“Logistics Pulse” is your cheat sheet and to-do list for everything about trade, the supply chain and logistics. We dive deep into the latest news headlines and industry trends and equip you only with actionable insights you can use to improve your business—no matter your industry or role in the supply chain. Presented by Mothership.

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Last-mile and final-mile logistics are the most crucial steps in the supply chain, but they are often also the most complex and costly to manage. We break down everything you need to know about last-mile delivery and final-mile logistics. Learn about the key challenges businesses face and discover how shippers are bringing down logistics costs, planning more efficient delivery routes and achieving higher customer satisfaction rates.

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Get the latest insights into the most clever strategies top businesses use to optimize last-mile and final-mile logistics. We'll reveal top shippers' technology and the best tactics proven to enhance supply chain efficiency. We provide a comprehensive look at how the last mile is transforming the delivery and transportation processes—no matter the industry.

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What is last-mile delivery?

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Host 2  00:00

I think for a lot of people, this is kind of a black box, right?

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Host 1  00:02

So, maybe just starting off, you know, the absolute basics. 

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Host 2  00:06

So, last-mile delivery, sometimes also called final-mile delivery, or final-mile logistics, is that last step, that last leg in the delivery process, when a good goes from a distribution center, a fulfillment center, you know, one of those big warehouses, to the customer's actual location, whether it's a home or a business.

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Ad Read  00:24

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Host 1  00:40

We're going to do a deep dive today and try to really pull out all the interesting stuff.

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Host 2  00:44

Some real insights to be had here.

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Host 1  00:46

It starts with the order placement, obviously, clicking buy. Then, the tracking information kicks in.

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Host 2  00:51

Then, the goods arrive at a transport hub.

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Host 1  00:53

Which could be?

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Host 2  00:54

A distribution center or a fulfillment center. From there, delivery routes get planned, and then a carrier, you know, like FedEx, UPS, the Postal Service.

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Host 1  01:06

Or even one of those, like, local delivery companies that have popped up.

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Host 2  01:09

Absolutely. Gets selected and assigned to pick up the package. They grab the goods, and finally, it's delivered with that proof of delivery. It's an important part of the process, especially from the business side.

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Host 1  01:22

Okay, and that really contrasts with first-mile delivery.

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Host 2  01:26

Yes.

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Host 1  01:26

Which is the very first step in the process.

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Host 2  01:28

Exactly, so that's the transportation of goods from, let's say, a supplier or a manufacturer to that initial hub we were talking about.

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Host 1  01:36

Right.

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Host 2  01:37

And what's interesting here is that the first mile, it's often much more streamlined and less expensive.

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Host 1  01:44

Why is that?

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Host 2  01:45

Well, because you're typically dealing with these fixed locations.

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Host 1  01:49

Okay.

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Host 2  01:49

Right? So it's like a factory to a warehouse, predictable volumes, you know, how much is going to be moving.

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Host 1,01:54

So more like scheduled routes?

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Host 2  01:56

Exactly. It's much more efficient.

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Host 1  01:57

Whereas last mile is?

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Host 2  01:59

Last mile, it's all over the place.

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Host 1  02:01

Right.

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Host 2  02:01

Much more dynamic, and that's where the costs really start to climb.

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Host 1  02:04

So if we think about this in terms of, you know, our online shopping habits, last-mile delivery, it's clearly super important to us as consumers.

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Host 2  02:15

Absolutely.

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Host 1  02:16

You know, we want our stuff fast.

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Host 2  02:18

Yeah. I mean.

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Benefits and advantages of last-mile delivery for businesses

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Host 1  02:19

What about from the business perspective?

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Host 2  02:20

Yeah, consumer demand for fast delivery is actually a huge driving force here. Like you said, people want their stuff quickly. They've come to expect it.

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Host 1  02:28

Yeah.

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Host 2  02:29

And so businesses that can nail that last-mile delivery, they get a real edge over the competition.

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Host 1  02:36

Okay, so break that down a bit more for me.

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Host 2  02:38

Sure.

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Host 1  02:39

What are the actual benefits for a business?

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Host 2  02:41

Well, it's simple, really. It can lead to more sales.

