Shippers everywhere in the country, whether great or small, selling to businesses or consumers, nearly all have succumbed to the “Amazon effect.”
In shipping, this term — used derisively by some, but recognized by all — refers to spillover effect on consumers of Amazon’s notoriously short fulfillment window. The bellwether may have been in May 2015, when the online retail giant began offering next-day and even same-day order delivery.
Amazon has placed a great deal of emphasis on operations and technology that will shave every possible second off their last mile logistics time.
Amazon can afford to flex every muscle in its campaign to reduce the last-mile logistics window down to near nothing, including vast and strategically located warehouses; a fleet of their own delivery trucks; independently contracted delivery drivers used during peak times; and even a budding drone delivery model.
The Amazon effect has increased customers’ expectations for nearly instant gratification of their online ordering. Sometimes the allure of quick delivery even trumps the benefit of savings, with consumers willing to part with more of their cash to get their product faster.
The problem is, even the largest retailers in the United States don’t have the wealth or footprint to keep up with Amazon in the last mile logistics competition.
For midsize companies, last-mile logistics presents a complicated and costly problem without easy answers. However, logistics managers can find a balance between providing speed and managing their internal process and budgets.
Last mile logistics: What is it and why is it important?
A term used in road transportation, last mile logistics refers to the process of moving products from their last transit stop to their final destination. “Last mile” is not used in a literal way but figuratively, with last mile logistics often consisting of tens to hundreds of miles.
The oldest supplier of last-mile logistics is the U.S. Postal Service, followed in time by delivery companies such as FedEx and UPS.
Last mile logistics is essentially unique to the road transportation industry, acting as the “cleanup hitter” of sorts for all other transport channels by completing the final stage of deliveries. Also, road transportation differs from other forms of logistics because it does not move over a single route or to a single set of destinations, such as the case with port-to-port, airport-to-airport and train terminal-to-terminal.
Forms of last mile logistics
Different formats of last mile logistics have to do with whether the final recipient is a person or a business. A great deal of research and writing about last mile logistics focuses on business-to-consumer deliveries, but the conversations are often relevant to both groups.
Business-to-consumer (B2C) last mile logistics: When a consumer orders a product online or over the phone, the product gets picked at the warehouse, packaged and then sent for delivery. It is loaded onto a truck from the company’s own fleet or from a for-hire trucking company. If it’s a less-than-truckload shipment on a for-hire truck, it will be loaded with other products from the other retailers.
The product might originally be shipped from an international source, traveling first via ocean freight or air freight before being transferred to a tractor trailer. Or it may be loaded from a U.S. warehouse location directly into the tractor trailer of a company’s own
When the product passes through each of its transports and is finally delivered to the consumer, a person at his or her home, that last leg is business-to-consumer last mile logistics.
$638 billion by 2022: Projected value of retail e-commerce sales in the United States, up from $360 billion in 2016
Business-to-business (B2B) last mile logistics: In business-to-business shipping, one business sends products or raw materials to another business, which will sell the products or use the material to manufacture a commodity.
Just like in B2C logistics, the shipper makes the decision about what carrier to use, but B2B shippers typically have more decision-making power about vendors are used throughout the entire the supply chain, especially in the last mile trip.
B2B shippers monitor delivery much more closely to make certain shipments arrive on time. They are dealing with large customer contracts, and and poorly handled last mile logistics could put those relationships in jeopardy.
B2C and B2B shippers differ in some ways, perhaps most notably in the variety of shipments being sent.
B2B shippers often deal in large freight cargo, with purchase orders and delivery routes that tend to be consistent over long periods of time. A fabric supplier routinely sends 100, 12-yard bolts of fabric to clothing companies and craft stores. Every month, a manufacturer ships brake rotors and drums to an auto parts store.
B2C shippers often ship a range of products to a much larger and more diverse group of recipients, individuals who have ordered one or more products for their personal use. These deliveries are made to homes, apartment complexes, high-rise residences, gated communities, condos and townhomes.
"There’s a big difference between B2B and B2C freight when it comes to last mile,” said Jim Monkmeyer, president of transportation for DHL Supply Chain in North America, in an article on SupplyChainDive.com. “In the B2C realm, you've got freight deliveries, you've got parcel and probably everything in between."
