The final step of the delivery process, in which a driver leaves the distribution or fulfillment center, store, or warehouse and reaches the customer’s address, is called last-mile delivery. It’s the most crucial and intricate part of any delivery process – it requires extreme attention to detail and support from a logistics service provider. It requires a centralized order system, dispatching, scheduling, optimizing delivery drivers onto specific routes, accurate parcel tracking, and extensive customer notification systems. Additionally, last-mile delivery costs are about as high as 50% of the overall delivery costs, making it the most costly part of the entire process.
Overall employment of delivery truck drivers and driver/sales workers is projected to grow 11% from 2021 to 2031, much faster than the average for all occupations. In 2023, e-commerce sales will continue to accelerate. Over 20% of purchases are expected to occur online this year, compared to 17.8% in 2021. This means there will be increased pressure and new challenges for retailers and shippers to deliver a positive last-mile delivery experience for online shoppers.
The Shift to Online Shopping
When the COVID-19 pandemic happened, most people resorted to online shopping for deliveries. Years later, the reliance on online delivery and shopping has not gone away–it’s increased substantially and will continue to do so. There were 268 million digital shoppers in the US in 2022 – and there will be 285 million in 2025.
This means businesses that relied on in-person traffic only a few years ago have had to re-examine their business model to accommodate the digital demand. Companies have had to upgrade and remodel their digital ordering systems and, more importantly, set up complex delivery logistics programs to streamline online shopping and delivery.
The growth of eCommerce puts an incredible strain on existing delivery providers, including USPS, UPS, FedEx, etc. This burden overwhelmed the carriers and customers, as packages had increased delays and logistical issues. Because of this, third-party delivery companies, freelance couriers, and gig-based delivery apps sprang into the gaps to fill some last-mile delivery needs, putting pressure on even more delivery drivers in an already overwhelmed industry. Managing couriers is incredibly complex, requiring a good amount of hands and labor to pull off.
Remember that this has been snowballing in the last couple of years. Stabilizing a delivery company, even a gig-based one, takes a lot of work to keep up with the increased demand and all the challenges a delivery service poses.
Last-Mile Delivery Challenges
In addition to the increased wave of consumer need, there are many challenges for a delivery carrier to overcome, particularly with the last-mile delivery drivers. Last-mile delivery is essential not just for the carrier but also for the customer.
Visibility – the customer knowing when and where their package will arrive – is crucial. Visibility increases the service’s credibility, as consumers will not want to use a service with unstable or unreliable delivery. This means updating the customer about the delivery and tracking the package. Having good visibility also means that the customer service line will be overwhelmed less.
Last-mile delivery is the most expensive part of the delivery simply due to the on-the-ground aspect of the job. The vehicle, the salary of the driver, the fuel, the length of the route, the number of packages, and package redelivery after a failed attempt all impact how expensive a last-mile delivery will be. Delivery companies need to ensure they have a solid dispatching and driver management system to take care of all these logistics to minimize costs.