Last Mile in the Logistics Industry | What is it?

Are you familiar with the term "last mile" being used in the telecommunications industry to refer to the final communication segment, but find it difficult to understand how the term applies to logistics? We’ve got you covered.

When a package is delivered, it passes through multiple locations before being delivered to the customer, and the very final location is called the Last Mile in the logistics industry. While sorting and preparing packages for shipping has been digitized and robots have been introduced to manage and operate with less effort, delivery still requires human labor.

This article provides an overview of the challenges associated with the Last Mile and offers strategies for addressing them within the logistics industry.

The Last Mile = the final stage before a package arrives

The Last Mile refers to the last stage that a package reaches before it is delivered to the customer - not the "last mile" distance. Depending on the distance from the delivery location to the customer, packages are delivered to the customer after passing through multiple locations.

With the rise of online shopping businesses in recent years, it has become increasingly important to establish a final delivery location in each area in order to reduce the time between order placement and delivery completion. The proximity of the customer to the final delivery location is critical in providing quality service, including free delivery. Therefore, finding effective ways to establish the Last Mile is crucial.

The Last Mile will continue to expand

In order to attract more customers and repeat customers, it is important for e-commerce businesses to provide not only products, but also a full range of delivery services. 

For example, many e-commerce businesses may offer services such as free delivery, same-day shipping, or next-day delivery. Therefore, as many e-commerce businesses have started to focus on the Last Mile, transportation companies are required to enhance their services to be able to respond. 

Three challenges posed by the Last Mile

As mentioned, while e-commerce companies continue to offer services like free shipping and same-day delivery, transportation companies face challenges such as declining profits and a shortage of drivers. Furthermore, there is an increasing burden on delivery staff due to missed deliveries, necessitating measures from transportation companies to keep up with the expanding Last Mile.

Free shipping may reduce profit margins

In order to accommodate free shipping, e-commerce businesses may reduce payments to shipping companies as a way to cut delivery costs. In this case, even if the carrier increases its workforce to accommodate the increased delivery volume, profits will decline due to the reduced payment. 

Furthermore, although some shipping companies may offer convenience store pickup as a means of reducing staffing costs and minimizing the impact on profits, this approach is not a comprehensive solution due to the additional fees involved. To truly address this issue, shipping companies must provide reliable and secure services that incentivize e-commerce businesses to utilize their services, even if it requires paying for delivery rather than offering free shipping. 

Increased deliveries will lead to a shortage of delivery drivers

Driven by a growing emphasis on consumer satisfaction, e-commerce providers face rising expectations from customers who demand flexibility in receiving their purchases. This trend has been accelerated by the surge in online shopping, which was notably fueled by the COVID-19 pandemic starting around 2020.

Consequently, transportation companies have experienced an amplified burden, with various concerns arising, including the mistreatment of delivery personnel and increased workload. Particularly, the push for cost reduction in deliveries has led to reduced wages and extended working hours due to prolonged waiting times caused by re-deliveries.

Although the price hikes by shipping companies that occurred in 2017 seemed to alleviate the labor environment to some extent, they are still unable to keep up with the increasing delivery volume. Furthermore, due to the declining population caused by the falling birthrate and aging population, we need to face the challenges of an aging population and declining number of drivers.

Initiatives to Improve the Last Mile

As the Last Mile becomes more efficient, customer convenience will be improved. For example, convenience store pickup services, reduced errors up-stream and drone deliveries will reduce the burden on delivery staff, offering customers greater flexibility and ensuring orders are delivered on time.

Enhancing convenience store pickup services

Convenience store pick-ups have positive impacts on lead time and the overall customer experience. By having the order fulfilled and picked up at the convenience store, customers would avoid delays in delivery and have the flexibility to pick up the order once it is ready. Implementing an automated storage and retrieval system (AS/RS) can play a crucial role in enhancing convenience store pickups, making the last mile more efficient.

With an AS/RS system in place at the convenience store, the time between an order is placed and ready for pick-up would be significantly reduced. With an AutoStore AS/RS, the order would typically be ready for in-store pick up in less than one hour, and often within minutes of placing the order, providing staff would be on duty. This would provide a seamless experience for customers who are happy to pick up the order in-store. If this would be a 24/7 option, even better. For example, the public facing PickUpPort enables customers to conveniently retrieve their prepared ordered items at any time.

It's worth noting that not all AS/RS systems would be able to fit in a convenience store. The key factor lies in space efficiency, where cube storage AS/RS stands out. This AS/RS solution has a high storage capacity and can handle high order volumes even within the limited space available in urban areas and convenience stores. Leveraging this technology would significantly optimize the last mile, ensuring streamlined operations and a positive customer experience.

In addition to convenience store pickup, alternative delivery options such as package pick-up at a shipping company's branch office are equally vital in providing customers with additional delivery choices beyond home delivery.

Improving Overall Delivery Efficiency

Another effective approach to enhancing overall delivery efficiency is through reducing errors at earlier stages of the process. Automating the picking process significantly minimizes picking errors, resulting in a reduction in costly re-deliveries and associated delays. 

Automation also offers advantages when it comes to smoothing out picking windows, giving better time to sort packages effectively for the last mile. This alleviates the pressure on carriers to manually sort packages. AutoStore AS/RS provides the means to achieve these improvements, leading to a more efficient and streamlined last mile delivery experience.

Conclusion

In conclusion, the Last Mile has emerged as a critical focal point in the logistics industry, driven by the increasing demand for efficient and customer-centric delivery solutions. E-commerce companies and transportation providers face the challenge of meeting rising expectations while overcoming obstacles such as declining profits, driver shortages, and missed deliveries. As the industry evolves, implementing innovative strategies, leveraging technology, and prioritizing the well-being of delivery personnel will be crucial for success in the Last Mile. By continuously adapting to changing consumer preferences and optimizing operations, companies can establish a competitive edge and ensure seamless last-mile delivery experiences for customers.