Consumer behavior has changed recently, delivery standards have evolved, and market requirements have become more complex. Customer satisfaction requires speed and effectiveness by delivery companies more than ever before. Since the last mile process is the most important in the modern world of logistics, companies must find solutions related to the costs of this process.
Last mile process costs are the investment a company makes in the last leg of its logistics operations, in which the package moves from the warehouse to the final customer. This process is crucial in terms of customer satisfaction. Managing this process properly brings benefits for both the client and the company. But if it is not implemented correctly, the company will most likely lose its credibility and reputation, as well as customers and money, which will undoubtedly push it into the abyss.
Last mile cost hike in past years:
The change in consumer behavior has made Delivery and E-Commerce companies around the world work hard to satisfy their customers, which has made the last mile process a priority for delivery companies. Growth in the e-commerce market has doubled the demand on the last mile. The high demand on this process made it more difficult to maintain efficiency in delivery.
The biggest challenge in the last mile process is controlling and rationing costs while maintaining high delivery efficiency. The solution to this dilemma is simple, and it is to follow basic practical methods, and adapt to the changing needs of customers. High shipping costs reduce financial returns, which worries employers. To ration out last mile costs, it is imperative to understand the factors driving up cost.
What is the cost of the last mile process:
If this process is not managed effectively, it will be a burden on the company. This process can consume up to 41% of supply chain costs, and consumes as much as 53% of the total cost of the shipping process. Modern technological solutions to the last mile process, reduce the costs of delivery companies, as well as contribute to achieving meaningful profits.
A study conducted by Statista, in 2018, showed that the average cost of the last mile process was as follows: the delivery company incurs $10 for each delivery, and consumers pay $8 of it, but what the customer is really willing to pay is $1.4. The last mile market was estimated to be worth $30.2 billion according to the study. It is difficult to control the factors that drive up the cost of the last mile process without working to manage them with effective tools. This process directly affects the company’s profits, and the only way to survive this high cost is to put this process under a microscope, study it, manage warehouses and exploit the company’s resources in the optimal way in cooperation with technology and the tools it provides.
Factors driving up last mile costs:
With this intense race in the e-commerce sector, it is difficult to keep up with consumers’ expectations. Today’s customers want high-speed delivery, and some want their parcels to arrive the same day, which puts the company under tremendous pressure, and forces it to constantly improve its drivers routes as well as other logistics operations, which will increase the cost. Studies show that consumers always want free delivery, and most are willing to cancel an order if it doesn’t include free delivery. However, we find successful companies that go according to the customer’s desire and ultimately sell and profit despite the complexity of these issues.
The last mile is a difficult and complex process:
Companies globally suffer from the issue of the last mile, which is greatly affected by market variables, as well as by the volume of shipments and the distances between delivery points. The dynamics of delivery varies from villages to cities and this difference must be taken into account when managing it. The connection points in the villages and countryside are far from each other, unlike the cities where they are close, but the connection to the cities is governed by overcrowding, which represents a challenge, which causes delays and disruption of work. With the increasing growth of e-commerce, we see that these dilemmas have multiplied and led to the last mile process being referred to as complex and difficult.
Delayed and Returned Shipments:
Angry customers don’t have a problem leaving the company they’re dealing with when it comes to their packages and expectations. For example, if the customer does not receive a delivery on the same day as was agreed, his frustration forces him to resort to another company, with many options in the market, the customer finds an alternative company that suits his needs, and the first company loses a customer due to a late parcel.
Even if the delivery process is completed on the agreed day, the customer remains anticipating the parcel and sets expectations for its arrival time, which spoils his daily work schedule. The problem is also that the customer is not at home, as a lot of time is wasted when the driver has to change lanes or return to another delivery point, which will also increase the cost of the overall process.
(6) Ways Technology Can Reduce Last Mile Process Costs:
If the logistics operations are managed properly, the delivery companies save themselves a lot of time, money and effort and improve the last mile process and its development. Here are some of the ways delivery management softwares reduce last mile costs:
1- Follow up of the fleet
Delivery companies should always ensure the transparency of the work and movements of their fleet when carrying out deliveries. By incorporating intelligent and automated technology systems into the work, the company will ensure highly effective control and communication between management and field workers, which will drive the performance of the last mile process for the better, and through it will avoid entrapment
2- Live communication
The live tracking feature greatly supports the company, as the administration keeps in touch with the delivery workers and allows them to support them with detailed matters, such as weather and road conditions that contribute to avoiding any delays in the delivery process. With this feature, the company provides its customers with the expected time of arrival via the application or text messages. This feature keeps management informed of the performance and effectiveness of its employees. This feature contributes to reducing the costs of the last mile process by rationing fuel consumption and improving the performance of the delivery operator.
3- Route Optimization
This feature is designed to locate the shortest routes while including as many connection points as possible. Companies should take into consideration factors determining the driver’s itinerary, such as fuel costs, driver productivity, risks, eviction urgency and size, and others. With proper route management, the company can add packages to drivers within seconds.
Conversely, when the driver provides his management with road conditions, points of congestion, and how long it took to get to a certain point, this data is analyzed and used to develop a better itinerary for the rest of the fleet, which in turn teaches it.
The company is lively about the presence of overcrowding to avoid it, for example, which will benefit the process, expedite it and reduce its expenses. One of the advantages of this system is that it facilitates the process of transferring the shipment to another vehicle in the event of a breakdown of the vehicle carrying it.
4- Increase interaction with customers
Consumers are now highly demanding to be able to check the status of the package, and to be able to control when and where it arrives. If the company is able to give the customers this feature, and allow them to communicate with the delivery worker, it will help reduce the percentage of returned parcels. In all cases, customers should be provided with live updates of the package via email, phone call or, most appropriately, text message.
5- Proof of delivery automatically
Delivery companies must maintain proof of sending and receiving the parcel, details of the parcel’s condition upon receipt, customer availability and payment details. These proofs can be collected electronically via notes, photos or videos, and uploaded to the system by the delivery operator. The ability to collect and store data in real time contributes to answering customer inquiries and concerns. Electronic proofs contribute to eliminating the hassle of paperwork that takes time, effort and space in the office.
6- Data collection and analysis feature
By collecting and analyzing data automatically, the company can identify its weaknesses in the last mile process, and provide information necessary to the continuous development of the supply chain. Follow-up information such as the number of tasks completed, the average time required for each task, the distance traveled, the time lost and the miles traveled in each process, all contribute to the development of the last mile and knowledge of the capabilities and effectiveness of delivery workers.
This information can be used at the management level or at the delivery person level. This information can be categorized into different fields, daily, weekly, monthly, or even by hours. This information can be used at the management level or at the delivery person level. This information can be categorized into different fields, daily, weekly, monthly, or even by hours. These classifications help answer many questions, such as:
-Why do some delivery workers outperform their colleagues?
-Are there certain days of the week when deliveries can be completed faster?
-Is there a specific hour of the day when deliveries are complicated and difficult?
-Is there a way to adjust drivers’ lines to avoid rush hour?
Through this feature, reports can be created and studied for development. By analyzing this accurate data, the company can make its decisions with confidence, which will improve its productivity and reduce its costs.
Studies indicate that 46.8% of merchants and sellers in the world are planning or actually starting to contract with smart delivery management systems, in order to be able to grow and continue in this field, which has grown and its challenges have grown.
All logistics companies need in order to get rid of the challenges of the last mile once and for all, are advanced technological features combined in one system, that help the company to overcome and avoid any adversity, this is the future and these are its requirements.
Contact LogesTechs, to learn more about freight management systems and solutions.