3 Last Mile Trends You Should Be Excited About
As we move towards the second half of the year, it is expected that online retail sales in the US will reach an estimated $1 trillion. This is yet another accomplishment for the already growing industry, which continues to pose a challenge for carriers in terms of “The Last Mile”.
The Last Mile refers to the final stage of the delivery process, which constitutes approximately 53% of the total delivery cost. However, the increasing demand for swift and efficient deliveries at lower costs has presented itself as an opportunity for carriers and manufacturers alike to diversify themselves to stay ahead of the competition.
This is particularly significant for large-scale platforms such as Wal-mart, Target, Amazon, and others that facilitate the sale of standardized products. In this article, I will highlight some key trends and updates to consider as we observe the final leg of a product’s journey from its producer to the consumer.
The Last Mile Landscape and What it Includes
At its core, he Last Mile refers to the final stage of the delivery process, where goods are transported from a transportation hub to the end-consumer’s doorstep. This phase involves various parties: customers seeking timely and hassle-free deliveries, merchants wanting to provide superior services, and delivery providers looking to make profitable transactions.
The complexity of ‘The Last Mile conundrum’ is apparent as each group attaches diverse expectations concerning delivery speed, service quality, cost-effectiveness, and visibility. The interplay of these variables can result in challenges and trade-offs for any participant, leading to less than optimal outcomes.
Despite considerable efforts to improve Last Mile delivery, success remains elusive, as new issues and developments continue to emerge. In fact, technological advancements, market trends, and environmental factors continue to raise the bar higher, creating new dilemmas for companies to address.
The Moving Horizon
Customers expect merchants to have a full spectrum of capabilities to get them their product or service. Funny, now the term “omnichannel” has lost its shine, outdated since it is now the standard. However, customers are not willing to pay for this capability.
This can be especially challenging for commoditized products that are sold on a large scale, such as paper towels, dry goods, and household staples. Niche products/brands have sought to overcome this challenge by selling their products to their “fan base” on Amazon or third-party platforms if drop shipping does not make financial sense.
Merchants often face blame for not getting products to their destinations on time. But the blame may not always lie with them, especially when seasonal peaks are involved. Merchant flexibility is still expected despite peak times and costs, which has resulted in changes in the way products are packaged and shipped. Poor packaging can lead to higher return rates, which can strain resources.
Delivery providers come in a variety of types. Traditional delivery providers include FedEx, UPS, USPS, and DHL. Of these carriers, USPS has a unique infrastructure that tends to fare better with individualized and unique deliveries to high and low-density residential markets. USPS faces challenges since mail volume and frequency are declining. Other carriers are attempting to emulate the residential delivery process/system similar to USPS to avoid a crunch on margins and to exploit a customer-dense model.
Some carriers and manufacturers have begun partnering with local/regional third-party logistics and fulfillment providers to manage The Last Mile. However, this solution still proves challenging for high volume, time-sensitive, and repetitive product sales. It is likely that public drop-off points will have to be inserted into existing buildings and infrastructure to accommodate carriers partnering with 3PLs.
Finally, it is important to consider the gig economy as an emerging solution for logistics management. Companies like Google, Uber, UberEats, Instacart, TaskRabbit, and Postmates outsource their logistics to the masses. It is expected that what used to be your son/daughter’s “paper route” will become your teenager’s summer gig as a freelance Uber driver, food delivery and yard worker.
2. Emerging Business Models
There are several ways that delivery can be arranged when purchasing goods from a seller. One option is where the seller arranges the delivery by working with partners and dividing up the route based on each company’s strengths. Another option is an intermediary arranged delivery where companies offer goods from multiple sellers. The intermediary purchases and picks up the goods on the customer’s behalf, then arranges a suitable time and place for delivery.
Brick and mortar stores often offer buyer arranged pick up, where customers can collect their purchases themselves. However, a more integrated inventory management system could be used to pull from in-store and distribution centers, or drop ship to make the process more accurate, faster, and cheaper overall.
3. Streamlining the Last-Mile
There are several high impact/low cost initiatives that cities are introducing to cut down on truck traffic and reduce emissions. One such initiative is the idea of shifting delivery windows to times with lower traffic volumes. Centralized drop off lockers, such as those being tested by QuikTrip and Amazon, can also help reduce the need for individual deliveries to residential areas, while the better usage of alleys and curb space can keep traffic lanes open in dense urban areas.
Another idea being implemented in some cities are “superblocks”, which only allow local traffic, with other traffic being routed around to specific delivery and drop-off points. This cuts down on emissions, air quality, and traffic congestion. Low emission zones are also being created in Europe, where access by some polluting vehicles is restricted or deterred in order to improve air quality. Encouraging the use of alternative vehicles such as electric scooters and bikes can also help reduce emissions.
Tweaking existing infrastructure such as converting vacant lots and buildings to warehouse/fulfillment spaces can also help cut down on delivery traffic. Retailers can reduce truck traffic by switching from a just-in-time inventory system to stocking more items in brick-and-mortar stores. Green shipping methods, such as floating products on a river, are also being explored.
Consolidating freight and establishing local delivery hubs will help cut down on the number of individual deliveries being made. By implementing these initiatives, cities and companies can work together to reduce traffic congestion and emissions while improving air quality.
Joe Oliaro is the Chief Real Estate Officer and Vice President of Sales for Wagner Logistics, a leading 3PL provider that has specialized in contract warehousing, transportation and fulfillment services for over 75 years. Joe brings a unique perspective to Wagner’s leadership team as he oversees their top-notch sales team and real estate activity across Wagner’s coast-to-coast portfolio. Day-to-day, he coordinates with professionals in the organization to create solutions for new and existing customers. For more information, visit https://wagnerlogistics.com/