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Host 1  02:45

Right.

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Host 2  02:45

Think about it. You're online, you see two similar products, one says it'll be there tomorrow, the other one says it'll be there next week.

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Host 1  02:53

I know which one I'm picking.

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Host 2  02:54

Exactly.

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Host 1  02:55

Yeah, and they're probably going to charge me more for the one that gets there tomorrow.

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Host 2  02:58

Probably.

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Host 1  02:59

But I'm willing to pay it.

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Host 2  03:00

You're willing to pay for that convenience.

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Host 1  03:02

Yeah, for sure.

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Host 2  03:03

And that's how businesses can actually reduce pressure on their profit margins. By offering this fast delivery, they can charge a premium.

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Host 1  03:11

And make up for some of the costs involved, makes sense. And on top of that, you know, you get business growth.

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Host 2  03:15

Yeah.

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Host 1  03:16

Because if you're known for reliable, fast delivery, people are going to come back to you again and again.

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Host 2  03:22

Yeah, it's loyalty.

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Host 1  03:23

Exactly, and ultimately, it all boils down to customer satisfaction.

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Host 2  03:28

Right.

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Host 1  03:28

A happy customer is a loyal customer.

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Host 2  03:30

So true.

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Host 1  03:31

And they're more likely to recommend you to their friends and family.

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Host 2  03:35

Yeah, I mean, I know for me, if I have one bad delivery experience, that can really turn me off a company.

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Host 1  03:42

Oh, absolutely!

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Host 2  03:43

Even if the product itself is great.

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Host 1  03:45

Yeah, it leaves a bad taste in your mouth.

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Host 2  03:47

Totally.

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Host 1  03:47

You start associating that company with hassle, with inconvenience, and you're less likely to shop there again.

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Host 2  03:54

Okay, so we get it. Fast delivery, good for customers, good for business.

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Host 1  03:58

Seems like a win-win.

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How much does last-mile delivery cost?

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Host 2  03:59

But what about the costs?

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Host 1  04:01

Oh yeah!

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Host 2  04:02

It sounds like this is where things can get really complicated. Complicated and expensive. In fact, last-mile delivery is typically the most expensive and complex part of the entire supply chain.

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Host 1  04:14

Really?

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Host 2  04:15

Really!

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Host 1  04:15

So, more than, like, manufacturing the goods?

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Host 2  04:17

Yeah.

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Host 1  04:18

Shipping them across the ocean?

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Host 2  04:19

It's often more expensive than all of that.

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Host 1  04:21

Wow, that's crazy.

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Host 2  04:23

There's a stat from some recent academic research that really blew my mind.

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Host 1  04:28

What is it?

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Host 2  04:28

Last-mile delivery can account for up to 53% of the total delivery cost.

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Host 1  04:34

That's more than half.

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Host 2  04:35

More than half.

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Host 1  04:36

So when I'm paying, you know, $5, $10 for shipping, more than half of that is going to—

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Host 2  04:41

Just that last little stretch.

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Host 1  04:42

Just getting it from the warehouse to my house.

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Host 2  04:44

Exactly.

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Host 1  04:45

Wow!

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Host 2  04:46

It's pretty mind-boggling when you think about it.

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Host 1  04:49

So, what are the biggest factors that contribute to those costs?

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Host 2  04:53

Well, there's a whole bunch. First off, you've got the investment in equipment, technology, the delivery vehicles themselves, right?

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Host 1  04:59

You've got to buy those trucks or vans or whatever they're using.

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Host 2  05:01

Yeah, and maintain them.

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Host 1  05:03

Exactly. There's the ongoing expenses, maintenance, repairs, insurance. Those costs can really add up.

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Host 2  05:10

And then you have the cost of fuel.

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Host 1  05:12

Oh, yeah, fuel is a big one.

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Host 2  05:14

Yeah, especially with gas prices being so volatile.

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Host 1  05:17

And it's not just fuel, depending on where you're delivering, yeah, tolls, congestion charges.

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Host 2  05:22

Those can add up.

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Host 1  05:23

Those can really eat into your profits.

