Unnoticed Bottleneck: The Last Mile

Simon Seeger is the Managing Director of Bettermile. Bettermile is a SaaS solution for last-mile delivery. It plans and optimizes delivery routes. The routes are dynamic.

Now that peak shopping season is over, let's think about a forgotten supply chain risk: the last-mile bottleneck. Retailers and delivery companies have been busy lately.

During Covid-19, lots of things changed. Russia attacked Ukraine and China put many cities on lockdown. Consumers noticed that things they used to get easily were suddenly hard to find. This is because the “supply chain” got disrupted. This means factories closed, there weren't enough containers or ships to get things where they needed to go. People talked about these problems a lot.

As Covid-19 hit, people shopped online more and last-mile delivery became important. The industry did well despite problems. In the U.S., parcel shipping increased by 37%. Package deliverers were like heroes during the crisis, along with doctors, nurses, sanitation workers, and supermarket workers. The industry helped the situation instead of making it worse.

Delivering packages to customers at their homes is becoming harder for companies to do well. It costs a lot to do it right, and there isn't much money to be made from each package. Shipping big orders is easier and cheaper than shipping lots of small ones. Last-mile delivery, which covers the distance between businesses and people's homes, can be hard and expensive. In fact, it often costs as much as half of what it costs to get the product from the factory to the customer.

Logistics companies benefit from higher volumes but last-mile operators face increased costs. The National Retail Federation (NRF) reports a 27% rise in container-based retail imports in the US since 2017, with a total of 26 million TEU expected this year. The largest container ship's capacity has also increased by 13% to 21,413 containers. Pitney Bowes estimates a nearly doubling of US parcel volumes from 11.9 billion in 2016 to 21.5 billion in 2021, with an extra 10 billion stops.

Delivery growth will keep going up regardless of inflation or recession. The NRF said retail sales will likely grow 6-8% during the holidays next year, while e-commerce could jump up to 10-12%. Manufacturers are also selling directly to consumers, so instead of sending one box to a retailer, they may send 1,000 little boxes to individual buyers.

Delivery drivers face difficulties as parcel volumes and complexity increase. They have to carry more parcels, cover longer routes, and are at risk of making mistakes. However, this approach is unfeasible in the long run. Failed deliveries, congested parking, and exhausted drivers reflect poorly on the company's operations. Consequently, companies are searching for innovative ways to alleviate the burden on drivers instead of overloading them.

One way to solve delivery problems is to use parcel lockers and shops. A truck can drop off 20 packages at one place, instead of driving to 100 homes. This saves the driver a lot of time. People who live near these places can pick up their deliveries there.

Parcel lockers get full and make it tough to receive your package from farther away. The locker's space is limited, so your items only stay for about a day or two before being sent back. Parcel shops also fill up, but they have a disadvantage of restricted opening times. Therefore, people prefer to use them as a stop-on-the-way-home option.

AI helps make last-mile delivery better. It helps companies make customers happy while also improving employee well-being. AI crunches data so companies can plan routes and predict delivery times. This helps both customers and delivery people have a better experience. AI also helps drivers find the right place to stop, making sure more deliveries are successful. And AI can optimize routes, saving drivers time and making their jobs easier.

Delivery companies are using AI and mapping data for last-mile delivery. Some companies make their own solutions, while others rely on tech specialists. Technology is helping with last-mile delivery, but disruptions can still happen close to home.

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