Optimizing Last Mile Delivery: Challenges, Trends & Solutions 

During the era of e-commerce, flexible delivery services that ship to each unique customer’s location are the norm. In Asia Pacific, 57% of consumers say they would switch retailers if they were not given flexible delivery options like click-and-collect, flat-rate shipping, shipping to multiple addresses, and curbside pickup.

Last mile delivery is a term used in supply chain management and transportation planning to describe the last leg of a journey. Optimizing your last mile logistics with a trusted final mile carrier that offers flexible delivery options may not only help to retain customers but can also encourage them to increase their spending. According to Capgemini's research, approximately 75% of “consumers are willing to spend more if they are satisfied with the delivery services.” Last mile delivery is also the only physical touchpoint e-commerce businesses have with their customers, making it all the more critical to get it right.

However, while successful delivery is crucial to a satisfying online shopping experience, small business owners often find it challenging to get a reliable, accurate, and low-cost last mile delivery service that enables them to distribute products from their warehouse to customers’ final destinations. 

Businesses that prioritize efficient last mile delivery are more likely to stay competitive in the e-commerce market. However, poorly optimized last mile fulfillment may lead to higher costs and lower profitability. In addition, delayed and failing delivery services can result in increased cancellations and returns of shopping orders. A bad shopping experience can harm the customers’ brand loyalty and discourage repeat purchase behaviors. 

Efficient last mile delivery, on the other hand, can:

• Reduce costs: An effective last mile carrier will use advanced route planning, deferred shipments, and efficient resource allocation to minimize fuel consumption, labor expenses, and vehicle wear and tear to reduce the cost of delivery.

• Improve customer satisfaction: Timely and accurate deliveries ensure customers receive their orders when expected. Real-time last mile tracking and proactive communication can be used to enhance transparency and reduce customer frustration caused by delays or errors. 

• Strengthen brand loyalty: Fast and reliable last mile delivery may help build customer trust, encourage repeat purchases, and make customers more likely to recommend your brand.

The last mile delivery process begins with order placement, where products are transported from a distribution center or transportation hub to the end customer. Once the order is received, the last mile logistics provider typically uses various systems and tools to prepare it for fulfillment. 

This stage sets the foundation for a smooth delivery experience from the warehouse to the customer's doorstep.

Step 1: Order entry to dispatch

Once the order is processed, the warehouse team gets to work. Staff carefully pick and pack the items, and each package is securely prepared and labelled for transit. The parcel is then handed over to the final mile carrier to start its journey to the customer.

Step 2: Route optimization

Some last mile logistics providers use advanced route optimization tools to minimize delivery times and cost. Route optimization tools may analyze factors like traffic, delivery addresses, and time constraints. Or, in the case of cross-border last mile delivery, route optimization may analyze the fastest way to get shipments from one country to the next, whether it is a direct flight or involves shipping to multiple countries.

Step 3: Delivery

With the parcel in transit with the final mile carrier, customers may be able to track its progress and anticipate delivery. Many logistics providers also enable customers to choose how their deliveries are received, such as requiring signatures or providing proof of successful delivery. Features like photographic confirmation or digital signatures help reduce disputes, enhance transparency, and improve customer trust.

Managing costs of last mile delivery

Many online customers expect shipping fees to be reasonable or even free if they make a purchase over a certain amount. According to fintech company, Clearco, “shipping fees are one of the main reasons why shoppers abandon their carts, with an average cart abandonment rate of 69.9% across industries.”

To meet customer expectations, businesses can choose to incorporate shipping fees into the costs of their products or absorb the costs and sacrifice margin. Still, the cost of last mile delivery is a challenge for businesses and has been driven up by rising fuel costs, inflation, and issues such as theft and the need to redeliver to customers not at home.

Managing returns and failed deliveries

Last mile logistics can get complicated due to various situations, from no one being at the destination to pick up the deliveries from the couriers to rescheduling the delivery time and customers not liking the product and returning it. Missed delivery windows or unclear tracking can result in customer dissatisfaction, and returns add another layer of complexity that may increase costs and present further logistics challenges.