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Host 2  05:25

Yeah, for sure.

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Host 1  05:26

And then there's labor.

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Host 2  05:28

Yeah, the people who are actually driving those trucks.

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Host 1  05:30

Exactly. You've got to pay the drivers, the logistics staff, the people planning the routes.

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Host 2  05:35

Right.

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Host 1  05:35

That's all part of the cost.

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Host 2  05:37

So it's just this constant juggling act of different expenses.

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Host 1  05:42

It's a lot of moving parts, and a lot of things that can go wrong.

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Host 2  05:45

And inefficiencies, like poor route planning and failed deliveries.

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Host 1  05:50

Those are big ones. Yeah, like when somebody's not home or they put in the wrong address,

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Host 2  05:54

Yeah, exactly.

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Host 1  05:55

And the delivery person has to come back another time.

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Host 2  05:58

And that just adds more cost to the process. It's inefficient.

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Host 1  06:01

Yeah.

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Host 2  06:01

It's frustrating for everyone involved.

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Host 1  06:03

And there's also the issue of returns.

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Host 2  06:05

Oh.

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Host 1  06:06

Which, you know, a lot of people don't think about.

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Host 2  06:08

Yeah, returns are a huge part of e-commerce now, and they add another layer of complexity.

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Host 1  06:13

Yeah, because you have to handle the goods again?

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Host 2  06:15

Exactly. You have to pick them up.

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Host 1  06:17

Yeah.

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Host 2  06:17

Get them back to a warehouse or a store. It all adds up.

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Host 1  06:21

And then there are things like seasonal changes, holidays.

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Host 2  06:24

Oh, yeah, the holidays.

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Host 1  06:26

When everybody's ordering stuff online.

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Host 2  06:27

That's when things get really crazy.

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Host 1  06:30

Yeah, because there's more traffic.

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Host 2  06:31

Yeah.

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Host 1  06:32

And the delivery companies get slammed.

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Host 2  06:35

And they often have to hire extra help.

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Host 1  06:37

Right.

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Host 2  06:37

Which adds to the cost.

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Host 1  06:39

And then you've got things like bad weather.

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Host 2  06:41

Yeah, you can't control the weather.

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Host 1  06:43

Right.

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Host 2  06:43

And it can cause all sorts of delays.

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Host 1  06:46

Yeah, it's like every potential problem in the delivery process gets magnified in that last mile.

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Host 2  06:51

Exactly, because it's that final, critical stage where everything has to come together perfectly.

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Host 1  06:58

And unlike other parts of the supply chain, last-mile delivery often doesn't benefit from economies of scale.

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Host 2  07:07

That's right.

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Host 1  07:08

I don't quite understand why that is.

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Host 2  07:09

Well, think about it this way. When you're shipping a huge container of goods across the ocean, the cost per item is relatively low because you're moving so much volume.

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Host 1  07:20

Right.

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Host 2  07:21

But with last-mile delivery, you're often dealing with individual packages going to unique destinations.

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Host 1  07:28

Yeah, like my house.

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Host 2  07:29

Exactly, and each one of those deliveries requires its own planning, routing, handling.

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Host 1  07:36

Right.

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Final-mile logistics: The challenges of last-mile delivery

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Host 2  07:36

So it's much harder to achieve those same economies of scale.

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Host 1  07:40

So even if a delivery company is doing, you know, hundreds of deliveries in a day, each one is essentially a unique problem.

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Host 2  07:47

Exactly, and that's why it's so difficult to make last-mile delivery truly cost effective.

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Host 1  07:52

And then you've got all those operational headaches.

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Host 2  07:54

Oh yeah, those are fun.

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Host 1  07:55

You know, bad route planning.

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Host 2  07:57

Yeah.

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Host 1  07:58

Road closures, traffic jams, unexpected weather events.

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Host 2  08:03

It's like a Murphy's Law of delivery.

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Host 1  08:05

Totally.

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Host 2  08:05

Anything that can go wrong probably will.

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Host 1  08:08

And those things lead to delays, missed delivery windows.

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Host 2  08:13

Yeah, people get frustrated.

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Host 1  08:14

Right, and then the company has to spend more money.

