The last-mile delivery market is growing exponentially in the U.S. A recent Technavio study found that this sector — providing last-mile logistics support for businesses — will increase by nearly $144 billion between 2021 and 2026 and hit nearly $270 billion by 2028.
Propelling that growth? Increased demand for e-commerce and same-day deliveries. While Amazon and Walmart currently dominate the market, there’s plenty of room for the “little guys,” too. Trends influencing this market growth also include a growing focus on environmental sustainability — like electric vehicles (EVs) — and innovative technology used to optimize route planning and enhance customer service.
State of the Market
While it’s become a quickly-evolving component of the transportation and logistics space, last-mile delivery still remains largely inefficient — and expensive. It’s this sector that experienced some of the biggest challenges during the pandemic.
For example, e-commerce and online sales accelerated at breakneck speed, as did package shipments. Retailers and carriers faced even more issues and stratospheric costs. While carriers added drivers and increased capacity, they did so at the expense of control, efficiency, and visibility.
Solutions Driving the Last Mile
As the last-mile delivery market expands globally, it’s driven by a host of technology and people innovations, with logistics companies:
- Recruiting, training, and retaining more delivery drivers
- Opening automated distribution centers with autonomous, AI- and ML-supported self-learning applications
- Developing and offering more specialized delivery and transport options
- Exploring alternative delivery methods — like drones, droids and automated loading/advanced analytics, ML software, driverless tech, camera-based object tracking, and more — to shorten delivery times
Key Benefits of Last-Mile Logistics Software
A critical component to creating more robust last-mile services? The software and platforms running each process. This last-mile logistics solution offers many benefits to companies of all sizes.
Better Order Management
By replacing legacy last-mile delivery software with new enterprise solutions, companies can take advantage of automated processes — and real-time monitoring — to identify and alert customers to possible delays. This streamlined communication helps build trust and increase customer satisfaction.
Flexible Payment and Delivery Options
Cybersecurity remains a concern for many B2B and B2C customers who remain hesitant about providing credit card information in online platforms. Companies can provide the option to pay upon receipt, with contactless payment options.
Likewise, offering the flexibility to have orders delivered to multiple addresses makes ordering more convenient. Robust last-mile delivery software facilitates the ability for someone to update delivery locations or times — and for companies to better process cancellations and returns.
Route Optimization
Poor weather conditions, traffic snarls, and road construction are just a few challenges facing deliveries. The right software tracks these issues in real-time and sends automatic updates to drivers to ensure their routes are still efficient.
Warehouses located closer to residential and business areas where orders are delivered also help to cut down on length of delivery times.
Streamlined Shipping and Delivery Operations
Modern last-mile delivery software increases business efficiency and promotes increased visibility with last-mile tracking. Automation facilitates verification, helps managers to plan loading more accurately, and generates predictive insights.
Current and Future Trends
There are many trends influencing the direction of last-mile delivery.
Crowdsourcing and the gig economy, for example, has the ability to reduce out-of-pocket shipping costs for retailers. Customers can schedule deliveries at their convenience, and GPS enables real-time tracking.
Smart technology for tracking is a boon for retailers and customers alike. GPS and RFID tags can accurately track shipment movement in real-time pinpointing an item’s exact location during transit. For temperature-sensitive products — like food boxes — companies can embed IoT-enabled sensors to monitor humidity and temperature. It’s even possible to monitor weather and adjust delivery routes to ensure packages arrive in perfect condition.
Rapid order fulfillment, started by Amazon Prime, is table stakes for many companies. It’s impossible to compete at the same level of this online giant — which reportedly spends billions of dollars on shipping each year. But companies have partnered with third-party logistics (3PL) providers using warehouse management systems to increase shipping efficiency and decrease delivery times.
Droid and robotic delivery is helping defray labor costs, which represent about 60% of last-mile delivery expenses. Cost isn’t the only challenge here, either, but also availability and scheduling. So while this tech remains in development, some retailers, like Amazon, have begun experimenting with robotic delivery via autonomous delivery bots, drones, and self-driving vehicles.
Growth of Urban Warehouses
Retailers have also shifted their approach to warehousing by adopting the strategy of urban warehousing. After all, the closer a fulfillment center is to its customers, the easier it becomes to shrink delivery lead times. Building warehouses closer to major cities expedites last-mile logistics by facilitating companies’ abilities to fulfill same-day orders. Building these last-mile warehouses closer to urban centers offers another benefit — proximity to the labor it needs.
A recent Deloitte study highlights the need for this newer sector in commercial real estate, driven by:
- The trend of city living
- Smartphone and smart device use
- Shorter delivery timeframe requirements
- The shared services economy focused on capacity utilization to decrease costs
Preparing for Increased Demand
As demand for last-mile delivery increases, companies should continue to implement logistics innovations and consider these other recommendations including:
- Planning ahead by predicting demand spikes to ensure they’ve got enough resources and staff to meet customer requirements
- Partnering with 3PL companies that already have infrastructure in place to successfully manage last-mile delivery
- Offering multiple shipping options, including standard and express
While in-person shopping remains popular, the e-commerce market will continue to grow as well — bringing increased demand for accurate, efficient, and quick last-mile delivery.
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