The Last-Mile Problem: A Practical How-To Guide for Supply Chain Managers
The last mile in logistics refers to the final stage of a delivery journey -- from a distribution or fulfilment centre to the end customer or delivery point. Despite covering only a fraction of the total distance in a supply chain, the last mile typically accounts for 30 to 50 percent of total delivery costs. It is slow, expensive, and difficult to scale -- and it is the most visible part of the supply chain to the end customer.
In 2022, the last-mile problem is acute across multiple sectors. The boom in e-commerce and direct-to-consumer delivery has created consumer expectations of speed and transparency that legacy logistics networks struggle to meet. Urban density makes delivery difficult and expensive; rural coverage is sparse and costly. Here is a practical guide to managing last-mile delivery effectively.
Step 1: Map Your Last-Mile Landscape
Before you can improve last-mile performance, you need to understand it. Map your delivery addresses by density and geography. Identify the segments where cost is highest (typically low-density rural areas and urban areas with parking and access restrictions). Measure current performance metrics: cost per delivery, on-time delivery rate, failed delivery rate, and re-delivery rate. The re-delivery rate is particularly important -- a failed first-attempt delivery doubles or triples the cost of that delivery.
Step 2: Segment Your Delivery Population
Not all deliveries are the same. High-density urban deliveries have different economics and challenges than low-density suburban or rural deliveries. Segment your delivery population by geography, volume, time-sensitivity, and item characteristics (size, weight, temperature requirements).
Different segments may require different delivery models. Urban micro-fulfilment (smaller, more frequent replenishment from local distribution points) can reduce last-mile distance significantly in high-density areas. Rural deliveries may be better served by consolidation networks or click-and-collect alternatives.
High-value, time-sensitive deliveries may justify premium delivery modes; bulk, low-urgency deliveries should use the most cost-effective mode available.
Step 3: Optimise Routes and Scheduling
Route optimisation software reduces last-mile cost by reducing the total distance driven per delivery and improving vehicle utilisation. The savings are typically 10 to 20 percent on fuel and driver time, and are recoverable within months on a medium-sized fleet.
Delivery scheduling that consolidates deliveries by geography and time window reduces total trips. Offering customers a choice of delivery windows (and incentivising off-peak windows with faster delivery or lower fees) helps consolidate demand.
Failed deliveries are a major cost driver. Proactive communication (delivery notifications, driver-to-customer contact) significantly reduces the failed-delivery rate. Flexible delivery options (nominated safe locations, locker networks, rescheduling by text) reduce failed attempts further.
XNM supports public-sector and capital-project organisations in supply chain design, logistics optimisation, and procurement strategy. Reach out to XNM's procurement, sourcing & contract management team to discuss last-mile and supply chain design for your organisation.