Why "The Last Mile" Matters
And how companies are innovating in this space
September 30, 2019, Bruno Jacobson
Last-mile delivery usually refers to the transportation of goods from a transportation hub (such as a warehouse) to the final destination (consumer's homes). It might not sound like an area that particularly favors a lot of innovation – but it does. In this article, we explore why it matters.
What is the last mile and why it matters
Most parts of your daily products are not manufactured in your home country. In fact, they are usually not from one country. A lot goes into making your mobile phone, for example. A new phone starts out with a design in the home country, is sourced with components manufactured in different parts of the world, then is sent to the assembly factory.
The assembled products then are marketed and shipped to stores and warehouses. Finally, they are shipped to the end consumers’ homes all over the world.
The last part of the chain is called the “last mile.” It sounds like a tiny part. However, studies have shown that this part of the supply chain accounted for 53% of the overall delivery costs in 2016. This number was expected to continue to increase.
But the last mile isn’t critical just because it accounts for the majority of the delivery costs.
The last mile is critical because it influences a variety of other things: customer satisfaction, delivery time & cost, and ease of use.
It also has an impact on businesses too. If the delivery takes several days, it will likely increase the cost and may reduce the number of items that you would typically make available.
A good example is plumbing supplies. Imagine when people have 'a situation,' they need these supplies as soon as they can get them. So, at this point, people are unlikely to order them online, instead preferring to run to a shop to buy them.
Now imagine that instead of going to the shop, you can order the supplies to be delivered in 30 minutes or less, how much more convenient would that be?
It is just an example, of course. But the ability to deliver things more quickly, and in more innovative ways, has the potential to change how both companies and consumers think of the last mile.
The Race for quick delivery
There are two reasons why last-mile logistics has recently become even more important.
One is simple, with the growing urban populations, and congestion becoming a recurring problem; adding more vehicles to deliver goods isn’t an ideal scenario.
The second reason is e-commerce.
According to Matthias Winkenbach, a research scientist at MIT’s Center for Transportation and Logistics, the exponential growth of e-commerce adds to the complexity of cities, which have already been dense and congested.
"Home delivery routes of e-commerce shipments typically consist of 50 to 150 stops per day, depending on the type of vehicle" Wikenbach noted. He compares that to beverage distributors delivering to commercial clients, stopping about 10 to 15 times. Big difference.
With e-commerce continuing to grow, the last mile is expected to increase in complexity, making innovation in this area particularly important.
We’re definitely already seeing a trend among several companies in adopting certain technologies.
The most prominent example is perhaps Amazon’s 2013 announcement that it would begin Amazon Prime Air, an autonomous delivery system that makes use of drones. Its first test flight took place in 2016. Although still under development, it might not be too long until we begin seeing delivery drones hovering above us.
Amazon is not alone in the race for quick delivery. Other companies, such as Airbus, Google, and Uber, have launched similar program initiatives for cargo drones.
We’re also seeing greater participation of citizens in this economy, through innovations that resemble Uber or Lyft. According to this article, companies like UberRUSH (now a defunct division), Postmates, Deliver, and Amazon Flex allow for independent deliverers to deliver packages, thus taking this weight off the companies’ shoulders.
Imagine one day on your way home from work; you notice a delivery from a warehouse that you happen to go by every day to a house a couple of blocks down from yours. You can pick it up, deliver it, and make a few bucks easily. You might even make it your part-time or full-time job if you’d like.
And with the potential of autonomous vehicles, shipment delivery might take a huge step forward in the future. At the moment, deliveries have limitations, such as shift schedules, cost of labor, and other factors. Imagine a self-driving vehicle that doesn’t rest, and costs less per mile as the mileage increases.
Having deliveries 24/7 sounds good in theory. But what if you’re not home? Or what if you don’t want to wake up in the middle of the night?
Well, there is innovation on that front as well.
With the advent of IoT and smart technologies, consumers will not only be able to track our parcels, but they can even allow people to deliver in-house, provided that the system is secure enough.
Beginning with the latter, Amazon has already released its in-home delivery system, called “Amazon Key.”
To use the system, customers must install the Amazon Key Home kit including a smart lock and security camera. On delivery day, the employee can use an app to have one-time access to unlock your door and leave the package inside. Then, he uses the app again to relock the door. Every time the door is unlocked, the customers will receive a notification and live camera feed of the delivery.
For some people, it might require a big gulp to trust in such a system. But if this option doesn’t have you jumping around enthusiastically shouting “Hallelujah!”, you can always follow a more traditional approach.
With IoT and smart trackers, you can know exactly when your parcel is arriving, thus decreasing customer frustration. Setting a scheduled delivery not only helps customers to secure the delivery, but it also helps companies plan their last-mile deliveries to cut costs, and reduce the complexity of our urban roads.
As we have seen, there is plenty of innovation already taking place in the last mile. What was once something that most of us just thought of as something inconvenient, has now become a fertile ground for service and transport innovation.
Going forward, as 5G comes along, IoT takes over, and technology improves, we can expect to see much, much more.
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