A recent study shows that businesses failing to optimize final mile delivery capabilities can see a decrease of up to 26% in net profit over three years. Scary, but hardly surprising. Demanding customer expectations and inefficiencies in travel routes unfold into costly and challenging-to-manage final mile logistics.
It’s a hard pill to swallow knowing that frequent orders, your ecommerce business’s lifeline, also eat into your profit margins. But does it have to be a “one cannot exist without the other” type of situation?
Not if you play your cards right. Optimizing your final mile services helps you reduce supply chain costs and remain competitive in a cutthroat industry. With assistance from the right software providers, your final mile woes will be a thing of the past.
In this article, we’ll cover:
- What Is Final Mile Logistics?
- Why Final Mile Logistics Management Is a Nightmare
- How Route Optimization Solves Your Final Mile Logistics Nightmare
What Is Final Mile Logistics?
Final mile logistics, also referred to as last mile delivery, is the process of transporting goods from the distribution center to the end customer in the most accurate, fast, and affordable way possible.
U.S. ecommerce has risen steadily in recent years, from close to $286 million in revenue in 2017 to over $430 million in 2020—and the trend shows no signs of slowing down.
At first glance, this is great news for ecommerce businesses. Who doesn’t want more sales? But once you scratch the surface, things get messy.
The final mile is the most expensive stage of the supply chain. More orders put pressure on companies to meet customer expectations for fast deliveries without eroding profits.
Easier said than done.
Why Final Mile Logistics Management Is a Nightmare
Heavy customer expectations surrounding shipping times and prices, inefficient travel routes, and failed deliveries are all barriers to achieving the best final mile delivery.
Amazon’s same-day deliveries drive customer expectations to an all-time high, gas prices keep rising, and home addresses don’t seem to get any closer together. Add up all these factors, and you have a one-way ticket to Nightmare on Final Mile Street.
Customer expectations for fast and free delivery are on the rise
Consumer demands for fast and free delivery put stress on companies to upgrade operational delivery capabilities, which implies additional costs.
Customers want their orders, and it’s clear they want them fast. Thirty-six percent of consumers say that ordering online for same-day delivery is important. Same-day deliveries entail higher delivery costs (more miles, more drivers, and more stops).
The costs associated with same-day delivery could potentially be included in your delivery fees. But customer expectations for price are just as high as they are for speed—people want businesses to pick up the delivery tab. An NRF report found that 75% of respondents expect delivery to be free even on orders under $50. Free shipping means companies pay for delivery themselves, which eats into profit margins.
If you’re thinking about foregoing same-day and free delivery altogether to save costs, think again. Failure to meet these needs will cost you clients and hurt consumers’ experience with your brand. More than 25% of shoppers say they’d leave their cart if same-day shipping wasn’t available. And 59% report free delivery would improve their online shopping experience.
Travel routes are complex and crippled by inefficiencies
Multiple delivery locations across different areas hinder the effectiveness of final mile solutions.
Drivers have to navigate crowded cities with a lot of traffic or reach the depths of isolated and rural areas. A constant increase in the number of packages delivered each day to scattered addresses entails driving extra miles and making various stops.
Inefficiencies in travel routes are aggravated outside of highways. Drivers delivering several parcels to distinct places around a city have to use local roads. Local roads require drivers to go at lower average speeds, constantly brake and accelerate, and spend more time on the road—all of which significantly drive up costs.
Failed deliveries are expensive
If a customer isn’t home, your driver goes to the wrong address, or they miss a promised delivery window, the home delivery fails. Failed deliveries entail more fuel costs, labor costs, and wear and tear on the vehicles because the driver has to return a second time to the same location.
Deliveries that fail due to a mistake on your end negatively impact customer satisfaction. A few instances of bad customer experience can be enough to lose a client forever. Over 15% of buyers will stop shopping with an ecommerce business after receiving a late delivery once, and 55% will stop buying altogether after two to three late deliveries.
How Route Optimization Solves Your Final Mile Logistics Nightmare
Route optimization is the method of finding the most efficient route to manage deliveries. Optimizing your drivers’ routes cuts costs, reduces the risk of failed deliveries, and helps curb many of the inefficiencies associated with final mile logistics.
Optimized final mile delivery also gives you a competitive edge in the ecommerce sphere. Fast, free, and accurate deliveries create an exceptional customer experience. Experience-driven businesses see an over-1.6x higher year-over-year growth than other companies in customer retention, repeat purchase rates, and customer lifetime value.
It ensures your drivers travel to the right place, at the right time
Through OptimoRoute’s Mobile App drivers can easily see up-to-date information about their next delivery and effortlessly transition from the Mobile App to their navigation of choice (Google maps, Waze, Apple maps etc.) which takes drivers to the correct addresses at the right time through the optimal route. They drive fewer miles, spend less time in traffic, and avoid failed deliveries.
It tracks the live location of all drivers and packages
OptimoRoute gives your customers real-time data about the location of their parcel. Real-time updates keep the customer “in the know,” so they don’t clog up your customer service lines with questions about orders, thereby preventing failed deliveries.
It considers all constraints when planning routes
OptimoRoute’s smart routing tools take into consideration customer availability, vehicle capacity, and driver schedule when planning the best route to prevent failed deliveries.
It prepares for the unexpected
OptimoRoute’s replanning feature reroutes all deliveries when unexpected events take place (a driver doesn’t show up, or a new same-day order comes through). It also takes into account variables like current vehicle locations, driver schedules, planned destinations, package location, and re-delivery time windows when rerouting.
Optimize Final Mile Logistics With OptimoRoute
Your customers are counting on you to meet their delivery experience needs, and the success of your ecommerce business heavily depends on it. Thankfully, reduced costs, customer loyalty, and a competitive edge in the age of Amazon Prime are all well within reach.
To see how route optimization can revolutionize your final mile logistics efficiency, test OptimoRoute for free for 30 days.
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