Last Mile Logistics is one of the hottest segments in Commercial real estate (multifamily remains smoking hot as well). Building out the ecosystem of companies (not just Amazon) to allow them to deliver products in a day (or even faster) is happening now. As a consumer, this is a fabulous and welcome change.
However, the following represents a ton of challenges:
–The technology to handle a package from company to consumer is incredible. Lots of new technologies are being developed as I type. Clearly, Amazon has figured this out. Walmart is right behind. Smaller companies will have to develop or buy their own technology to compete.
–Ecommerce is growing and uber competitive. This is not a stagnate industry. Faster and faster delivery, consistently AND now cheaper and cheaper (maybe even free). So as you build out your logistic chain, the market continues to move.
–The last mile comprises of 53% of the cost of shipping. Companies need to get it right and cost competitive.
The last mile logistics industry is rocking and rolling. We have a front row seat at CRE practitioners and consumers. Incredible to watch and participate. Read below for more on this very hot topic.
The challenges of last mile delivery logistics and the tech solutions cutting costs in the final mile
By: Shelagh Dolan | Published on January 12, 2022
As consumers increasingly turn to ecommerce for all their shopping needs, speedy fulfillment and distribution isn’t just a “nice to have”—it’s the expectation of every online shopping experience. And if logistics companies and their retail partners want a shot at thwarting the ever-looming threat of Amazon Prime, it needs to be a priority.
As a result, businesses have begun racing to develop new technologies and experimental supply chain models to increase parcel volume, expedite deliveries, and delight customers — all while trying to cut costs. Unfortunately, one of their biggest expenses and challenges is same-day, final mile delivery.
A UPS truck transporting vaccine shipments away from the Pfizer manufacturing site in Kalamazoo, Michigan. Courtesy of UPS
What is last mile delivery?
In a product’s journey from warehouse shelf, to the back of a truck, to a customer doorstep, the “last mile” of delivery is the final step of the process — the point at which the package finally arrives at the buyer’s door. In addition to being a key to customer satisfaction, last mile delivery is both the most expensive and time-consuming part of the shipping process.
What is the last mile problem?
If you’ve ever tracked a package in real time online and saw that it was “out for delivery” for what felt like forever, you already understand that the last mile problem is inefficiency. That’s because the final leg of shipment typically involves multiple stops with low drop sizes.
In rural areas, delivery points along a particular route could be several miles apart, with only one or two packages getting dropped off at each one. In cities, the outlook isn’t much better; what urban areas make up for in stop proximity is quickly negated by the near constant delays of traffic congestion.
The costs and inefficiencies of the last mile problem have only been further compounded by the continuous rise of ecommerce in US retail sales, which has dramatically increased the number of parcels delivered each day, as well as raised customer expectations to include not just fast, but also free, delivery.
What are the costs of last mile delivery?
As a share of the total cost of shipping, last mile delivery costs are substantial—comprising 53% overall. And with the growing ubiquitousness of “free shipping,” customers are less willing to foot a delivery fee, forcing retailers and logistics partners to shoulder the cost. As such, it’s become the first place they’re looking to implement new technologies and drive process improvements.
Technology solutions to improve last mile logistics
With the rise of the gig economy, many consumers are already familiar with the concept of crowdsourcing local services through digital platforms like Uber, Airbnb, and Postmates. Location-based crowdsourcing allows consumers to open a mobile app to hail a ride, book a place to stay, order coffee to the office, hire a handyman to mount a TV, send flowers to that special someone, or even schedule takeout to arrive just as they’re walking through their apartment door.
What ordering looks like from the Postmates app. Postmates
The crowdsourcing model has been prevalent in transportation, hospitality, and food delivery for some time now, and retailers are eyeing its low startup costs, asset-light operations, and improved customer experience to ease their last mile delivery woes. With crowdsource technology, retailers, logistics partners, and consumers can connect directly with local, non-professional couriers who use their own transportation to make deliveries. Companies can get their online orders to customers faster, and customers can get their items when and where they want them. The freedom to make on-demand and scheduled deliveries also ensures that customers are home at the time of delivery—eliminating the need for a second (or third) attempt.
And with the ongoing integration and enhancement of automation across industries, it’s likely we’ll start seeing delivery robots, drones, and self-driving vehicles making many of these drop-offs in the not-so-far future.