Last mile delivery is the riskiest step of the e-commerce package delivery process that can make or break the customer experience. During this final delivery stage, parcels can be lost, damaged, or stolen. Fortunately, merchants can combat these shipping risks and inconveniences with innovative software and services that address these critical delivery challenges.
What is Last Mile Delivery?
Last mile delivery is the final phase of the package delivery process. During this phase, the parcel travels from the local distribution center to its end destination. Package or freight carriers are traditionally responsible for completing the last mile delivery.
Typical last mile logistics techniques include FedEx SmartPost and UPS SurePost. These services are a joint effort between UPS, FedEx, and USPS to improve customer service and control costs to merchants. Parcels sent with UPS or FedEx arrive at a USPS sorting center. From there, a postal carrier delivers shipments to the end address.
Benefits for the Carriers
Pitney Bowes Parcel Shipping Index predicts global shipping volume will exceed 100 billion packages by 2020. This growth in parcel volume, fueled by increases in e-commerce transactions, is requiring parcel carriers to rethink the efficiency of their logistics solutions.
By combining forces, the three largest carriers no longer need different drivers to complete deliveries in the same neighborhoods. A single delivery truck drops off packages for UPS and FedEx shipments. As a result, both carriers reduce their underused truck space, which increases efficiencies and reduces expenses.
Benefits for Merchants
E-commerce merchants are under immense pressure to provide an Amazon-quality experience to customers. Shippers have to get their products to their destinations quickly and affordably if they want to be profitable and drive growth. Some of the benefits of SmartPost and SurePost services to shippers include:
- Cost savings – Merchants save on shipping costs and don't pay residential surcharges.
- Weekend delivery – USPS delivers Saturdays for no extra charge.
- P.O. box delivery – Shippers can send parcels to P.O. boxes, which isn't possible with UPS and FedEx Ground services.
- Mix packages – You can drop off SmartPost and SurePost parcels at the same location, without making an extra trip.
There are downsides to using these last mile logistics services, such as longer delivery times, shipping limited to the lower 48 states, and a one to a nine-pound weight restriction.
Challenges for the Shipper
The final stage is the most critical step in the shipping process, but it's also the most expensive. Last mile delivery accounts for over 50% of the total shipping costs. During this stage, incomplete deliveries or unknown routes can result in delays, failed shipments, and additional expenses. As a result, estimating the costs of last mile delivery can be challenging.
Below are some of the difficulties that many last mile business models encounter.
Drivers without planned routes take longer to deliver shipments.
Solution: Some carriers are starting to implement route-mapping software that helps drivers optimize their delivery routes.
Incomplete addresses, remote locations, and unavailable customers can require costly redelivery attempts.
Solution: Access to pick-up locations and mail delivery lockers in post offices, shopping centers, and other public facilities can help combat this issue.
Customers expect timely delivery notifications that alert them when their package is in transit and when it will arrive. If a parcel arrives damaged, late, or not at all, customers will turn to the shipper for a resolution.
Solution: Integrated software solutions, such as Cabrella, can connect your shipping and insurance applications with a custom API so you can easily manage transactions, claims, and invoices.
Customer Complaint Management
When customer expectations aren't met, shippers often receive negative reviews that impact future business.
Solution: Third-party shipping insurance will reimburse you if a package is lost or damaged during transit. With this protection, you can immediately send the customer a replacement or refund and avoid complaints.
Visibility and Transparency
Merchants often receive complaints when customers can't track the status and location of their deliveries.
Solution: Real-time tracking improves visibility to the end-users and keeps them up to date.
Combating the unique last mile delivery challenges requires merchants to take proactive measures and explore innovative new solutions.
Alternatives Being Implemented by Carriers
Many merchants believe that customers prefer the most affordable shipping options. However, studies show that over three-quarters of online shoppers will pay more for same-day delivery. In response to consumer demands and the rapid increase in e-commerce transactions, logistics services and startups are developing innovative solutions.
- Shared economy, collaborative delivery – Using collaborative delivery, carriers employ gig economy workers to deliver parcels. This last mile delivery approach is often faster than traditional delivery methods and enables customers to schedule delivery times.
- Drop off to centralized locations – Retailers are becoming package distribution centers where customers can pick up their parcels in stores. With this option, merchants can offer same-day delivery.
- Drones – Although delivery drones are still in the early phases, they have immense potential to reduce the costs that come with a human workforce, and speed up shipping times. In the future, the use of drone delivery technology could become widespread.
Delivery options are a significant contributing factor to consumers' buying decisions. As a result, many carriers are now looking for last mile delivery alternatives that can offer a better customer experience.
Integrating tools at the shipper level can enhance the customer experience and help resolve issues related to last mile delivery challenges. Additionally, we recommend monitoring shipping costs, freight rates, insurance premiums, and carrier contracts to reduce the burden further.
Contact the Cabrella experts at 844-422-2735. Our licensed professionals will be happy to answer any questions you have.