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Last-Mile Delivery: Definition, Cost, Challenges, and How Covenant Can Help

April 18, 2023

Last-Mile Delivery: Definition, Cost, Challenges, and How Covenant Can Help

Our customized routing and optimization can help alleviate the pressure that last-mile delivery can bring.

Our customized routing and optimization can help alleviate the pressure that last-mile delivery can bring.

At Covenant, we are a true logistics partner. Our customized routing and optimization can help alleviate the pressure that last-mile delivery can bring . Covenant can also integrate and manage multiple last-mile providers across a broader managed solution.

You can think about logistics and delivery in 3 “miles.” The first mile is when a manufacturer distributes an item.

Middle mile refers to long-distance transportation and includes going through port, customs, hub storage and loading, and inland transportation. This stage involves bringing products to the final station before loading everything onto vehicles for delivery.

The last mile, or the final mile, is when the item is sent out from a fulfillment center or a local warehouse for its final delivery to the customer.

Although each step of the supply chain cycle is essential, the last-mile delivery is where most crucial. That's because it makes the most impact on the customer experience. For example, a customer will likely choose a competitor for his next purchase if a product arrives damaged, late, or never delivered.

This year global eCommerce sales are likely to surpass the 6.5 billion mark. Hence, businesses must outsource transportation to improve their last-mile delivery procedures to edge over their rivals.

Let's find out more about last-mile delivery and the costs and challenges that come with it.

Last Mile Delivery Costs

When the COVID-19 epidemic was at its worst, many customers who had previously made in-person purchases from brick-and-mortar stores started shopping online. As a result, E-commerce vendors had to re-adjust to the changing times.

Amazon took advantage of the shifting nature of the e-commerce industry and set high standards for the shipping process, forcing other retailers to keep up.

Since then, all online retailers have been considering the best strategy for managing their last-mile delivery costs.

In retail logistics, last-mile delivery is one of the most expensive aspects. On average, businesses spend nearly $10.10 per order on last-mile delivery.

According to another study, businesses that fail to optimize their last-mile delivery processes can experience a profit decline by as much as 26% over three years.

To cut costs, several businesses opt for a tech-enabled third-party logistics (3PL) business that can access the technology and infrastructure required to optimize the last-mile delivery stage.

Several expenses add up to make the last-mile delivery relatively expensive. For instance, inventory, fuel, maintenance, and labor. In addition, replacements, returns, and other contributing factors increase costs.

Budget management is now a significant challenge for businesses, with consumers wanting features like same-day or free delivery while expecting packages without any damage.

Here are a few reasons why last-mile delivery costs are high:

●       On average, a delivery driver may expect to make between $16 and $24/hour.

●       For a small package in high-density delivery, the final stage of delivery costs around $10.

●       Delivery of heavy and oversized products in low-density areas costs about $50.

These statistics show why it is crucial for e-commerce businesses to optimize last-mile delivery costs by adopting flexible transportation management solutions.

Last Mile Delivery Challenges

In addition to costs, last-mile deliveries pose other unique challenges. Here are some of those challenges.

Delivering in Urban Areas

People driving through a bustling city know the traffic is a nightmare. The narrow roads make parking impossible, and the deliveries are more time-consuming than in the suburbs, leading to delays.

Lack of Good Drivers and Vehicles

The U.S. had a driver shortage even before the coronavirus made it difficult to make deliveries. The shortage is due to a retiring workforce and a need for new drivers coming into the industry. In addition, drivers are leaving for other jobs that offer benefits and good working conditions.

Delivering Large and Heavy Items

Today, consumers are ordering everything online, including heavy items like furniture. That means more than one individual must complete the last-mile delivery process. That means arranging suitable delivery people to make the necessary delivery arrangements.

Badly Planned Route

Unpredicted contingencies that usually plague last-mile deliveries can make route planning a challenge. For example, unfavorable public events or weather can result in unexpected congestion due to road repairs or blockages.

Route planning is challenging because of the factors such as weather and public or social events that lead to unexpected congestion. All this can slow down the route optimization process. Even with the latest technology that can forecast congestion and weather at a given hour of the day, it is impossible to predict and plan delivery routes accurately.

Unsuccessful Deliveries

In the last-mile delivery procedure, unsuccessful deliveries and delays are unavoidable. Unfortunately, last-mile delivery services have not addressed delivery delays for several years. The problem is only becoming worse as the demand for quicker deliveries increases.  

Here are some reasons why meeting shorter delivery periods is complex.

●      Failed and Unpredictable order volumes may affect the delivery span.

●      Problems during commutes include road blockages, unforeseen congestion, or sudden weather changes.

●      Since most warehouses are outside cities, delivery times can be prolonged due to the long commute.

Delayed deliveries can occur for various reasons, including verification and incorrect addresses, unpredictable weather, traffic circumstances, and unanticipated delivery issues. Such deliveries can make earning a profit and elevating operating expenses difficult.

Unanticipated Accidents

Keeping a controlled environment inside a warehouse is possible. However, you can’t guarantee the same atmosphere during the delivery stage. Anything can go wrong, such as an accident due to bad weather or road conditions, damaging the goods. This uncertainty can make it challenging for businesses to operate courier and delivery services.

Another factor that can lead to damaged goods is improper packaging. In addition, erratic roadways can increase the risk of products getting damaged. Finally, customer expectations of same-day deliveries are at an all-time high due to big names like Amazon Prime.

Although businesses and customers benefit from quick delivery, logistics, and fulfillment industries are under immense pressure.

Contact us For the Latest Last-Mile Delivery Solutions

If you're a business looking for assistance with optimizing your last-mile delivery, Covenant Logistics can help seamlessly integrate with your existing logistics needs.

Covenant Logistics can help provide 4pl management/oversight, combine multiple solutions into one overall integrated solution, and manage that solution on your behalf. We offer a wide range of logistics solutions to help streamline your supply chain and improve your overall transportation management.

With advanced technology and infrastructure, Covenant Logistics can help you reduce costs, improve efficiency, and enhance your customer experience.

Contact us below to learn more about our services and how we can help your business succeed.