Last mile logistics: The biggest challenges
Shippers in both B2C and B2B realms face similar challenges in last mile logistics, but the volume and variety faced by B2C shippers makes them especially susceptible to problems.
Last mile logistics has much more to do with customer experience than any other part of the supply chain.
Need for speed: Customers of all kinds expect speed of delivery, creating a just-in-time culture that demands last mile logistics providers move at a breakneck pace. Consumers are willing to pay premiums for next-day and same-day delivery, giving B2C shippers huge incentive to shrink the last mile window as much as possible.
In B2B shipping, speed of delivery is a matter of relevance and service to the customer. If a company can get its product to the retailer or manufacturer more quickly than its competitor, they gain a competitive edge.
Additionally, B2B customers don’t leave their consumer-based “Amazon effect” at the door when they walk into work. Their established consumerist expectations of quick delivery transfer to their professional mindset.
Delivery environments: Increasingly dense cities and suburbs make it more difficult for last mile logistics professionals to plan and execute efficient routes. This density also jeopardizes road safety. After a dip during the Great Recession, fatal crashes involving large trucks seem to be returning to previous levels.
Outside the city, even the most rural customers also expect the same quick turnaround. There’s no such thing as a “delivery area” any longer. To remain viable, a business must be able to deliver anywhere — and quickly — regardless of the last mile logistics challenges.
B2C shippers also deal with issues related to customer availability during home delivery, sometimes being forced to return two to three times to finally dispense with a package.
Cost: An article on BusinessInsider.com reports that last mile logistics accounts for 53% of a average company’s total shipping costs. Several factors contribute to this large share of the shipment’s total cost, not least of which is the tremendous rise of e-commerce.
Online shoppers have become reluctant to pay shipping charges, spoiled by so many retailers who offer free or reduced shipping as enticements for a first-time buyer or to drive up the total final ticket. This puts the cost for shipping squarely onto the retailer, justifying the expense as a loss-leader to promote greater volume and edge out the competition.
Last mile logistics: Working toward solutions
As they face the inescapable costs and burdens of last mile logistics, businesses everywhere are seeking solutions. Although some appear far-fetched, all types of technologies are being considered as paths toward a more simplified system — or just a way to keep up.
Increasing delivery speed and density with route optimization
One of the most direct and currently feasible solutions, route optimization software can save significant time in last mile logistics. While functions such as global positioning and delivery route planning have been in use for years, artificial intelligence is stunning the industry with advanced data interpretation.
This machine learning goes far beyond telling drivers the best way to maneuver through a 50-stop route. The most advanced systems detect and analyze historic and current data about road conditions, weather patterns and traffic congestion to deliver real-time predictions and recommendations about route progress.
These systems also provide much more detailed visibility of the supply chain, as literal inches of progress are tracked. Route optimization software also assists in driver management and collision avoidance.
Growing relationships with drivers and vendors
As the shortage of qualified truck drivers continues to exacerbate capacity throughout the U.S. road transportation industry, it has become more important than ever for companies to recruit and retain high-quality drivers.
Whether they maintain their own fleet or contract with a for-hire trucking company, businesses are wise to place great emphasis on the individuals actually performing their last mile logistics. They may consider offering higher pay and special incentives to drivers who want to build long-term careers.
Of course, experienced and serious professional drivers will be more productive on a day-to-day basis as they gain and employ knowledge of their route over time. Also, knowing that customer service is as crucial as speed in both B2B and B2C last mile logistics, professional and engaging drivers help companies maintain their client relationships.
Other ideas gaining traction
Locations where consumers can pick up their items: In some B2C circumstances, retailers offer consumers the option to retrieve their order from a fixed location such as a storage locker or participating retail outlet — maybe a convenience store or cell phone store.
These locations are also used when a package delivery has failed multiple times due to the customer not being at home.
Drones and robots take packages the final mile: Many seemed skeptical when Amazon first announced it had plans to eventually deliver some packages via drone, but since then the Prime Air program has taken shape and doesn’t seem as futuristic.
Autonomous vehicles will make up 85% of last-mile deliveries by 2025, according to data reported at RoboticsBusinessReview.com. If industry experts are correct, by the end of the next decade consumers can expect to see mini-robots rolling down sidewalks in suburbia, dropping off Amazon packages at their neighbors’ doors.