Ever ordered something online and then choked on the shipping price? Or are you a seller who often gets complaints about expensive postage from customers? Worse yet, perhaps you have lost many potential customers because of this. Even though none of that is your fault … Or is it?
One sure thing: You’re not alone!
Those final few miles to your doorstep, known as the last mile, are surprisingly expensive for companies, often eating up a huge chunk of their budget. But, it’s not like you as a seller can’t do anything about this problem. Let’s unpack why this “final sprint” is costing so much and explore some potential solutions.
Why the High Price Tag?
Imagine delivering a pizza to every house on your street. You’d stop and start constantly, right? That’s essentially the last mile: lots of short trips with frequent stops. This fragmented nature means drivers spend more time idling and navigating, not driving long distances. Plus, urban areas often have traffic congestion, adding to the time (and cost) per delivery.
Then there’s labor. Drivers are the backbone of last-mile delivery, and their wages contribute significantly to the overall cost. This is especially true for express deliveries, where speed and reliability come at a premium.
Finally, some deliveries require specialized equipment like refrigerated trucks for groceries or vans for bulky items. These add another layer of expense. These factors combine to make last-mile delivery a big cost driver. Studies show it can account for up to 53% of the total supply chain cost for online orders! This cost often gets passed on to the consumer in the form of higher shipping fees.
Now, let’s dive into the component of last-mile delivery that makes it cost so high!
Last Mile Delivery Cost Component
The last mile, the final leg of a product’s journey from the warehouse to your doorstep, often eats up a disproportionate share of the total delivery cost. Studies show it can account for a whopping 53% of the supply chain cost for online orders! But why is this short stretch so expensive? Let’s break it down:
1. Vehicles
Specialized vehicles like refrigerated trucks or large vans can be expensive to acquire and maintain, driving up costs. Not to mention we are talking about underutilized vehicles parked and idling, especially in dense urban areas, waste fuel and driver time. Meanwhile, these vehicles also lose value over time, contributing to overall costs even if not actively used.
2. Fuel
Frequent stops and short trips in the last mile lead to more fuel consumption per delivered item compared to long-distance hauling. Urban gridlock increases idling and adds unnecessary miles, pushing up fuel bills. Apart from that, there are also fluctuations in fuel prices which can add unpredictable spikes to delivery costs.
At this point we can see why driving and stopping to deliver goods to homes can be so expensive. But there are still further factors.
3. Labor Cost
Unfortunately, currently, there are no deliveries that can be made automatically by vehicles containing this fuel. There still has to be a human to move it.
In fact, driver wages, especially for express deliveries, can be a significant cost factor. Not to mention the company’s obligation to fulfill workers’ rights, such as providing benefits such as health insurance, adds to expenses, and salary increases for skilled drivers.
4. Administration
Inefficient routing without optimization software wastes time and fuel, increasing costs. But on the other hand, route planning also requires its own work which is also inseparable from costs. This along with managing complex delivery schedules and driver availability adds administrative overhead. Also, invoicing, tracking, and document management add operational costs.
5. Reverse Logistics
This last component is honestly a bit troublesome. Processing and handling returned items incurs additional labor, transportation, and potential restocking costs. Then, if a delivery is missed, rescheduling deliveries due to missed attempts adds time, fuel, and driver costs. Dealing with unclaimed packages also requires storage, disposal, and potentially refunding customers. It’s all just a matter of costs and fees.
So actually, to be fair, the high last mile costs are commensurate with the number of parties and stages involved in it. But still, this is quite disturbing for the continuity of online buying and selling activities.
Finding the Finish Line: Potential Solutions
So, what can be done to bring down these soaring costs? Here are a few promising avenues:
- Route Optimization Software: By intelligently planning delivery routes, companies can minimize driver travel time and maximize efficiency. Imagine delivering to all your neighbors on the same side of the street first, instead of zigzagging across the block!
- Alternative Delivery Models: Locker systems, pick-up points, and even drone deliveries can be cheaper options for certain types of goods, especially in dense urban areas.
- Collaboration and Consolidation: Sharing delivery networks with other companies can reduce redundancies and optimize the use of vehicles and drivers. Think of carpooling for packages!
- Automation: While still in its early stages, autonomous vehicles offer the potential for significant cost savings in the future. Think self-driving delivery bots buzzing around!
Conclusion
Finding solutions to the last-mile cost challenge is crucial for both businesses and consumers. By embracing new technologies and innovative approaches, we can make that final stretch to your doorstep smoother and more affordable for everyone. So, the next time you click “order,” remember, behind the scenes, a battle is being waged to bring your package home at a reasonable price. And who knows, maybe one day, that battle will be won by a robot butler riding a flying pizza box!
Data points to remember:
- Last-mile delivery can cost up to 53% of the total supply chain cost.
- The average cost per last-mile delivery is around $10.
- Route optimization software can reduce delivery costs by up to 20%.
These are the components in last-mile delivery that cause high costs to be paid. By knowing this and several alternative solutions, hopefully you as a seller or buyer can be more comfortable when making transactions.
