Last-mile logistics is one of the most misunderstood parts of the entire supply chain network. Even though it might not look it, the final stage of the delivery process makes up a whopping 53% of the entire cost. With online retail and eCommerce becoming mainstays and an increasing demand, shippers need to find better ways of addressing their last-mile delivery.
Put simply, last-mile logistics is the last leg of the delivery process from the distribution center to the end-user. Usually, but not exclusively, last-mile delivery involves small package carriers that deliver products to consumers. According to the trends in last-mile logistics, the global cost of package delivery, which excludes pickup, line-haul, and sorting, amounted to $83 billion in 2016. What’s more, shippers and logistics companies of all sizes have identified last-mile as being a driving force for growth and profitability.
Final mile delivery strategies will allow logistics businesses to get more products to consumers faster and more effectively. These are both key issues that need to be addressed within the framework of an omnichannel supply chain and the eCommerce business, as a whole. It’s important to point out that over a quarter of consumes state that they would be willing to pay a premium for instant or same-day deliveries.
But while eCommerce giants like Amazon have perfected their final mile, many small and mid-sized enterprises haven’t.
The Challenges of Last-Mile Logistics
There are several reasons why last-mile deliveries pose a challenge and a significant cost for companies. For starters, shipping packages in urban areas can often be difficult because of traffic congestion and parking regulations. Rural areas, on the other hand, suffer from a lack of distribution centers, inefficient delivery routes, and sparse orders to be fulfilled. In both cases, we are dealing with inefficiency in both fuel consumption and time.
Another challenge for a last-mile delivery company is in the complexity of the process. For example, some products may require unpacking, specialized installation, or in-house delivery. In some of these cases, shippers need to ensure that the final product is an accurate reflection of what’s being sold. It’s true that many last-mile carriers do not offer this type of work, while some that do may consider it as an additional service.
Consumers nowadays demand fast and transparent deliveries. Some of the reasons for high delivery costs are related to the inefficient routing of drivers, limited flexibility in delivery options, as well as the significant expenses required for personnel and maintaining delivery fleets.
While there may be other factors to consider here, companies that want to improve their last-mile delivery services will need to strike a delicate balance between offering competitive delivery options and maintaining or improving consumer expectations, all the while keeping their costs at a minimum.
To do this, they can either opt to provide this service in-house or outsource their last-mile deliveries to a third-party logistics provider (3PL).
The Benefits of Outsourcing to a Last-Mile Delivery Company
As consumer expectations continue to increase, there are several reasons why companies could benefit from outsourcing their last-mile logistics services. Among them, we can include the following:
- Limited Implementation and Maintenance Costs – The initial investment and overhead costs of building and maintaining an in-house delivery solution can be significant. Working with a 3PL can eliminate the need to invest in warehouse space, technology, a delivery fleet, or the manpower needed to handle all the last-mile delivery processes.
- Flexibility – If your organization deals with seasonal products or for when you may be experiencing a peak in demand, you can use the services of a 3PL to scale space, transportation, and labor based on your inventory management. As such, companies outsourcing last-mile deliveries can remain agile and responsive during periods of peak demand, maintaining the quality of their customer experience.
- The Resource Network – Many third party delivery companies have a vast distribution network of carriers that can provide highly customizable services to their clients. Using an in-house delivery vehicle to send a single item to a customer, for instance, can be quite inefficient. By using their network and relationships, logistics businesses can consolidate freight and provide volume discounts.
- Management Systems – While in the past, delivery management relied on paper-based processes, today it has become automated and digitized. Yet, implementing warehouse and transportation management systems, as well as tracking other such state-of-the-art transport management solutions can prove to be costly and challenging. Professional logistics businesses will typically have these tools already and will know how to use them effectively.
- Business Support – Aside from the infrastructure, technology, network, and manpower, professional logistic companies can also provide you with a depth of experience that you may not otherwise possess in-house.
- Meet Consumer Expectations – In most cases, the final mile is the face of one’s company in the eyes of the consumer. Get this wrong and their opinion of your business will drop. Around 83% of shippers and 94% of logistics providers said that working with a professional 3PL has contributed to the improvement of customer service.
The Possible Concerns of Outsourcing to a Last-Mile Delivery Company
It would be a mistake to think that outsourcing your delivery services to a third party isn’t without risk. In most cases, however, these arise from a lack of up-front communication about the exact wants, needs, and expectations that a company has from its 3PL. Professional logistics businesses will usually find where there may be such misalignment, but this may not always be the case.
Other causes that can lead to issues down the road include:
- Strategic Misalignment – When a 3PL and its client don’t have the same cultural and/or strategic goals, it can make for a very difficult relationship over the long-term. In some cases, the fact that the company and the 3PL are headed in different directions may lead to the negation of all advantages that may have otherwise been provided.
- Technology Integration – Tying a company’s internal systems with that of the 3PL is one of the most important aspects of an outsourced relationship. When fully integrated, you can expect many benefits from your third party’s team. But if not done correctly, you won’t be able to drive the results that you were hoping for. The key to success is to map out everything from the beginning and to get the seal of approval from all stakeholders before IT programmers and web developers get to work on integration and implementation.
Outsourcing Cost vs. Value
Deciding between an in-house delivery solution and outsourcing it, often boils down to financial considerations. The total benefit of what final mile delivery strategies can provide is often hard to quantify. However, some may be tempted to go for the lowest cost possible, hoping to reap the most value.
But, there will eventually come a point where the cost will not equal value anymore. Even though at first glance, a low cost may be tempting, if something goes wrong and recovery is necessary, that initial low cost will immediately turn into a high cost. Striking a great cost-to-value ratio is therefore dependent on taking into account potential issues that may arise from lower quality providers. Making both quality and cost very important whenever you decide to outsource your delivery service.
Redbird Logistics Services will work with you, no matter your needs. Our logistics services and supply chain solutions will cater to all of your requirements. We will work to implement the services you need while maximizing the efficiency of your supply chain management, network optimization, and increasing your customers’ experience. With our real-time technology, we will provide you with complete visibility of your products every step of the way.
If you’re looking for a top logistics company, look to Redbird Logistics Services. Contact us today!