Analyst Insight: Last-mile delivery remains the Wild West of delivery logistics and fulfillment. There’s no magic bullet for all businesses; customer demands and expectations are shaped by whether they’re ordering clothes, washing machines, groceries or menu items, or routinely shopping online. Emerging trends that impact last-mile include the role of contractors in fulfillment, rapid order fulfillment, increased USPS handling, in-house delivery services, upselling during delivery, smart technology, warehouse strategy, self-driving delivery vehicles, and anticipatory shipping.
Last-mile delivery’s efficiency depends on factors such as retailer size, number of orders picked and packed per day, and order pickup frequency. Last-mile success can remain elusive for companies that lack the technology or partnerships, drop-off points, financial wherewithal or flexibility to deliver at non-peak times. They need the ability to gain from efficiencies of scale, get control of labor and delivery costs, and navigate congested cities. Last-mile delivery trends include the following:
Retailers are turning part of their stores into fulfillment centers by adding tools like carton flow, flexible conveyors, packing stations, and adjustable shelving, to handle the volume of online orders and bring fulfillment closer to the customer.
Delivery via drones, robots, and self-driving vehicles promises to limit labor costs and enable 24×7 delivery. But regulatory and operational issues could prove a barrier. For example, Amazon warehouses use robots for most picking and some packing. Some companies are experimenting with an automated delivery process or have staff dedicated to fulfilling delivery orders, even at restaurants.
Software applications and mobile technology such as Postmates, Amazon Flex and UberRUSH provide independent drivers with full or supplemental income. This last-mile delivery mode is less efficient than a system with active route management, but helps reduce last-mile costs. Challenges arise when regional or local last-mile delivery organizations must work with national carriers, but smartphone technology is closing the gap.
While traditional mail delivery activity has lagged in recent years, the U.S. Postal Service has picked up its e-commerce package delivery volume, leveraging its extensive processing and package-delivery expertise and low operating costs. Meanwhile, several large retailers have started using their employees to provide in-house delivery services. Some have even partnered with competitors or regional companies to share transportation assets and minimize costs.
Predictive intelligence helps companies look at prior consumer purchases to anticipate other products they might want. The companies can offer “upsold” purchases during the online checkout process, potentially process an additional order upon delivery completion, or (at least with larger fast-moving consumer goods firms or companies) offer subscription orders based on knowledge of customers’ purchasing frequency.
Manufacturers and retailers are opening urban warehouses and fulfillment centers, using neighborhoods as logistics hubs to get packages to customers more quickly, and designing dedicated last-mile warehouses. Last-mile delivery hubs are part of Amazon’s fulfillment strategy in some cities. Even pop-up warehousing is in play as a solution for meeting peak or unusual last-mile demand.
Some firms use artificial intelligence and optimization algorithms for inventory management. These technologies can anticipate shipping demand for better inventory management. The optimization enables shippers and retailers to perform the bulk of their transportation before the consumer buys the product, pre-shipping items to local warehouses to avoid high shipping costs.
Piloting of in-home delivery services, such as Walmart’s InHome Delivery, enable the delivery associate to place groceries or packages inside the absent customer’s home, using smart entry technology while wearing a proprietary camera for delivery verification.
Last-mile delivery solutions are unique to each retailer. Last-mile’s success rides on a mix of fulfillment strategies, improved technology, analytics, partnerships and employee training and retraining. Larger companies will need to take an active workforce approach to address increasing automation, and gear up to use technologies such as radio frequency identification for inventory visibility. Autonomous vehicles will have a role, but drivers will still be needed. Much last-mile automation will be about getting the right product on a truck.