here is an overview of some of the major last-mile carrier providers that ecommerce brands and consumers rely on to get packages to destinations quickly and safely, though there are many smaller local or regional carriers that do the same.
FedEx is a multinational corporation that has offered delivery services since 1971. The company specializes in delivering time-sensitive packages and is committed to providing customers with the best door-to-door delivery experience.
At the beginning of 2020, FedEx announced that it was taking steps to increase efficiency and lower the costs of last-mile residential deliveries as ecommerce sales continue to grow.
UPS is a top delivery service for ecommerce businesses. In recent years, the company has optimized its services further and introduced UPS Express Critical to meet growing consumer demands. UPS provides real-time shipment tracking (from pickup to delivery) and optimized routes to ensure timely delivery and control costs, plus other key features and benefits.
They have even introduced services like UPS My Choice and UPS Access Points to add further convenience to the last-mile delivery experience.
USPS continues to be a preferred option for last-mile delivery services. Although mail volumes have declined, USPS continues to see a surge in package deliveries. USPS also works with other major carriers like FedEx and UPS to support last-mile deliveries, which has helped support the fast growth of ecommerce.
USPS has also introduced new technology, such as the Informed Deliver program, which offers a daily update on what packages a customer will receive that day.
How carriers solving for last-mile delivery in 2023
In the United States, 90% of last-mile delivery growth is driven by ecommerce. So solving for last-mile delivery issues is a high priority for both shipping carriers and fulfillment companies. Carriers like FedEx and UPS face challenges with inefficient routes and missed deliveries. Oftentimes, the carriers overcome these difficulties by using USPS to complete the last leg of delivery.
UPS and FedEx will often transport orders hundreds or even thousands of miles before passing the package on to USPS to complete the final mile of delivery. USPS runs local routes every day, meaning they already deliver to the end customer through residential routes and don’t have to go out of their way to do so.
However, UPS and FedEx are working to catch up to USPS by exploring cheaper and more efficient delivery processes and methods.
ShipBob understands the importance of a quick last-mile delivery experience and knows it’s no longer a nice-to-have, but a must-have. We’re dedicated to helping ecommerce businesses shorten delivery times by connecting brands with premium last-mile delivery providers. Additionally, ShipBob has over 40 fulfillment centers across the country in order to be located closer to shipping carrier hubs.
For example, industry leading pet supplement brand, PetLab Co. trusts ShipBob to identify carriers that will get orders into the hands of customers quickly.
“In order to scale, large brands need to have a solid fulfillment partner in place because speed of delivery is important. Giant retailers like Amazon have created new norms for acceptable delivery times.
For now, consumers are more forgiving of DTC companies and generally deem the standard 3-5 business days for delivery to be adequate for orders in the US. This is an important metric for us, and we work with the ShipBob team to ensure that the vast majority of our orders are delivered within 2-3 business days. In closely monitoring this data, ShipBob has been able to identify regional carriers that work better for our orders. ShipBob really understands the importance of fast shipping and makes it a standard practice, even through big promotions and holiday sales.”Stephanie Lee, COO at PetLab Co.
For growing brands like Ample Foods, partnering with a 3PL can alleviate the pressures of working directly with carriers. By outsourcing fulfillment to ShipBob, brands are able to leverage our relationships with carriers to ensure customers are having positive last-mile delivery experiences.
