Last-mile delivery—the final stage in the delivery process—is crucial for customer satisfaction, but it also presents logistical hurdles for companies. Moving products from distribution centers to customer doorsteps is one of the most expensive and challenging aspects of fulfillment.
In this guide, we’ll explain the complexities of last-mile delivery and the strategies that streamline routes, cut costs, and boost efficiency.
We’ll also explore innovative models like micro-warehousing and how real-time technology is revolutionizing the last leg of delivery—turning a common pain point into a competitive edge.
Expert insights: To give you an expert’s take on last-mile delivery optimization, we talked to Tony Runyan, Chief Client Officer at Red Stag Fulfillment. Tony manages our carrier relationships and has deep knowledge of last-mile delivery processes and optimizations.
TL;DR:
Key takeaways
Last-mile delivery is the final stage of getting packages from warehouses to customers, presenting unique challenges like high costs and customer expectations for fast delivery.
Technologies like route optimization software, real-time tracking, and data analytics are streamlining last-mile logistics and improving efficiency.
Strategies to overcome last-mile challenges include batching deliveries, using micro-distribution centers, offering flexible delivery options, and improving communication with customers.
The future of last-mile delivery involves innovations like micro-fulfillment centers, autonomous vehicles, drones, and sustainable delivery options to meet growing e-commerce demands.
Real-time visibility, predictive analytics, and crowdshipping are emerging trends that offer more transparency and flexibility in last-mile delivery operations.
The last-mile delivery process
Last-mile delivery is the final step in getting packages from warehouses to their final destination.
Here’s a breakdown of the last-mile delivery process:
- Picking and packing: Orders are prepared at fulfillment centers.
- Transit to transportation hub: Packages may be sent to a nearby distribution center for last-mile delivery prep.
- Loading delivery vehicles: Packages are sorted and loaded onto vans or trucks for final delivery.
- Route planning: Software determines delivery routes based on factors like package volume, traffic, and customer availability.
- Physical delivery: Carriers navigate to customer addresses and obtain proof of delivery when needed.
Throughout the last-mile process, customers expect real-time updates on their package status. Tracking systems provide estimated arrival times and current locations for timely deliveries, enhancing the customer experience.
Last-mile vs. first-mile and middle-mile logistics
Each leg in the delivery journey has its own purpose. Here’s the difference between last-mile, first-mile, and middle-mile logistics:
- First-mile: Moving goods from manufacturers to warehouses
- Middle-mile: Transporting goods between warehouses and distribution centers
- Last-mile: Delivering products from distribution centers to customers.
The last-mile delivery problem
The last-mile problem refers to the challenges and high costs of the final delivery stage in your supply chain.
Several factors contribute to last-mile inefficiencies:
- Customer expectations: Today’s shoppers want fast, flexible deliveries that arrive in two days or less with real-time tracking.
- Residential delivery challenges: Delivering to homes presents unique obstacles, especially in urban areas. A delivery driver may need to navigate complex apartment buildings, handle absent customers, and ensure safe package drop-offs.
- Urban congestion: Heavy traffic and limited city parking can delay deliveries and make it difficult for drivers to complete routes efficiently.
- Complex route planning. Improving routes involves many factors, including package volume, vehicle capacity, customer availability, traffic, and weather.
The mix of these variables can increase failed deliveries and complicate the shipping process—and that doesn’t even include the issues you can face working with carriers. As Tony says:
Getting last-mile delivery right is a constant battle that changes frequently and requires constant focus and attention to reduce risk. National carriers seek to get as much of your spend as they can, and they will incentivize you for doing this.
At the same time, if a carrier struggles with performance or capacity and you’ve hitched your wagon to them, now you’ve put your customers’ experience at risk.
Tony Runyan
Chief Client Officer at Red Stag Fulfillment
Last-mile delivery services and options
To meet diverse customer needs, retailers and logistics providers offer various last-mile services and options.
Delivery speed options
Fast delivery has become a non-negotiable for shoppers. In fact, 55% of consumers will look elsewhere if free shipping takes longer than two days. Take this into account when creating your last-mile strategy.
However, different product categories may have different delivery time expectations. It’s important to consider this in your last-mile delivery strategy, as it can affect your delivery targets and carrier selection. Tony explains:
For some product categories, consumers may be perfectly fine with a 3-5 day transit time, while with others, the expectation is 2 days. Add to this that different carriers (including regional and local carriers) tend to focus on specific categories (light weight and standard packages) and your carrier selection list could grow or shrink.
Tony Runyan
Chief Client Officer at Red Stag Fulfillment
Same-day delivery
Same-day delivery has become increasingly popular. Market research shows that 80% of consumers expect retailers to offer this service, with nearly a third expecting it to be free.
Retailers can meet this demand by using local inventory and partnering with last-mile carriers for quick pickups and deliveries. While convenient for customers, same-day delivery presents logistical challenges, including tight turnaround times and peak demand surges.
Next-day and two-day delivery
Next-day and two-day delivery options are common, with 60% of customers expecting free shipping to take two days or less.
These options balance speed and affordability. Many customers prefer choosing a scheduled delivery window that fits their availability, reducing the risk of missed deliveries but requiring careful carrier coordination.
