Understanding Last Mile Delivery – A Complete Guide for Businesses

Last-mile delivery is the final step of the supply chain process where goods leave warehouses and end up at customers' doors. In addition, it is also the priciest and most complicated part of logistics.

This stage might look simple, but it can eat up as much as 40% of total shipping costs. It shapes customer satisfaction more than anything else in the delivery journey.

That's all to make companies feel the heat to deliver faster and also keep costs down. So, let's dig deep into the topic of how last-mile delivery works.

What Is Last Mile Delivery?

Last-mile delivery means getting packages from warehouses to end customers. It's the journey from a distribution hub to someone's doorstep.

This part costs the most, and it's where customer happiness is won or lost. Moreover, last-mile delivery differs significantly from the other stages. Here is the full list of all miles:

• The first mile moves goods from manufacturers to warehouses.
• The middle mile refers to the process of shifting goods between warehouses and distribution centers.
• The last mile takes products to buyers.

Why Is Last Mile Delivery Important For Businesses?

Last-mile delivery shapes how customers see a business. So, to make their businesses successful, they have to nail this final stage of shipping and outshine competitors.

1. Customer Expectations

People expect delivery to be fast and reliable. Many e-commerce businesses offer same-day or next-day delivery. The following are some of the expectations that a shopper has:

• Speed requirements have skyrocketed. Most consumers switch to online stores for faster delivery services, such as 10-minute deliveries by Blinkit or Minutes by Flipkart.
• Transparency is huge. Customers want to track their packages in real time.
• Delivery flexibility. Options include choosing delivery dates or by days, including weekends.

2. Competitive Advantage

Faster speed and reliability become a key to getting products in minutes. So, they give an edge over other businesses when customers need products urgently or in a short period of time.

Moreover, loyalty and brand reputation also hinge on the customer experience with on-time delivery.

3. Revenue Impact

Last-mile delivery affects both costs and revenue, and when you mess it up, it can have significant consequences. That's why optimizing the last mile is so important.

Moreover, failed deliveries are expensive. Every attempt burns fuel, time, and labor. If customers aren't home, the shipping costs double with no extra revenue.

4. Different Industry Ways

Different industries deal with last-mile delivery in their own ways.

Food delivery companies live and die by speed. For example, Domino's 30-minute delivery guarantees.

Another example is that dairy and pharmaceutical companies need a temperature control system.

5 Stages in Last Mile Delivery: Step-By-Step

Last-mile delivery has five main stages that get packages from distribution centers to your door.

1. Order Processing

Order processing began immediately after a customer placed an order in the store. Once done, the system confirms the payment info and makes sure the item is in stock.

After that, the order goes through a fulfillment queue where warehouse software specifies the location and sends out staff for picks.

Activities involved:

• Payment verification and fraud checks
• Inventory check for availability and reserve for order routing
• Order route to a specific fulfillment center
• Customer is notified on order confirmation

2. Package Consolidation & Sorting

After picking, packages head to consolidation, where staff double-check contents against order details. Every package gets a unique tracking number and a shipping label.

Once done, packages are sorted based on route, carrier, and destination code.

Sorting criteria include:

• Based on the destination code
• Shipment service (standard, express, or same-day delivery)
• Package size and volumetric weight
• Any specific requirements and package fragility

3. Route Planning & Dispatch

Route planning software utilises outdated data and machine learning to estimate the probable delivery time and retrieve shipments based on the most efficient delivery routes.

Route optimization factors:

• Distance between stops
• Traffic patterns and timings
• Driver breaks
• Vehicle capacity and volumetric weight
• Customer updates with current hub details

4. Out For Delivery

Based on the type of delivery, drivers hit the roads with the items needed to deliver today.

Some businesses, such as BlinkIt and Flipkart's Minutes, share the live location of delivery agents. While some businesses, such as Amazon and Flipkart, just send a notification to customers with the "Out For Delivery" status.

5. Proof Of Delivery & Feedback Collection

Drivers confirm delivery on the spot, along with digital proof that includes time, GPS, photos, signatures, and OTPs. Customers get instant emails or texts confirming delivery.