“ShipBob has been a great partner as Ample has grown. ShipBob helps us offer new products to our customers with hardly any extra effort on our part. Our focus is to grow our business, and that will not be achieved by packing up orders, sending out boxes, and dealing with enormous carriers like FedEx and UPS ourselves. That’s what ShipBob has mastered. We want to focus on engaging with our customers, building our community, and continually developing new products that keep pace with science and customer needs. ShipBob lets us do just that.”– Pablo Gabatto, Business Operations Manager at Ample Foods
Additionally, ShipBob’s global network of fulfillment centers allows brands to store inventory close to shipping carrier hubs in order to shorten transit times to end-customers (and lessen shipping costs). Take it from supplement and wellness brand, TB12:
“We distribute inventory across ShipBob’s fulfillment network so we can be closer to major distribution hubs, shipping carriers, and more of our customers. This has helped reduce not only transit times but shipping costs. We’ve seen an uplift in conversions by offering free shipping thresholds and 2-day shipping. Since switching to ShipBob from our previous 3PL, our fulfillment cost on comparable orders went down by 25%.”– Michael Peters, VP of E-Commerce Operations at TB12
Last-mile delivery amidst the COVID-19 pandemic
The alarming onset of the global Coronavirus pandemic caused many countries to undergo lockdown, with physical stores closing their doors. Thus, the demand for home deliveries and ecommerce increased dramatically during the COVID-19 pandemic.
Even Amazon couldn’t keep up with the demand. Although they reported $75.5 billion in 2020 first quarter sales (up by 26% from last year), they saw a drop in profits due to the inability to meet last-mile delivery expectations.
To keep up with demand and offer more ‘contactless delivery’ options for safety purposes, new technology has been introduced to automate last-mile delivery methods. For example, Jingdong logistics in Beijing, China, launched autonomous drones and shuttles to deliver commercial and pharmaceutical products to customers quarantined in urban areas.
In early 2019, FedEx introduced a prototype of the same-day delivery bot, Roxo. FedEx is now hoping to commercialize Roxo within the next 18 to 36 months.
How last-mile delivery helps with 2-day shipping
With the rise of fast, free delivery and expectation of two-day shipping, the last-mile plays a major role in getting orders to customers on time.
Another piece that directly impacts the ability to deliver quickly and affordably is fulfillment location. To use ground shipping to reduce shipping costs and transit times (as opposed to more expensive air shipping), orders must be able to ship from a location closest to the end destination.
As ecommerce businesses grow and their order volume picks up, they will typically ship from additional fulfillment centers across diverse regions to more efficiently reach customers, while depending on last-mile delivery to get them there on time.
How 3PLs like ShipBob help with last-mile delivery
Working with ShipBob lets you leverage both the inherent last-mile strengths of USPS, innovations from UPS and FedEx, and additional support from regional carriers we partner with. Before shipping every order, we get quotes from all of the major carriers. Then we use the best value carrier and pass the savings on to you. This way, you and your customers benefit from fast and affordable delivery.
We can also analyze customer data to optimize where your orders ship from. With the distributed inventory model, inventory is strategically split across different fulfillment centers of your choice and then sent from the warehouse that is located closest to the customer. When your orders travel less distance, you save both money and time in transit.
With last-mile logistics, fast ecommerce shipping is key. The less distance between the warehousing facility and the customer, the better. ShipBob continues to add more locations to its US network, including international fulfillment locations across the globe.
Last-mile delivery FAQs
Last-mile delivery can be confusing at times. Here are some of the most common questions regarding last-mile delivery.
What does accepted by last-mile mean?
When tracking a delivery or shipment, “accepted by last-mile carrier” means that your package or shipment has been received by the third-party responsible for the final delivery.
How much does the last-mile cost?
The last-mile of your package’s journey can cost up to around 25% of your shipping costs. This can be a very lopsided amount if your package has gone 500 miles, only to have less than 1% of the journey be 25% of the cost.
What is the ‘last-mile challenge?’
Cutting costs and improving efficiency on last-mile delivery is what is commonly referred to as the ‘last-mile challenge.’
What is first-mile delivery?
How can I improve my last-mile delivery?
You can improve your last-mile delivery speed and lower costs by utilizing more warehouses, being closer to customers, and offering tracking for you and your customer. This can all be done by partnering with a 3PL, like ShipBob.
To learn more about how ecommerce fulfillment through ShipBob can benefit your business, follow the button below and we’ll be in touch.