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Host 2  08:16

Exactly!

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Host 1  08:17

To try and fix the problem.

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Host 2  08:18

Reschedule deliveries, maybe offer some kind of compensation.

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Host 1  08:22

Right, so it's like a ripple effect.

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Host 2  08:24

Absolutely, the costs just keep piling up.

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How top companies are optimizing their last-mile delivery and final-mile logistics

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Host 1  08:26

Okay, so we've talked about the challenges, but businesses aren't just sitting back and accepting this, are they?

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Host 2  08:32

No, no, they're not. They're trying to get a handle on this.

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Host 1  08:35

So what are some of the key approaches?

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Host 2  08:37

Well, one of the most important things is intelligent route planning.

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Host 1  08:41

Okay.

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Host 2  08:41

Using sophisticated software and real-time data to figure out the most efficient delivery routes.

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Host 1  08:48

So like an algorithm that takes into account traffic and all that?

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Host 2  08:52

Traffic, weather conditions, construction, all those variables that can affect delivery times.

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Host 1  08:59

So it's not just like a static map.

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Host 2  09:01

No, it's dynamic. It's constantly updating to find the best possible route.

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Host 1  09:06

That's pretty cool.

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Host 2  09:06

Yeah, it's pretty amazing technology.

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Host 1  09:08

And then there's strategic carrier selection, which is basically just choosing the right delivery partner.

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Host 2  09:14

Exactly.

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Host 1  09:15

For the job.

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Host 2  09:15

Yeah, some carriers are better for certain types of deliveries. Some are faster, some are cheaper, some have better coverage in certain areas.

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Host 1  09:25

So it's about matching the carrier to the specific needs of the delivery.

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Host 2  09:29

Exactly. It's all about finding the best fit.

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Host 1  09:31

And then you have to think about the actual mode of transportation. Of course, technology plays a huge role here.

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Host 2  09:37

Oh, yeah, we can't forget about technology, no.

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Host 1  09:39

So, how is technology being used to improve last-mile delivery?

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Host 2  09:44

Well, for one thing, there are sophisticated tracking systems that provide real-time visibility into where a package is.

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Host 1  09:53

Yeah, I love those.

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Host 2  09:54

Yeah, they're great.

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Host 1  09:55

You know, you can track your package every step of the way.

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Host 2  09:57

Exactly, you know when it's left the warehouse, when it's out for delivery, when it's arrived at your door.

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Host 1  10:02

And even if the delivery is a little slow, just knowing where your package is can make you feel better about it.

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Host 2  10:08

Absolutely. It gives you peace of mind, and it can actually reduce customer service inquiries.

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Host 1  10:14

Right, because you're not calling up the company.

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Host 2  10:15

Exactly!

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Host 1  10:16

Being like, where's my stuff?

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Host 2  10:17

Yeah, you can just check the app.

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Host 1  10:18

Exactly.

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Host 2  10:18

To see where it is.

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Host 1  10:19

And then partners partnering with specialized logistics companies.

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Host 2  10:23

Yes, this is becoming more and more common.

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Host 1  10:25

Why is that?

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Host 2  10:26

Well, because last-mile delivery is so complex, it often makes sense for businesses to outsource it to companies that have the expertise and the infrastructure.

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Host 1  10:38

Yeah.

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Host 2  10:38

To handle it efficiently.

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Host 1  10:39

So they can focus on, you know, making the product and selling it.

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Host 2  10:42

Yeah, their core competencies.

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Host 1  10:44

And let the experts handle the delivery.

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Host 2  10:47

Right. It's a win-win for everyone. It's not just one silver-bullet solution. It's a combination of strategies.

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Host 1  10:51

Right. Working together.

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Host 2  10:54

Yeah, from planning the route to choosing the vehicle to using technology to track everything.

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Host 1  11:01

And, ultimately, it's about finding efficiencies at every point in the process.

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Host 2  11:05

Exactly, optimizing the entire ecosystem.

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What is final-mile logistics?

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Host 1  11:07

Okay, so just to recap everything we've talked about today: Last-mile delivery is that crucial final step in getting goods to us.

