Industry News

Will the Shipping Industry Conquer its Last-Mile Problem?

Michael Brown
10 Minutes

Will the Shipping Industry Conquer its Last-Mile Problem?

 

Last-mile connectivity is an essential element of a supply chain system. It represents the last leg of a delivery solution in B2B and B2C business models. Last mile connectivity is referred to as the planning and management of the distribution of goods from a fulfillment center to the final address. It is a crucial aspect for e-commerce since the rapid upwelling of home deliveries in the latter part of the last decade.

Commonly, the last chance to ensure the wow factor and add to the customer satisfaction index it has increasingly taken the forefront of examined topics in logistics. It has triggered several studies towards a better link between the buyer and the seller and even compelled many businesses to reevaluate where they fall short of innovation in this sector.

 

Challenges faced by last mile connectivity

Last-mile connectivity has several challenges which it needs to overcome before it becomes a pivotal component of the supply chain system.

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Cost of last-mile connectivity: The cost of last-mile connectivity is anywhere between 41 to53 percent of the total cost. This is attributed to the fact that once the goods are delivered to a central hub, they have to be individually loaded on smaller vehicles like cargo and sprinter vans and delivered to the destinations. Due to a competitive market, businesses have to attract customers through a deeply discounted expedited delivery option; making them and their logistics partners bear the cost of transport. This cost absorption compels businesses to change how and where their products are being fulfilled. It is important to recognize the expeditious nature of deliveries needed for the 21st century. Gone are the days when it was customary to wait 7 days for retrieval of your cold press juicer.

According to a study conducted by Statista Research, 26% of online shoppers cited slow shipping as the main reason behind cart abandonment in 2017, up 4% from 2016. Seventy-six percent of online shoppers surveyed in Dotcom Distribution’s 2018 E-commerce study said delayed arrival of an online order would likely influence future purchase decision from that seller. It’s clear that failing to meet or exceed rising consumers expectations results in lost business.

Congestion and safety concerns: Last-mile delivery systems need to meet delivery deadlines. With the option of two-day and same-day delivery becoming the industry standard; businesses have to match the demand with adequate fleet volume and delivery personnel; and to add insult to injury, congestion on the roadways are seeing peak levels with more vehicles on the road than ever before. Urban areas such as Silicon Valley and NYC have seen bicycle courier startups crescendo as a solution to the problem.

Furthermore, safety concerns of the merchandise are another problem. I’m sure we have all seen a footage of a package being removed from a target's doorstep by an unsuspecting passer-by. Every year, millions of dollars’ worth of goods get damaged due to bad weather or get stolen from the consumers’ doorsteps and either the delivery company or the retailer has to pay for it.

Incorrect addresses or far-away delivery points: Last mile connectivity is inundated by the incorrect address problem. Many times, the delivery personnel have incomplete addresses or do not find the address at the delivery location. In rural areas, each delivery location is a couple of miles apart from each other, increasing the cost and time of delivery. Although this may be the easiest item to see resolved, the system remains overwhelmed by the forward and reverse process of this supply chain.

 

How do we fix it, You say?

Having understood the major problems in the last mile connectivity, you may wonder about the solution to these issues. Since the last mile connectivity issues are different for different businesses, there is no single solution to the challenges faced by the shipping industry. Here are a few solutions implemented around the nation.

Technavio Last Mile Delivery Market Report

 

The use of fulfillment centers: To reduce the cost of delivery, companies are increasingly using the crowdsourcing model of delivery. They are exploiting fulfillment centers to strategically house their products at different localities across the nation to facilitate quicker last mile connectivity. Fulfillment centers are becoming increasingly popular for manufacturers and suppliers that are looking for a way to minimize central storage that can drive up export time. Businesses that utilize this hub and spoke model see much better productivity and customer satisfaction.

Use of bicycles and hybrid vehicles: As mentioned earlier, to counter the congestion problem, delivery teams are increasingly using bicycles and small, hybrid vehicles for delivery in the city environment. This also reduces the cost and carbon footprint of the delivery. Local governments are highly in favor for companies taking advantage of these green friendly vehicles with some states issuing subsidies for businesses to integrate this into their business model.

Use of technology for delivery: Logistics companies are increasingly using technology towards planning and executing deliveries. This increases the delivery efficiency and optimizes both time & cost of transport. Complex AI-based algorithms are being implemented towards route planning and optimization. This in turn is increasing customer satisfaction in terms of quick and efficient delivery. Robots and drones are getting involved in the transportation hub and customer end increasing the consumer experience.

Delivery lockers and store pickups: To solve the lost or damaged package problems, companies like Amazon are employing delivery lockers where the consumer can go and collect their package. Also, stores in several locations are doubling as pickup points for the consumers to come and collect their goods.

 

Overall, the last mile connectivity problem is a pressing issue in a supply chain system. It is ever developing new challenges which in turn are getting combated through the implementation of technology and innovative ideas. With time, we are sure that the problem will be mitigated completely which in turn will provide enhanced and satisfactory buyer-seller experience.  

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