The rapid worldwide urbanization, unprecedented ecommerce growth and increase in customer expectations have put a strain on last-mile delivery – leading to an urgent need for higher delivery volumes in shorter times across cities. This has caused the already elusive and time-consuming operations to become even more complex and costly. The final mile is in fact the most expensive part of the shipping process, amounting to roughly 40% of the entire supply chain. Therefore, businesses have more room to reduce cost on the final mile than they do on the first or middle one. How can businesses cut costs on operations while driving value for customers as well?
1- Outsourcing Operations
Last-mile delivery is referred to as the Achilles’ tendon of ecommerce, as it has the power to sink an online business, if not seamless and cost-effective. Tackling the final leg is tricky as having to assign orders, manage fleets, attend to mistakes, etc. can lead to large overhead and distract businesses from their core activity. 3pLs can provide businesses with both dedicated and on-demand fleet – and have the expertise and resources to manage logistics during peak times, reducing the cost of delays and failed deliveries. They also streamline the entire last-mile by leveraging digital products to make the process faster and hiccup-free. The need for such technology is in fact reflected in the global logistics automation market size growth, which is expected to reach US$88.9 billion by 2026 from US$48.8 billion in 2021. (Research and Markets)
2- Auto dispatching deliveries
Manually assigning orders wastes time, requires staff, increases the margin for error and is overall a non-optimal method of resource utilization. In the age of digital transformation, time is money (especially in the final mile!) and businesses can no longer afford to lag while the market competes to offer the fastest fulfillment and best customer service possible – which is now the most significant differentiator for brands. Automated dispatching with a fleet management software reduces manual dependencies and mitigates delays and human error, ensuring speedy and accurate deliveries. This makes last-mile delivery more cost-effective and efficient.
3- Optimizing Routes with Fleet Management Software
The longer the delivery trips, the higher the cost. Fleet management software thus relies on AI and machine learning algorithms to find the best routes for drivers – taking distance, accidents on the road, traffic, vehicle type and other variables into consideration. By taking the most efficient routes, fuel consumption and vehicle maintenance cost are reduced – and drivers can take on more deliveries in less time.
4- Coming Closer to Customers with Micro Fulfillment Centers
Reducing the physical distance between businesses and customers shortens delivery time – which is why micro fulfillment centers (MFCs) have become the solution to e-commerce speed and cost-cutting matters. MFCs are small urban hubs dedicated to pick-ups or returns, sometimes found within existing stores. They facilitate the catering to densely populated areas due to their location. In the case of an online grocery, having access to MFCs can help businesses cover wider segments while making deliveries faster, cheaper, and overall and more flexible. MFCs are cost-effective and can reduce the overall delivery order time to less than 2 hours since order time and bring the cost down from $10-$15 to $3-$5. (Chainanalytics)
5- Clubbing Orders with Feet Management Software
If two or more orders are received around the same time and need to be delivered to locations in close proximity or share a similar route, orders can be ‘clubbed’ – or assigned to the same driver by the fleet management software. This enables drivers to take an optimized route to drop off multiple orders in one trip, saving on time, fuel consumption and vehicle maintenance costs while increasing customer satisfaction.
6- Enhanced Returns and OS+ D Strategy
While returns are a lower priority for shippers, studies have shown that frictionless returns are amongst the top 5 conversion drivers for customers in some markets. With 70% of online customers considering easy returns as an important factor in ecommerce (Narvar), the significance of a seamless return strategy cannot be disregarded when thinking of cost-cutting. Return products are divided between two categories: controllable returns and uncontrollable ones. While the latter is not always within a business’ control, the former can be avoided or eliminated altogether. The brand and shipping partners must come together to address the root of all controllable return issues, and solve them with improved logistics processes, product handling, packaging, storage, transportation etc. to make sure they meet customer standards. Due to the generally high cost of inventory, businesses have limited storage space in warehouses or fulfillment centers, making it difficult and costly to stock returned deliveries. It is hence important to enhance Consumer Return Management strategies, through which a business communicates with customers before collecting, organizing, and restocking returned items. Intelligent post-consumer return management such as Open Box retail platforms and liquidation programs are critical to help maximize yield and minimize expenses in this phase. Through an effective product returns strategy, businesses can lower costs, improve customer service, and ultimately increase revenues and profitability.
7- Improve First Attempt Delivery Rates (FADR)
Failed deliveries tarnish the brand image dramatically, causing customers to abandon a retailer or become unlikely to shop from them again. Moreover, they are costly to the business. According to a recent report by Post and Parcel, failed deliveries cost $216,171 a year in the US alone. These costs can be mitigated with enhanced management and technology – as software automate human decision and reduces the margin for error, increasing FADR and making the last mile process more accurate.
Address Verification Software
Through auto-dispatching and dynamic route planning, drivers are less likely to end up at the wrong address. Businesses will however still face failed deliveries as some online forms filled by customers may have incorrect or incomplete addresses, misleading drivers. Thus, data accuracy is essential. Address verification software can help overcome such issues by accessing verified address data across digital touchpoints.
Offering Time Slots
Giving customers the choice to pick a delivery time slot allows them more convenience. This enhances customer satisfaction while enabling shippers to streamline the dispatching process, by setting a sequence for shipments from booked time slots. This increases FADR, as drivers are ensured somebody is available to receive deliveries.