Last-Mile Delivery 101: Process, Challenges & Solutions

What is Last-Mile Delivery?

Last-mile delivery refers to the final stretch in the delivery process where the goods move from a distribution center to the customer’s doorstep. 

Efficient last-mile delivery management is critical. According to Digital Commerce 360, up to 98% of customers consider the delivery process a key factor influencing their brand loyalty. A further 93% want to receive updates throughout the delivery process.

While striving for Amazon-like delivery services to satisfy customers, companies must consider the costs involved. Final-mile delivery is the most expensive part of e-commerce delivery. A Business Insider report estimates that last-mile delivery’s share of the total cost of shipping is upwards of 53%.

Factoring in all of these, it is imperative that online retailers manage last-mile delivery expertly. This article will delve deep into the topic to reveal how final-mile delivery works, popular methods used in 2024, challenges brands can expect, and solutions to them.

How Does Last-Mile Delivery Work?

Last-mile delivery service consists of a series of steps, all adding together to ensure an exceptional customer experience. These steps are as follows:

1. Order Placement

The process begins when a customer orders an item on an e-commerce website. The order management system receives and records the order details, product specifications, the customer’s delivery address, and any special instructions.

2. Order Fulfillment

After receiving the order, the next step is fulfillment. The online retailer or a partner 3PL picks the order from inventory, packs it, and prepares it for shipping. Efficient management at this stage ensures the customer receives the correct product in the proper condition.

3. Route Optimization

Once the package is ready to ship, it is crucial to determine the most efficient delivery route. Here, online retailers and 3PLs need to factor in traffic conditions, the package’s delivery window, and the fuel efficiency of any given route.

4. Last-Mile Delivery

The core stage of the process is when the delivery driver transports the package from a local distribution hub to the customer’s delivery address. The efficiency and reliability of this step significantly impact customer satisfaction.

5. Delivery Confirmation

After the order is successfully delivered, the e-commerce brand or its logistics partner sends the customer a delivery confirmation. This confirmation can take various forms, from electronic signatures to photo confirmations, delivery receipts, SMS text messages, or emails.

Types of Last-Mile Delivery Popular in 2024

Courier delivery is the most widely used last-mile delivery method in e-commerce. However, as the industry continues to grow and customers expect same-day and on-demand delivery, it is high time businesses embrace other delivery methods. Some popular last-mile delivery options worth exploring in 2024 include:

Drone Delivery

Drone delivery is a hot topic in e-commerce because of its potential for speed and efficiency. Unmanned Aerial Vehicles (UAVs) can bypass traffic and deliver packages to customers’ doorsteps. 

Drone delivery has the potential to be effective in urban areas where traffic congestion often leads to inefficiencies in last-mile delivery. Because of their flexibility, drones can also deliver to remote places where access would be difficult or expensive due to a lack of infrastructure.

Autonomous Vehicle Delivery

Self-driving cars are a cost-effective and reliable alternative to human couriers in the last-mile delivery service. These autonomous vehicles utilize advanced sensors and navigation systems to operate safely on public roads without human involvement. E-commerce and 3PL brands who opt for self-driving cars get the advantage of 24/7 operation, reducing delivery times and operational costs. 

Parcel Locker Delivery

Another popular last-mile delivery method in 2024 is the use of parcel lockers. These safe storage spaces are a convenient solution for customers who may be unable to receive packages at home during delivery. They are strategically located in easily accessible areas such as apartment complexes, shopping malls, and transit hubs to facilitate easy delivery and pick-up of orders. 

Customers who select this option receive a unique code that grants them access to the parcel locker, where they can pick up their delivery at their convenience. Parcel locker delivery helps reduce the risk of lost packages and missed deliveries.

On-Demand Delivery

A human need that has grown significantly in tandem with e-commerce growth is the demand for instant gratification. On-demand delivery caters to this and allows businesses to keep their customers satisfied.

This delivery method utilizes mobile apps and online platforms to connect customers with nearby couriers who can deliver goods quickly (hours or even minutes). On-demand delivery is most popular for food and grocery delivery. It can also be a convenient method of delivering medicines to online pharmacies.

Crowdsourced Delivery

Crowdsourced delivery leverages the gig economy to facilitate efficient last-mile delivery. Businesses that choose this option tap into a network of independent drivers and cyclists to offer their customers flexible and scalable delivery solutions.

As a last-mile delivery method, it helps businesses manage peak demand periods around holidays when customer orders increase significantly. Moreover, it is an ideal solution for businesses that want to expand their delivery coverage without significant infrastructure investment.

In 2024, efficient last-mile delivery is a priority for any brand that sells goods online. By leveraging some of the listed popular delivery methods, businesses can enhance their delivery capabilities, improve customer satisfaction, and stay competitive in a rapidly evolving e-commerce landscape.

Last-Mile Delivery Challenges

As noted in the introduction, last-mile delivery service is challenging for many businesses. For a business to provide a memorable customer experience, it also has to deal with and find a solution to the following challenges.

Speed

A leading challenge of last-mile delivery is speed. Customers no longer expect businesses just to deliver orders to their doorsteps but do so in the shortest time possible. Research by McKinsey found that 25% of online shoppers are willing to pay a premium price for same-day or instant delivery. The number rises to 30% among younger buyers, who make up the majority of e-commerce customers.

Online retailers, therefore, must find quicker ways of delivering goods to their customers to compete with e-commerce behemoths like Amazon, which have normalized same-day, 2-day, and 3-day deliveries.

Visibility

Referencing Digital Commerce 360’s findings, it’s important to note that 90% of online shoppers desire constant updates on their order status throughout the delivery process. This demand underscores the significance of last-mile tracking during customers’ post-purchase experience.

