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The reason last mile delivery is expensive, and tech solutions to cut costs

  •   4 min read

We all love “free” shipping, but delivery, in contrast to being free, is increasingly expensive since the onset of COVID-19. What makes the cost so high — and how can we reduce it?

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Since the spring of 2020 when the first round of lockdowns began, demand for delivery services has surged dramatically. Data reveals that the last mile delivery market in North America alone is expected to reach nearly $60 billion by 2025. However, for both new and established retailers, adjusting to this fast-growing delivery market remains a challenge. The reason is as simple as it is frustrating: Delivery costs are getting more and more expensive.

‌As various retailers compete for a share of this booming market, it has become essential for businesses to reexamine their logistics strategy and identify ways to improve efficiency and reduce costs. A major component to improving delivery performance resides in what is often called the “last mile” of a route, or the last stretch from a hub to the destination. But what makes the last mile so important, and how can technology help mitigate the high cost of last mile deliveries?

From warehouse to doorstep.

‌As home delivery services continue to ramp up, the last mile concept is fast becoming a topic of interest. In transportation logistics, the last mile refers to the final journey of a package from the warehouse or store to the customer’s doorstep. While it is relatively affordable to ship a container of goods to a distribution hub, dispersing those products to hundreds or thousands of separate homes in an organized and timely manner is an entirely separate challenge.

For many e-commerce companies, the sudden increase in demand for delivery services over the past 18 months has brought the last mile problem into sharper focus. In short, companies with legacy shipping management systems are finding it difficult to scale up operations without sacrificing profit, delivery speed, and reliability. Finding effective ways to address the last mile problem will remain a critical concern for businesses seeking to compete in today’s fast-evolving e-commerce marketplace.

Driving the surge in last mile delivery prices.

Data indicates that last mile logistics account for over half of the total cost of shipping and 41% of supply chain costs. With multiple low-volume stops and large fleets required to maintain flexibility for real-time requests, the following factors drive expenses sky high: ‌‌

  • Inefficient route planning. The more stops drivers need to make, the more likely they will accrue out-of-route miles along the way. Ineffective route planning for the last mile usually results in fewer deliveries. Although these out-of-route miles account for a fairly small percentage of total mileage, fuel costs and associated vehicle maintenance can quickly add up when companies scale up their delivery operations.
  • Increasing time on roads. Unlike intermodal or freight transport, individual deliveries require drivers to navigate congested city streets, increasing idle time and further driving up fuel and maintenance costs. In addition, delivery drivers may need to travel at lower speeds, which decreases overall fuel efficiency. Wasted fuel costs can become a major obstacle for businesses seeking to keep up with immediate market demands.
  • Demand for flexible and transparent delivery windows. When customers are not home to accept a delivery, companies must absorb the associated transportation costs. Requesting that customers be available for multi-hour or even day-long delivery windows is not a solution: As a company increases fleet capacity to handle more demand, the costs of failed deliveries will increase as well. 


Build a better last mile delivery system.

Despite these challenges, retailers are adopting innovative strategies to reduce costs, bolster efficiency, provide greater visibility, and optimize the entire last mile logistics system. Here are some new technologies bringing promising outcomes:

A) AI-powered route planning.

Utilizing intelligent software can drastically increase the speed and accuracy of all route plans. Smart algorithms make it possible to perform complex calculations almost instantaneously with much less margin of error. With the right routing software, it’s easier to precisely eliminate inefficient routes and avoid costly delays due to traffic congestion or roadwork.

B) Automation for dispatching.

‌In the old days, human dispatchers would contact drivers directly to adjust their routes. Today, tech-powered platforms can do this task automatically and immediately provide revised information to drivers with no manual work required. Using an application to unify a company’s fleet under a single system makes dispatching a breeze and can reduce the high costs of last mile deliveries.

C) Streamlined, real-time delivery tracking.

‌Consumers appreciate the ability to track deliveries online. Creating a system in which customers can receive email or text updates regarding delivery progress can save an enormous amount of time and money. When customers know where their package is and its ETA, they will be less likely to call customer service or file a complaint. Being more transparent about transportation logistics also makes it easier for customers to plan for delivery, reducing the number of failed deliveries and the high costs associated with them.

‌‌Via Logistics is the leading new technology to provide last mile delivery solutions. We have built relationships with retailers around the globe, from Los Angeles to Tokyo, providing tech-enabled solutions for efficient delivery. Powerful algorithms, honed over millions of trips and deliveries, allow our platform to rapidly scale up automated routing and dispatching. 

Our platform now actively supports more than 500,000 deliveries every day all around the world. By partnering with us, we estimate that businesses can reduce their time commitment to last mile delivery planning by up to 80% while potentially increasing driver efficiency by more than 50%.

For more details on Via Logistics and the advantages of working with an experienced technology partner, visit our website, or reach out to logistics@ridewithvia.com

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