Route inefficiencies and traffic delays

Delivery delays are often caused by route inefficiencies, traffic congestion, and incorrect addresses. These issues may increase delivery times, reduce driver productivity, and add to operational costs. Urban areas, in particular, may face challenges like unpredictable traffic patterns and last-minute route changes.

Efficiently serving rural areas

Delivering to rural areas presents its own challenges including hard-to-find and hard-to-reach addresses and the time and costs involved in driving long distances between deliveries. Preventing failed deliveries and route optimization tools can help minimize the costs of last mile delivery to rural areas. Allowing customers to self-collect packages from a centralized location can also help by reducing the number of stops on a delivery route. 

Cost management techniques

Managing costs effectively in the last mile fulfillment process is essential for maintaining profitability without compromising service quality. For example, bulk shipping may allow businesses to reduce delivery costs by consolidating multiple shipments into one.

Product packaging also plays a key role in shipping costs. Reducing packaging sizes where possible may reduce shipping costs, or using FedEx packaging materials and supplies can help to keep shipping costs as low as possible.

Customize delivery experience

Customers value personalization. According to Forbes, 81% of customers prefer companies that offer a personalized experience. A personalized delivery experience seeks to enhance customer satisfaction by addressing individual needs.  

That could include full traceability that allows customers to track their shipments in real-time, and proactive communication that keeps them informed about delivery updates. The ability to let customers customize delivery dates and locations with a solution like FedEx Delivery Manager®* also helps to ensure a positive delivery experience that meets their personal needs.

Flexible pick-up and delivery options

Providing flexible options for last mile delivery such as rescheduling a delivery, delivering to another address, and offering customer click-and-collect options is vital for meeting diverse customer needs. Offering same-day, next-day, or click-and-collect services caters to a wide range of expectations and ensures satisfaction. 

These options accommodate urgent deliveries and increase convenience for customers to enhance their overall experience. Providing flexibility in how customers receive packages can also help businesses expand their reach and build long-term loyalty. 

Tracking systems and real-time updates

Real-time tracking systems enable e-commerce businesses to monitor shipments at every stage. This provides operational teams with the data needed to address issues proactively. At the same time, customers may also receive notifications about their parcel’s location, estimated delivery time, and changes to the delivery schedule—keeping them informed and eliminating the need for them to contact customer support.

Micro-warehousing for localized distribution

Inbound Logistics defines micro-warehousing as “using small-scale storage facilities strategically located close to customer locations. This method, also known as micro fulfillment, aims to speed up order fulfillment by storing inventory nearer to the end customer.”

Crowdshipping delivery models

Software company Locus defines crowd shipping as “the method used to deliver packages to customers by leveraging non-professional and local courier services..”  However, crowdshipping can result in inconsistent service and fluctuating reliability.

Sustainability and green logistics

Some final mile carriers are adopting sustainable practices like using electric vehicles, optimizing delivery routes to minimize emissions, and consolidating deliveries to reduce trips.

Automation and AI in route planning

According to RTS Labs, some route planning systems use artificial intelligence to analyze factors like traffic and weather and dynamically adjust delivery routes in real-time to ensure timely and cost-efficient deliveries.

• Cost-effectiveness: Compare pricing structures and ensure the partner provides value without compromising service quality.

Optimizing last mile delivery is essential for meeting customer expectations and staying competitive. In an increasingly competitive market, effective last mile delivery can serve as a key differentiator that helps businesses retain customers and drive growth.

 Investing in flexible last mile delivery solutions not only reduces costs but also meets the evolving expectations of today’s consumers. By leveraging innovative technologies, optimizing processes, and partnering with reliable carriers like FedEx, e-commerce businesses can streamline their last mile logistics.

With continuous efforts to optimize last mile delivery, FedEx will keep providing reliable delivery services and support to small business owners.

*For all services mentioned, please check fedex.com for service availability as services vary per country.