Standard delivery
Standard delivery offers a balance between shipping costs and delivery time. It’s generally the most economical option for non-urgent deliveries, with shipments arriving within three to seven business days. Customers often choose this option for routine or bulk orders.
Fulfillment methods
Choosing the right fulfillment method is critical for overcoming last-mile delivery problems. Whether you opt for in-house delivery or outsource to a third-party logistics provider (3PL), you’ll want to balance control, cost, and customer satisfaction.
In-house vs. outsourced logistics
Retailers can handle last-mile delivery in-house or outsource to specialized providers. Each approach has its benefits and drawbacks.
- In-house delivery offers more control but requires significant investment in infrastructure, including warehousing, transportation, technology, and specialized staff.
- Outsourcing provides scalability and expertise. It’s more cost-effective for many businesses, as 3PL providers have established networks. Outsourcing lets you focus on core business activities like product development and marketing while leaving logistics to experts.
Click-and-collect
Click-and-collect is a growing trend where customers pick up online orders from designated lockers or retail stores. This option saves on last-mile shipping costs while still offering convenience to customers.
5 technologies that streamline last-mile delivery
Technology can greatly improve last-mile delivery logistics by helping you improve operations, cut costs, and improve customer satisfaction.
1. Route planning software
Using AI-powered algorithms will help you create the most efficient routes. These programs factor in real-time traffic, weather, and customer availability. This leads to less fuel use, more on-time deliveries, and higher productivity.
2. Real-time tracking
Customers want to follow their package’s journey in real time. Real-time tracking provides updates on estimated arrival times and delays. Some systems even use Internet of Things (IoT) devices to monitor package conditions like temperature and humidity.
3. Electronic proof of delivery (ePOD)
ePOD systems replace paper records with digital ones. Delivery drivers can quickly capture electronic signatures, photos, and notes. This creates a secure, auditable record of successful deliveries.
4. Integration with order management
Last-mile delivery systems now connect seamlessly with order management and inventory platforms. This integration enables real-time data exchange, leading to better coordination, fewer errors, and more efficient handling of exceptions.
5. Data analytics
By analyzing data from last-mile operations, you can spot inefficiencies and identify areas for improvement. This data can help with:
- Using machine learning for demand forecasting
- Planning predictive maintenance for delivery vehicles
- Analyzing customer feedback to improve service
- Using external data like weather and economic indicators for more accurate predictions
6 ways to overcome last-mile delivery challenges
Last-mile delivery poses several challenges for ecommerce businesses, but effective strategies can help you overcome them.
Before we dive into the specifics of optimization, we need to cover what is often the most efficient and error-free option: finding a trusted partner who can advise you. As Tony says:
In my opinion, the best way to optimize last-mile delivery is to use a partner who is familiar with last-mile carriers and how they work. This could be through your 3PL, a consultant, or even simply utilizing your network of other e-commerce owners and stakeholders.
Identify what your customers expect first and foremost. Once you understand what expectations you need to meet, your search begins for the right carrier mix.
Tony Runyan
Chief Client Officer at Red Stag Fulfillment
1. Batch deliveries and optimize routes
Consolidating multiple orders into single delivery runs and using advanced route optimization software significantly reduces costs and improves efficiency. This approach allows for planning the most cost-effective and time-efficient delivery routes.
Grouping orders based on geographic proximity minimizes travel time and fuel consumption, leading to more streamlined operations and faster deliveries.
2. Take advantage of transportation hubs and micro-distribution centers
Strategically placing distribution centers and fulfillment hubs closer to customers reduces delivery distance and time. This strategy allows for more agile operations, especially in densely populated urban areas.
By shortening the last-mile journey, you can decrease transportation costs and improve delivery speed, meeting the growing consumer demand for quick and efficient delivery service.
3. Choose the right carrier
Different carriers have different product type preferences, and that’s reflected in their service offers and pricing.
Tony explains how to choose the right carrier:
You can quickly learn what carriers will support your packages based on their dimensions and weights. For example, most regional carriers will not accept packages larger than 50 pounds. In addition, companies like DHL eCommerce are targeting volume that is 4 pounds or less that will fit in a mail bag.
Once you’ve narrowed the list to carriers that will take on your volume and meet your customer expectations for delivery, you’ll move to negotiations.
Throughout this process, you may find that some carriers cannot offer discounts (depending on your volume) that will allow you to stay competitive in your market. This will narrow your list of carriers once again.
Ideally, you narrow your carrier mix to a minimum of two carriers where you are able to distribute volume based on what each carrier is optimized for. For example, you may find that you get extremely competitive pricing for light weight with one carrier while getting better discounts for heavier items through another.
Of course, working with a 3PL enables you to lean on them for the heavy lifting which will free up your package requirements by carrier and allow you to optimize for fast, cheap, and good service.
Tony Runyan
Chief Client Officer, Red Stag Fulfillment
4. Offer flexible delivery options
Offer various delivery choices like same-day, next-day, or scheduled windows to cater to different customer preferences.
