Getting Creative in Last Mile Logistics

“What’s driving the focus on last-mile delivery?” asks Adrian Gonzalez (@talkinlogistics).[1] He points out, “Over the past couple of years, we’ve seen a lot of activity related to last-mile delivery — from startups providing last-mile delivery services to advancements in transportation management systems and mobile technologies to more effectively plan, execute, and track last-mile deliveries, as well as several acquisitions in this space.” The term “last mile” is, of course, a nickname for the last leg of the logistics supply chain. Adam Robinson, a marketing strategist at Cerasis, explains, “Last mile logistics refers to the final step of the delivery process from a distribution center or facility to the end user. Although the name implies it is the final mile delivery, actual last mile delivery can range from a few blocks to 50 or 100 miles.”[2] One of the reasons last mile logistics is so challenging is because the last mile is vastly different in a crowded city than it is in an isolated rural area in a developing country.

Last Mile Logistics Challenges

Edwin Lopez (@EdwinLopezT37) calls last mile logistics “the final frontier of logistics.”[3] He asserts the last mile is “extremely inefficient.” Robinson reports, “Last mile may not seem very important, but it can make up 28 percent of a shipment’s total cost.” Little wonder supply chain professionals are focusing on how to make the last mile more efficient. What has really brought last mile logistics into sharper focus is the rise of e-commerce. Lopez elaborates, “Dreams of a seamless delivery experience are hardly new. The United States Postal Service has been trying to perfect its process for centuries; and United Parcel Service (UPS) and FedEx, for decades. Only now, the digital age has pulled last-mile delivery to the forefront of retailers’ minds as e-commerce and the Amazon effect require them to offer fast and free delivery, or become uncompetitive.”

“Retailers are searching for ways to perfect the process,” writes Barry Hochfelder (@barryhoch21). “To do so, retailers and logistics providers must first understand the factors driving costs. In addition to warehousing, fulfillment and technology expenses; fuel, vehicle and labor costs also factor into the last-mile price tag. Each segment has its list of inefficiencies, although it varies per retailer. When examining their costs and trying to perfect their last-mile strategy, retailers should look closely at their routes, loading processes and future opportunities.”[4] Some last mile providers have used route optimization technologies for years to improve route efficiency and reduce fuel costs. Jeremy Becker, Senior Manager for Supply Chain Consulting at Transplace, told Gonzalez, the stakes for improving last mile delivery have never been higher. “It’s become a consumer expectation,” he said, “and there’s an element of customer service around it too. … Retailers that aren’t capable of omni-channel distribution and aren’t able to deliver goods to customers in a variety of ways will have growth limitations.” Robinson adds, “Consumer demands and expectations are rising, and up to 25 percent of consumers are willing to pay extra for same-day delivery. Also, same-day delivery will reach a 25-percent market share by 2025. By 2018 alone, same-day delivery and last mile logistics will be valued at more than $1.35 billion. E-commerce is the driving force behind the sudden uptick in last mile logistics, and as explained by Logistics Management, e-commerce is expected to grow to $2.4 trillion by 2018 as well.”[5] Robinson believes there are seven trends currently impacting last mile logistics. They are:

