All Eyes Remain Focused on the Last Mile

Stephen DeAngelis

February 12, 2019

The last mile of most traditional logistics’ journeys ended at a retail store. The exceptions were goods purchased from mail-order catalogs. With the rise of e-commerce, the last mile journey can end almost anywhere. Michael S. Kraus, Chairman and CEO of EXPAK Logistics, explains, “One of the businesses that technology has been slowly pushing itself into is the last mile delivery business. In logistics, last mile delivery is defined as being the movement of goods from a transportation hub to the final delivery destination. … The revolution in the on-demand delivery service has had a wide impact to say the least, ranging from B2B services that offer last mile delivery to apps that allow consumers to order anything they want and have it delivered straight to their door.”[1] Some companies are experimenting with deliveries to non-traditional end points, like geo-locations and car trunks. All of these innovations are making last mile logistics much more complicated. Behind this focus on last mile delivery is customer expectations. Andrew Chung, CEO of Innovo Property Group, explains, “[The] explosive growth of online purchasing and competition among online retailers has resulted in a race to reach consumers. Whether it’s one-day, same-day or one-hour, how can sellers fulfill delivery promises? The answer is getting the last mile right.”[2]

Getting the last mile right

Getting the last mile right can be a differentiator for e-commerce retailers. Adam Robinson, a marketing strategist for Cerasis, explains, “The use of last mile in e-commerce can mean the difference between a positive customer experience and a return.”[3] He continues, “Simply not delivering a package on time will dramatically increase the rate of returns, and poor last mile in e-commerce delivery can contribute to increasing logistics costs. The best-laid plans for e-commerce shipping will fail when shippers do not consider this final, vital leg of the journey, and those that do take the time to understand its challenges and focus on last mile delivery can excel in e-commerce, and deliver more freight to consumers, boosting profitability.”[3] As a result Kraus notes, “Many online retailers have found themselves in fierce competition with each other to provide the fastest and most reliable order fulfillment for their customers.”

The “last mile” is a euphemism for the last leg of a product’s journey; but, planning for that last leg begins long before a package is placed on a delivery vehicle. Because consumers now expect purchases to be delivered fast (with next-day or same-day delivery becoming the norm), retailers are frantically buying and/or building warehouses so they can locate goods closer to consumers. Jeff Berman reports a 2017 study by CBRE that tracked newly-opened distribution centers in the top 15 United States population centers found, “These [distribution] centers are typically between 6-to-9 miles from the population centers they serve, with denser cities more likely to have shorter average distances like San Francisco and Philadelphia at averages of 6 miles and 6.3 miles, respectively. And cities that are more spread out have longer averages like 9 miles for the Inland Empire in Southern California and 8.5 miles in Phoenix.”[4]

Erica E. Phillips (@EEPhillips_WSJ) reports that some retailers were so desperate to find warehouse space this past holiday season they set up temporary warehouses in vacant suburban lots and in parking garages.[5] She observes, “The explosive growth of e-commerce and the competition among retailers to deliver goods quickly is running hard up against the scarcity of warehousing near population centers, triggering a land grab for distribution space that experts say is accelerating.” Some analyst predict once-thriving malls now suffering from the effects of the retail apocalypse may soon be turned into warehouse space. Brick-and-mortar stores remaining in business are also being used as e-commerce warehouses as well as click-and-collect pick-up locations. Chung notes, “Last-mile warehouses facilitate the movement of goods in the supply chain to the final destination. Being closer to the consumer decreases supply-chain costs while minimizing the time to complete delivery.” He adds “As consumers increasingly turn to e-commerce for their shopping needs, faster delivery isn’t just an added plus; it’s the expectation of the online shopping experience. If retailers and their logistics partners want a shot at market share, faster delivery needs to be a priority.”

Concluding thoughts

A few years ago, a logistics study concluded, “Gaps in infrastructure and accelerating trends for speed will increasingly put pressure on a logistics system not designed for e-commerce driven ‘last mile, last minute’ delivery service.”[6] Those conclusions have proven correct as retailers struggle to master last-mile logistics challenges. Chung explains, “Retailers are struggling to keep up with increasing demand for faster delivery. While consumer expectations around delivery are rapidly increasing, their delivery experiences are declining. Fast delivery is important to 99 percent of U.S. consumers when making online purchases. At the same time, an increasing number of consumers feel frustrated with the lack of professionalism and accuracy when having items delivered. For retailers looking to exceed expectations, there is a large opportunity to capture customer loyalty when delivery is done right.” As a result, Kraus writes, “What we will see in the future is anyone’s guess – but with businesses aching to corner the market in last mile logistics, much more is sure to change.” Most people are aware of efforts to develop autonomous delivery vehicles (e.g., driverless vans and drones) to speed up deliveries; but, other innovations, like employee deliveries, Uber-like delivery services, and niche last-mile service providers will also be part of the picture. Because last-mile logistics are the final and most important touchpoint for ecommerce retailers and consumers, their eyes will remain focused on perfecting them.

Footnotes
[1] Michael S. Kraus, “The Growing Expectations of Last Mile Delivery!Supply Chain Game Changer, 21 December 2018.
[2] Andrew Chung, “The Importance of Last-Mile Facilities in the Supply Chain,” SupplyChainBrain, 19 December 2018.
[3] Adam Robinson, “The Role of Final or Last Mile in E-Commerce to Effectively Deliver Freight to Your Customer,” Cerasis, 10 October 2018.
[4] Jeff Berman, “Last-mile deliveries tend to run closer to 6-to-9 miles, says CBRE research,” Logistics Management, 13 July 2017.
[5] Erica E. Phillips, “E-Commerce Companies Get Creative in Quest for ‘Last Mile’ Space,” The Wall Street Journal, 9 December 2018.
[6] Sean Kilcarr, “Logistics outlook: Last mile a major choke point,” FleetOwner, 22 June 2016.