Challenges In Last Mile Delivery

Last-mile delivery presents numerous challenges and is often the most expensive and problematic step for many businesses.

• Traffic jams slow things down, especially in cities. Delivery trucks often get stuck for hours, wasting fuel and making packages late.
• Cost Margin: Companies spend about 40% of total shipping costs just on last-mile delivery.
• Rural and Remote areas: Rural deliveries are tough. Drivers have to travel far between stops, with only a few packages per trip, which makes each route expensive.
• High Demands: Peak seasons can overwhelm delivery networks. Moreover, holidays bring a flood of orders. Companies scramble to find enough drivers and vehicles.
• Failed deliveries: They double down on the work, and drivers have to go back to the same address again and again. This eats up more money and patience.
• Bad weather: Heavy rains, snow, and storms can create safety risks, and packages stack up at the hub until things clear up.

How To Optimize Last Mile Delivery and Reduce Costs Without Sacrificing Quality

Here are some ways to optimize the last-mile delivery and save your profits.

• Leverage Technology: Use GPS, AI-based route planning, and tracking software to get real-time updates and information about current traffic status. This can make deliveries 20% faster, and rerouting decreases fuel consumption.
• Partner with 3PL Providers: 3PL providers provide ready-made delivery networks along with flexible pricing and warehousing solutions. For example, AAJ Swift is an all-in-one solution for any business. It handles everything from warehousing to last-mile delivery.
• Micro Fulfillment Centers: It brings inventory closer to customers, which shrinks the gap and increases the possibility of lightning-fast delivery.
• Real-Time Communication: It includes sharing GPS data, SMS, and email updates to customers. Proactive updates calm customer nerves and also decrease failed deliveries.
• Alternative Delivery Methods: Delivering packages to lockers (mainly in busy apartments and offices) cuts the failed delivery attempts. In addition, offering customers the option to choose their own pickup time or have items shipped from the warehouse also increases order fulfilment speed. Nowadays, some transport companies also use drones for fast last-mile deliveries.

Cost Breakdown Of Last Mile Delivery: Fixed Vs Variable Costs

Last-mile delivery cost is the sum of two costs, i.e., fixed and variable costs.

Fixed costs remain the same, regardless of the number of deliveries you make. Variable costs swing up and down with how much you deliver and how far you drive. More deliveries mean more driver hours and higher fuel bills.

Factors To Consider When Choosing A Last Mile Delivery Partner

Picking the right last-mile delivery partner isn't something to rush. Choosing wisely will save you a significant amount of profit margins.

1. Coverage Area & Network Strength

Geographic reach tells you if a partner can actually deliver to all your customers. However, it is very hard to find one. But we at AAJ Swift offer pan-India reach so that every customer in every corner of India gets their stuff.

Network strength indicators include:

• Driver availability in busy delivery zones
• Backup during peak rushes
• Consistent service across locations
• Local smarts and experienced drivers

2. Technology Stack

Modern delivery is all about solid tech, and it must offer:

• Live GPS tracking
• Have api hookups to connect to any other businesses
• Automated dispatch and rerouting predictions
• Electronic proof of delivery

3. Delivery Speed & SLAs

Service level agreements (SLAs) lay out what you can expect from a logistics company and their plan to deal with an issue. Here are some of the SLA metrics that a logistics company must offer:

• Aim for a 95% on-time delivery
• What are their failed delivery rates
• How fast they respond to issues in delivery
• Flexibility in managing delivery during peak days

4. Pricing Structure

Transparent pricing helps you to know what a logistics company charges you for. A legit PTL Transport service provider should not have any hidden fees, as they break the business's trust.

A good pricing model should have:

• Flat rates by zone and warehousing hubs
• Distance-based pricing
• Actual weight and volumetric weights
• Any surcharges apply during peak seasons or national holidays

5. Customer Service Quality

Customer-driven services, including escalation procedures for any issue, a customer feedback system, and a 24/7 support system, not only build trust but also increase repeat sales.

If you're still looking for a logistics company that has all these qualities, then try us. AAJ Swift not only provides business warehousing but also last-mile deliveries from 20+ years.

So, reach out to AAJ Swift, and we'll put together a quote that fits your coverage areas and volume.