  1. Faster Fulfillment Times are becoming the Norm. “Consumers want faster fulfillment, and shippers need to move more product at a faster pace.”
  2. New Players are Disrupting Last Mile Logistics. “Supply chain disruptors, such as venture capitalist start-ups, previously discussed in the Uberization of Trucking, are impacting last mile logistics. … Unfortunately, the tech landscape is riddled with cases of supply chain disruptors failing, but the trend is clear and shows little indication of regression.”
  3. Smart Tech is on the Rise. “The use of Uber-like apps implies another impact and trend in last mile logistics, the use of smart technology for tracking purposes. Through the Internet of Things (IoT), smart technology and sensors can successfully track shipments in real time. Consumers and shippers can both receive SMS alerts, email notifications and even Google notifications for every movement a shipment makes.”
  4. Advanced Analytics are Driving Last Mile Logistics Costs Down. “Analytics allow supply chain entities to isolate the cost-impacting factors across all shipments. … As a result, the overall costs of last mile delivery can be pushed further down, encouraging more consumers to use same-day delivery and faster delivery options.”
  5. Insourcing Reaches into Last Mile Logistics. “The sudden spike in last mile delivery encourages more shippers to begin insourcing last mile deliveries. In other words, shippers are using their trucks to reach their immediate, local consumers.”
  6. Autonomous Vehicles, Drones and Robotic Delivery Grow More Important. “Self-driving vehicles, drones, and robots will become key to increasing last mile delivery options, while maintaining high reliability and same-day delivery, in both rural and urban areas.”
  7. Drivers Become Merchants. “In conjunction with faster, better technology, including driverless trucks, the role of the driver will evolve. Drivers will become merchants, selling items from trucks.”

For more last mile trends, see my article entitled “The ‘Last Mile’ Challenge and the Future of Logistics: Part 1.” Robinson’s final two trends point to some of the creative ideas being suggested to meet last mile challenges.

Getting Creative with the Last Mile

Driverless vehicles, drones, and robots are but a few of the ideas logistics providers are considering. Robinson observes, “Robots are showing up in last mile delivery, including drones, unmanned ground vehicles (UGV), the so-called ‘office refrigerator on wheels’.”[6] Most of the big players are involved in developing these advanced solutions. For example, in the drone arena Amazon has a Prime Air initiative, Google has Project Wing, and UPS is testing a drone delivery system using the HorseFly UAV. The UPS initiative is a hybrid system that combines a drone which recharges on the roof of an electric delivery vehicle. Mercedes-Benz is developing a similar system using drones likened to “Robotic Carrier Pigeons.” Elisabeth Behrmann (@ElisBehrmann) reports, “Mercedes-Benz is looking at mounting automated flying drones onto a new line of electric vans as part of a 500 million-euro (US$562 million) investment aimed at speeding delivery times for online orders. The small pilotless aircraft would be part of a suite of on-board systems, including digital sorting equipment, that could cut both costs and delivery times in half for the final portion of a package’s journey.”[7]

Old school transportation is also getting a new lease on life. UPS has announced it will launch a pilot project in Toronto using cargo bikes for package deliveries.[8] KPMG analysts, Tom Mayor and Talley Lambert, conclude, “Consumers are increasingly responding to these new models. In fact, the rapid development and adoption of these technologies fuels and is fueled in part by the similarly rapid evolution of customer purchasing behaviors, including the demand for ever-faster fulfillment, the increasing expectation of free or very-low-cost delivery, the willingness — even eagerness — to purchase online (including once ‘off-limits’ items like fresh fruits and vegetables), and the acceptance of novel delivery mechanisms.”[9]

Footnotes
[1] Adrian Gonzalez, “The Growing Focus on Last-Mile Delivery,” Talking Logistics, 19 June 2017.
[2] Adam Robinson, “What Is Last Mile Logistics & Why Are More Shippers Looking at This Transportation Function?” Cerasis, 19 September 2017.
[3] Edwin Lopez, “Why is the last mile so inefficient?Supply Chain Dive, 22 May 2017.
[4] Barry Hochfelder, “What retailers can do to make the last mile more efficient,” Retail Dive, 22 May 2017.
[5] Adam Robinson, “What Are the Trends in Last Mile Logistics?” Cerasis, 13 October 2017.
[6] Adam Robinson, “Robots in the Last Mile: Are You Ready for Last Mile Automation?” Cerasis, 18 October 2017.
[7] Elisabeth Behrmann, “Mercedes Equips Delivery Van with Robotic Carrier Pigeons,” IndustryWeek, 7 September 2016.
[8] Ben Spurr, “UPS to test cargo bikes for deliveries in Toronto,” The Star, 23 October 2017.
[9] Tom Mayor and Talley Lambert, “The New Logistics Competition for the Last Mile,” IndustryWeek, 27 April 2017.

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