Delivery Management

Reducing the Cost of Last Mile Delivery

by Troy Searle, 2 February 2022

What is Last Mile Delivery?

The ‘last mile’ of a delivery journey, when an item travels from a transport hub to its final destination, is a particularly costly and challenging part of the delivery process. In this article, we break down the costs associated with last mile delivery and what you can do to make a reduction. 

Why is Last Mile Delivery service so expensive? 

Last mile delivery is fundamentally different to each other leg of the shipping journey: in other stages, there is only a single, or very limited number of destinations for the freight at the end of the journey. In Last Mile Delivery, a large number of deliveries to different locations are typically pooled together within a truck or car. As well, companies are potentially dealing with hundreds or thousands of packages every day. This means that last mile delivery requires multiple, frequent stops along the course of a route rather than a continuous journey to one destination. 

The problem comes in when you realise that with each extra stop comes the potential for increased permutations of route and logistical troubles. Multiply this by the number of packages in a truck and a large issue becomes apparent. With so many opportunities for the journey to veer off course, there becomes very little guarantee of efficiency on the journey.

Main factors driving up delivery costs

1. Failed deliveries

The potential for failed delivery is one of the key differences between Last mile delivery and every other leg of the journey. Due to drivers missing the delivery window, customer absence, or customers being unaware of their delivery’s status - deliveries frequently fail to connect with their recipient in the last mile. The rate of failed delivery generally  sits at around 5%, which results in wasted labour and fuel spent on pointless and/or repeat deliveries. 

2. Fuel costs & surcharges

Last mile delivery, particularly in urban areas, requires driving at low speeds with frequent acceleration and breaking, or even hours spent idling in city traffic. These actions are far more fuel consumptive and expensive than coasting along a freeway, and making it difficult to estimate costs.

3. Route deviations

Route deviations can quickly rack up costs associated with ‘out of route miles’ - that is, the fuel cost associated with travelling further than or alternatively to a planned route. While a surface level solution is simply to enforce that drivers stick to their intended route. Without a GPS system connected to sophisticated route management software, it becomes necessary for drivers to go off-route when they come across challenges such as roadwork or heavy traffic delays. The problem with this is that it can lead to unexpected costs, because the planned route is no longer a good indication of how much fuel was used in the journey.

3 ways to reduce costs of Last Mile Delivery

1. AI Route Optimisation and Integrated GPS

Intelligent Software can massively increase the efficiency of both route planning and the time spent on the routes themselves. Algorithms are able to perform complex functions quickly and easily, eliminating the potential for human error and saving admin time in the process. This results in routes that are optimised for minimal delays and fuel usage. Save the money spent on excess idling and being stuck in traffic. 

A transport management system that allows drivers to easily access this information is also crucial. After all, there’s no point having a perfectly planned route if the driver isn’t aware of its existence. Integrating different elements of the system together - particularly the route planning software and the GPS and navigation system available to drivers. This means that drivers are better able to stick to their routes and avoid creating out-of-route mile costs.

2. Advanced Track and Trace  

Advanced Track and Trace gives customers the ability to track their delivery status online and receive updates. This allows for better communication with customers, and this transparency often results in lower rates of delivery failure. Since customers can plan to be at home in time  for the arrival of their goods.

3. Reducing Labour 

Labour is one of the most expensive aspects of the last mile delivery process. Now, a certain amount of labour is of course necessary to complete the delivery, but many companies bleed revenue through poor labour management. This is either by way of excessive admin time spent manually planning out routes and dispatch, or overscheduled drivers who are left with nothing to do. 

A comprehensive TMS is able to not only reduce administrative labour costs by automating a number of administrative functions such as routing, dispatching, and invoicing. This also allow for more efficient scheduling due to a centralised system of information. 

Last Mile Delivery tracking & automation

Last Mile Delivery is challenging and unpredictable by nature, which drives up costs exponentially. However, it can be more easily and cost effectively managed through a TMS software. It has the capacity to respond seamlessly to quick logistical changes and automate administrative tasks. 


Want to get started with route optimisation, track and trace, and scheduling options? Book a free demo with TransVirtual today or get in touch with our team for a chat.

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