Last-mile tracking plays a crucial role in alleviating customer anxiety, as it provides real-time updates, ensuring customers are informed throughout the delivery process. This personal touch helps build trust, encourages them to come back, and makes them more likely to share their positive experiences with friends and family.

Efficiency

Another last-mile delivery problem that all e-commerce brands experience is a lack of efficiency in deliveries. Because logistics partners have to maximize vehicle load capacity, it means they take longer to start shipping a product or have to make several stops due to separate drop-offs that need to be made along a delivery route.

Such inefficiencies lead to delays, which affect the customer experience and hinder online businesses from meeting their delivery objectives.

Cost

Last-mile delivery is the most expensive part of shipping goods to customers from distribution centers. An estimated 53 pennies of each dollar spent on logistics goes to this final phase. E-commerce brands that sell low-margin products, deliver to customers in different parts of the world, or don’t sell enough volume experience the effects of this the most.

The cost problem escalates further when inefficiencies in order fulfillment and last-mile delivery lead to the wrong product being delivered or cause delays.

5 Technologies to Solve Last-Mile Delivery Problems

Despite the challenges in last-mile delivery, technological advancement in the logistics and e-commerce fields illuminates a light at the end of the tunnel. Online retailers can solve the problems mentioned above through adopting the following technologies:

1. Localized Storage and Dark Stores

Having distribution centers exclusively dedicated to online orders can enable faster and more efficient last-mile delivery. Online retailers can reduce transportation costs and delivery times by strategically locating these hubs closer to high-demand areas. Customers can also order products online, walk into any of the nearby dark stores, and pick them up themselves.

2. AI and Analytics for Route Optimization

Artificial Intelligence (AI) and analytics can analyze large data sets, including customer location, weather conditions, and traffic patterns, to help businesses determine the most efficient delivery routes for their delivery vehicles. By using these technologies, businesses can minimize delivery times, optimize fuel consumption, and enhance customer satisfaction by delivering on time and reliably.

3. Real-Time Delivery Tracking and Dispatching

Real-time delivery tracking and dispatching systems are a must for businesses hoping to provide visibility and transparency into the delivery process. Customers can track their orders in real-time and receive updates on estimated arrival times and any potential delays. 

Retailers, on the other hand, use last-mile delivery software to enable dynamic dispatching. By adjusting delivery schedules and routes based on priorities and existing conditions, they can improve efficiency and ensure effective resource allocation.

4. Drone and Autonomous Vehicle Delivery

Drones and autonomous vehicles offer innovative solutions to traditional challenges plaguing last-mile delivery. With drones, businesses can bypass traffic congestion in urban areas to deliver goods to customers quickly and reach delivery destinations in rural areas without any problem.

Autonomous last-mile delivery using self-driving cars allows businesses to operate around the clock without fear of overworking their employees. As a result, delivery speeds and reliability improve significantly.

5. IoT-Powered Delivery

The Internet of Things (IoT) enables smarter and connected logistics networks that rapidly transform last-mile delivery. Smart sensors and GPS trackers provide real-time data on the location and condition of packages, allowing online retailers to monitor and manage their delivery operations more effectively and ensure safe and on-time arrival. Leveraging IoT-powered solutions can also help facilitate predictive maintenance for delivery vehicles, ensuring minimal downtime.

Learn more about how to solve the last mile problem.

Amazon Last-Mile Delivery Success

Amazon is the world’s number one e-commerce website. As a leader in the industry, the company leads through innovation, with Amazon Last Mile Delivery setting the standard for what all other online retail brands try to provide their customers.

The Amazon Last Mile Delivery Program is facilitated through its in-house delivery subdivision, Amazon Logistics. Having its own delivery vehicles and networks allows for better flexibility and reliability when delivering customer orders. This program is also boosted through Amazon Flex, a partnership between Amazon and independent delivery service partners (DSPs). Amazon Flex allows the online retailer to leverage established delivery networks of independent contractors to offer more efficient last-mile delivery service.

Customers can select various delivery options depending on their location and the type of products they have ordered. Amazon Prime members and Amazon Fresh customers get same-day delivery on groceries and other select items. The retailer also offers one—and two-hour delivery windows in certain cities. Amazon Lockers are also available in some areas for customers who want to pick up their orders at their convenience.

Despite numerous challenges, such as traffic congestion and growing order numbers, Amazon’s last-mile delivery business continues to impress and set the tone for the rest of the industry. The company has also embraced technology and innovation by rolling out Amazon Scout, a delivery robot, in some cities.

Amazon’s success is an example of what an e-commerce brand can achieve by offering exceptional last-mile delivery service.

The Future of Last-Mile Deliveries

The rapid growth of the e-commerce industry due to the pandemic focused the spotlight on last-mile delivery. Digitalization and localization will be one of the most significant last-mile delivery trends over the next few years. Adopting autonomous vehicles and smart logistics will enable businesses to deliver customer orders faster and more efficiently. Third-party logistics (3PL) will also rise in prominence as e-commerce brands seek to outsource logistics so they can focus on their core business.

FAQs

What is a last-mile delivery station?

A logistics hub close to the delivery destination where packages are sorted and prepared for the final transportation phase to the customer’s address.

How long does last-mile delivery take?

The duration of last-mile delivery can vary from a few hours to several days depending on the items ordered by customers, the efficiency of the retailer’s delivery service, the distance between the distribution hub and the customer’s address, and weather and traffic conditions.

What is the last-mile delivery problem?

These are challenges faced by last-mile delivery service providers when transporting goods to the customer’s address. They include traffic congestion, the need for multiple stops, customer unavailability, and varying delivery locations.

What is Amazon’s Last Mile Delivery?

Amazon’s Last Mile Delivery is the set of strategies, technology, and partnerships that Amazon relies on to provide exceptional, on-time, and satisfactory delivery of goods to their doorsteps.