Efficient Delivery

Last Mile Delivery: Challenges, Solutions & How to Optimize it

Last mile delivery is a critical yet costly part of logistics. Depending on the type of delivery, it accounts for as much as 35% of total delivery cost. Optimizing your last mile delivery is therefore crucial to maximizing the efficiency of your logistics and boosting profits. On top of that, a company’s performance on the last mile also has a big impact on customer satisfaction.

But how does it work and what are the costs involved? We’ll cover everything you need to know in this article below.

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What is last mile delivery?

Last mile delivery, or last mile logistics, can be defined as the last step of the supply chain where goods (e.g. parcels) are transported from a warehouse, hub or retail store to the customer.
The goal of last mile delivery is to deliver goods as cost-effectively and quickly as possible to keep transport costs low and customer satisfaction high.

What is the last mile delivery problem?

Analysts of the World Economic Forum estimate that growing demand for eCommerce delivery will result in 36% more delivery vehicles in inner cities by 2030. As a result, they expect last mile delivery to grow by 78%. There are numerous reasons for the increasing demand:

  • The number of items being shipped to one location is decreasing, which results in more stops and smaller deliveries.
  • eCommerce is moving toward Next Day Delivery, or even Same Day Delivery, which increases the number of individual deliveries.
  • The range of products being shipped today is constantly growing and now also includes temperature sensitive goods such as food or medicines.

The increase in last mile deliveries may be convenient and comfortable for consumers. However, for cities the resulting congestion and traffic pose major challenges. The transportation providers are struggling with more stops, lower vehicle utilization, inefficient deliveries and, as a result, higher last-mile costs. That can be remedied by the use of a professional route planning tool that optimizes the sequence of stops and creates a cost-effective route plan.

How much does last mile delivery cost?

The last mile is by far the most expensive part of the supply chain and every failed delivery attempt, traffic jam or wrong turn drives up costs even more.

The total cost varies and depends on the type of delivery and other factors taken into account in the calculation. However, analysis has shown that last mile logistics accounts for around 30-50% of total delivery costs.

Learn more about our software solutions to meet the challenges of the last mile

How route optimization for last mile operations works

A route planning tool, such as PTV Route Optimiser, is essential for an efficient last mile delivery. Even if the dispatcher is familiar with the delivery area, manual route planning is unable to consider all crucial factors.

A software solution, on the other hand, uses algorithms to create routes that are optimized according to time, distance, and cost. It also considers road restrictions and parameters such as opening hours, loading capacity, time windows and current traffic conditions.

Get our free eGuide and learn more about the functionality and benefits of a route planning software.

How is last mile delivery calculated?

With special route planning tools, such as PTV Route Optimiser, you can calculate and optimize your routes for the last mile. The advantage of a software solution over manual planning is that it uses algorithms to calculate routes that are optimized according to various factors.

These factors include: time, distance, and cost, considering restrictions and parameters such as opening hours, loading capacity, time windows and current traffic conditions.

Based on these parameters, the tool assigns shipments to tours and vehicles and creates a schedule for the whole fleet. Get our free eGuide and learn more about the functionality and benefits of a route planning software.

What are the major benefits of last mile delivery route optimization?

Improved real-time visibility

Nowadays, customers expect real-time tracking of their shipments. They want to monitor their package; from the moment it is loaded into the delivery vehicle until it is delivered to their doorstep.

Our route optimization software provides you with the ability to calculate an ETA, constantly update it and send it to all participants of the supply chain, including your customers.

Shorter time windows

With a software solution optimizing your last mile logistics, you can offer your customers shorter time windows for delivery. When they no longer have to wait for hours for a delivery, overall satisfaction is improved, and customer retention is increased. Being on time also raises the number of successful first delivery attempts.

Reduce fuel consumption

Route optimization tools can help your dispatchers find the most efficient route, avoid congestion and reduce idle time. This in turn reduces overall fuel consumption, transport costs and CO2 emissions

Increased flexibility

Even the best route planning does not protect against unforeseen events: an accident on the route, a technical defect in the vehicle, or an urgent last-minute order. To avoid the resulting delays and rising costs, flexibility is needed. The dispatcher can send an updated ETA from the system, add new orders to a route via drag-and-drop, or redistribute the shipments to another vehicle. With just a few clicks, the route is reoptimized in real time.

Optimized utilization of vehicles

To prevent empty runs and low loads, it’s important to assign the right type of vehicle to your last mile deliveries. With PTV’s solutions, vehicle profiles are created and tailored to your fleet. These vehicle profiles are considered during the planning stage. In addition, the software optimizes the loading capacities and ensures better utilization of the vehicles. 

More successful first delivery attempts

When no one is at home, the driver has to return without delivering and to try again the next day. While this scenario cannot be completely avoided, its occurrence can be significantly reduced. Our routing and route planning solutions can be used to send a precise ETA directly to the customer. To increase reliability, the ETA calculation includes historical traffic data, construction sites, driving and rest times, and vehicle-specific average speeds. 

Real-world last mile delivery route optimization examples

Reference Story
How DPD Fresh optimizes deliveries of food products

Deliveries of fresh foods are on the rise, but pose challenges for logistics companies. A brand-new service in Belgium overcomes this with effective planning software.

Learn more
Reference Story
Efficient Same-Day Deliveries of Urbify

Urbify offers online retailers an operating system for same-day and next-day deliveries – using the PTV Developer components.

Learn more

FAQs about last mile delivery

What does last mile mean?

Last mile refers to the final stage of a supply chain. It’s the final delivery to the end customer. The last mile is usually costly and complex due to various factors that need to be considered, such as delivery windows, traffic, or vehicle limitations. However, it’s a crucial factor to get right, in delivering a great customer experience.

Why is the last mile a problem?

The last mile is expensive for transportation service providers. There are many reasons for this, including increased demand and smaller delivery volumes, high fuel consumption due to stop-and-go in inner-city traffic, high rates of failed delivery attempts and inefficient delivery routes.

What is last mile optimization?

Last mile optimization is about increasing the efficiency of the last mile delivery. The benefits of last mile optimization are reducing transport cost, increasing delivery flexibility and decreasing CO2 emissions.

How do I optimize my last mile delivery?

Special route planning tools help to optimize the last mile. They use algorithms that take all relevant factors into account, determine the most cost-effective routes, and ensure better vehicle utilization.

What is an example of last mile delivery?

A good example of last-mile delivery is DPD Fresh. The company uses PTV software to plan and optimize its delivery routes for fresh products. Read the whole story.

Why is last mile delivery costly?

The last mile delivery is the most expensive part of the supply chain. The reasons include inefficient routes, many stops with low order volumes, difficult traffic conditions and a high rate of failed delivery attempts.

Is last mile delivery profitable?

Last mile delivery is rarely profitable, due to the many costs involved. However, there are ways to reduce the costs and make last mile logistics more efficient. Besides, the main goals of the last mile are not profitability, but successful delivery and long term customer satisfaction.

What percent of shipping cost is last mile?

The percent of shipping cost of the last mile will depend on various factors. However, it’s been estimated that it can account for between 30 and 50% of the total delivery cost. The reason it’s so expensive is because parcels for the last mile need to be transported in vans instead of trucks to navigate urban roads. Moreover, the chance of failed deliveries is highest in the last mile.

How can we reduce the cost of delivery?

By using route planning tools, such as PTV Route Optimiser, routes are being optimized in terms of efficiency, time and cost. The PTV solutions also calculate a precise ETA that can be passed on to customers reducing the number of failed delivery attempts.