Last-Mile Delivery 101: How a 3PL Works With Last-Mile Carriers for Best-in-Class Fulfillment
July 20, 2020
What do you want to learn?
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, due to COVID-19, ecommerce sales continue to accelerate. This means 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 reach up to $50.95 billion in market size by 2022. 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 used to describe the transportation of a package from a fulfillment center to the package’s final destination. 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.
Importance of last-mile delivery
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.
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.
Challenges of last-mile delivery
To enable a positive last-mile delivery experience, ecommerce businesses must overcome a few challenges, such as order fulfillment, shipping costs, and order tracking.
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.
Last-mile delivery costs
28% of an online brand’s bottom line comes from last-mile delivery costs. Most of the time, it gets passed on to the customer, but not always. In 2018, a study revealed that businesses spent approximately $10 per order on last-mile delivery alone.
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.
What is a last-mile carrier?
The last-mile delivery process involves delivering a package from the nearest shipping hub to its final destination as cost-effectively and quickly as possible. Last mile-carriers are the actual shipping companies that transport packages, for example, FedEx, UPS, USPS, and other regional carriers. However, some carriers like UPS and FedEx have utilized USPS for last-mile delivery of parcels for some services like FedEx SmartPost and UPS SurePost to save money.
Last-mile carrier tracking
Finally, when it comes to last-mile delivery, communication is vital. A ProShip study found that 97% of customers expect the ability to monitor their orders throughout every step of the shipping process. ShipBob offers real-time order tracking from the dashboard. This also keeps customers up-to-date if unpreventable delivery exceptions occur.
Receive a ship date based on estimated arrival, and access shipment tracking information in real-time. You can even easily pass these details along to your customers.
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 are carriers solving for last-mile delivery?
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 fulfilment 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.
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?
The first-mile is the step in the ecommerce logistics and shipping process where packages are handed from a retailer, wholesaler, supplier, or fulfillment center to a shipping carrier.
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.