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Host 2  11:19

Yes.

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Host 1  11:20

And while we, as consumers, demand speed and convenience, and businesses can benefit from faster deliveries, you know, increased sales, happy customers. Absolutely.

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Host 2  11:31

It's also incredibly expensive.

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Host 1  11:32

Yeah.

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Host 2  11:33

And complex.

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Host 1  11:34

Very complex.

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Host 2  11:34

To actually execute, often making up more than half the total delivery cost.

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Host 1  11:40

That's right.

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Host 2  11:40

And that's because of all the factors we talked about, vehicle expenses, labor, the challenges of those individual deliveries and, to address these issues, businesses are using smarter planning, better carrier choices, different transportation methods, more technology to try and get a handle on it.

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Host 1  11:57

Exactly. They're throwing everything they can at the problem.

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Host 2  12:00

Okay, so that's where we are today.

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Host 1  12:01

Right.

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The future of last-mile delivery and final-mile logistics

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Host 2  12:02

But I'm curious to hear your thoughts on this. You know, we all want faster delivery. It's just become the expectation.

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Host 1  12:09

It's the standard now.

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Host 2  12:10

Right? Yeah. So what kind of crazy, groundbreaking solutions do you think?

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Host 1  12:16

Ooh, that's a good question.

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Host 2  12:18

We might see in the future to overcome these persistent cost and logistical hurdles? And I don't just want to hear about faster trucks or drones.

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Host 1  12:30

Yeah, yeah.

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Host 2  12:30

You know, think outside the box. Okay, all right?

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Host 1  12:33

What could completely revolutionize last-mile delivery?

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Host 2  12:37

Well, one thing that's really interesting to me is the idea of hyper-local fulfillment.

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Host 1  12:41

Okay.

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Host 2  12:42

So instead of having these huge centralized warehouses, you could have smaller, distributed networks of fulfillment centers, located closer to customers.

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Host 1  12:52

So, like in neighborhoods?

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Host 2  12:53

Yeah, maybe even in existing retail spaces that are underutilized.

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Host 1  12:59

Interesting.

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Host 2  12:59

So imagine, you know, a store that's open during the day, but at night, part of it transforms into a mini fulfillment center.

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Host 1  13:07

Wow.

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Host 2  13:08

Where goods are stored and deliveries are staged.

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Host 1  13:11

So, they're using the same space?

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Host 2  13:13

Exactly. They're maximizing existing infrastructure, and that could potentially reduce delivery times.

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Host 1  13:19

Yeah.

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Host 2  13:19

Because the goods are already closer to the customers.

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Host 1  13:22

And maybe you could even use like autonomous vehicles or robots.

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Host 2  13:25

Oh yeah!

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Host 1  13:26

To make those deliveries.

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Host 2  13:27

Yeah, self-driving cars or delivery robots that could navigate those neighborhoods and make those deliveries quickly and efficiently.

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Host 1  13:38

That's pretty futuristic.

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Host 2  13:39

It is, but it's not as far-fetched as it sounds.

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Host 1  13:42

Right.

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Host 2  13:43

There are already companies experimenting with these technologies. They're starting to pop up.

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Host 1  13:47

Yeah?

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Host 2  13:48

And, who knows, maybe someday we'll have drones dropping off our packages.

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Host 1  13:52

Oh, man, yeah, I don't know how I feel about that.

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Host 2  13:54

It's a little scary.

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Host 1  13:56

Yeah, a little too much.

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Host 2  13:57

Yeah.

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Host 1  13:57

But I guess we'll have to see what the future holds.

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Host 2  13:59

Exactly. The future of last-mile delivery is wide open, and I think it's going to be really exciting to watch it unfold.

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Host 1  14:07

Well, that's about all the time we have for today, but hopefully, this has given everyone a better understanding of this ever-evolving world of last-mile delivery.

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Host 2  14:15

Absolutely, it's fascinating.

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Host 1  14:16

Yeah, it really is.

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Host 2  14:17

And it affects all of us.

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Host 1  14:19

So, thanks for listening, and we'll see you next time.

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Host 2  14:21

See you later.

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