Allowing customers to select their preferred delivery time and location, such as home, office, or parcel locker, improves customer satisfaction and reduces failed delivery attempts. This flexibility saves time and resources while enhancing the overall shopping experience.
5. Be proactive with customer communication
Keep your customers in the loop with automated updates, real-time tracking, and proactive communication about potential delays.
Doing this not only helps manage expectations but also builds trust, which is critical when you’re trying to tackle last-mile delivery issues.
6. Improve first-time delivery success rate
Capturing detailed delivery instructions from customers and offering alternative delivery locations when necessary increases the success rate of first-time deliveries.
This approach reduces costly redelivery attempts and boosts customer satisfaction. Getting it right the first time saves operational costs and prevents customer frustration associated with missed deliveries.
7. Provide quick issue resolution
A responsive customer service team that handles delivery issues promptly and efficiently can turn negative experiences into positive ones, fostering long-term loyalty.
Addressing concerns swiftly and professionally demonstrates a commitment to customer satisfaction and builds trust in the brand.
The future of last-mile delivery
The last-mile delivery sector is evolving rapidly, driven by ecommerce growth and changing customer expectations.
Recent data highlights this trend:
- Digital Commerce 360 research shows total ecommerce sales for 2023 grew nearly 8% from 2022, with ecommerce claiming an increasing share of total sales.
- The National Retail Federation projects non-store and online sales to grow between 7% and 9% in 2024, reaching approximately $1.5 trillion, up from $1.38 trillion in 2023.
These figures underscore the growing importance of efficient last-mile delivery solutions. To address challenges, the last-mile delivery industry is embracing innovation and disruption.
1. Micro-fulfillment centers (MFCs)
Micro-fulfillment centers improve last-mile delivery by drastically reducing delivery distances. These smaller, localized warehouses are strategically placed in urban areas close to demand hubs.
The goal?
Speed up delivery times by bringing inventory closer to the customer.
MFCs make same-day and two-hour deliveries possible, especially in dense cities. This cuts down delivery times and overall shipping costs further.
2. Route optimization software
Efficiency is everything in last-mile delivery, and route optimization software makes that possible. Using real-time data and AI, this software helps you map out the most efficient delivery routes. This leads to shorter delivery windows, reduced fuel consumption, and lower operational costs.
Optimizing routes for companies with large fleets can significantly improve productivity and customer satisfaction while reducing environmental impact.
3. Autonomous vehicles
The future of cost-effective, round-the-clock delivery could soon rest in the hands of autonomous vehicles. These self-driving trucks and cars can handle last-mile logistics without the need for a human driver.
With big names like FedEx and Waymo piloting these technologies, businesses are looking at significant cost savings in labor and extended delivery hours. Plus, autonomous vehicles can navigate urban areas 24/7, making them perfect for after-hours deliveries and cutting down customer wait times.
4. Drones for faster delivery
When deliveries need to reach remote locations or meet urgent deadlines, drones are proving their worth. Drones excel where traditional vehicles struggle, such as when terrain or traffic congestion poses challenges.
They’re also ideal for urgent shipments, like medical supplies or time-sensitive orders, as UPS proved when it tested drone delivery for COVID-19 vaccines. While regulations still need to catch up, drones are becoming a serious contender in the last-mile delivery toolkit.
5. Sustainable delivery options
As consumer interest in green delivery alternatives grows, companies are adopting electric vehicles (EVs), bike couriers, and sustainable packaging to reduce their carbon footprints. This trend goes hand in hand with route optimization and micro-fulfillment centers, which may help minimize emissions by reducing the overall distance products need to travel.
By investing in sustainable last-mile logistics, you’re appealing to a growing base of eco-conscious consumers while future-proofing your business.
6. Crowdshipping
The rise of crowdshipping, or gig economy delivery services, is another growing trend. Similar to how rideshare apps work, companies like Roadie and Postmates are tapping into networks of everyday drivers to handle last-mile deliveries.
This approach is flexible, scalable, and cost-effective—especially for smaller businesses or in areas where traditional delivery networks don’t reach. With crowdshipping, you can expand your delivery capacity without the overhead of managing a full-time delivery fleet.
7. Real-time visibility and predictive analytics
Customers expect full transparency when it comes to their deliveries. Enter: real-time tracking and predictive analytics. This technology allows you to offer up-to-the-minute updates on packages, anticipate delivery windows, and even foresee potential delays before they happen.
On the backend, predictive analytics can refine routes and delivery schedules based on past data, boosting efficiency across the board. It’s all about meeting customer expectations and staying one step ahead of logistical challenges.
While widespread adoption of some of these technologies may still be years away, pilot programs and trials are already underway.
Solve final-mile delivery challenges
There’s no denying that last-mile delivery is a challenging part of ecommerce logistics—especially with customer expectations for faster, more flexible deliveries. While solutions exist, implementing them can be complex and resource-intensive.
Partnering with a trusted 3PL like Red Stag Fulfillment can help you streamline your order fulfillment process, from warehouse management to shipping.
By improving your operations, you can better meet customer demands and turn efficient fulfillment into a competitive advantage. Ready to enhance your order fulfillment strategy? Contact Red Stag Fulfillment today to discuss how we can support your ecommerce success.
