DISCUSSION

Where are the cost savings in last-mile delivery?

January 24, 2023Written by Tom Ryan

A survey finds retailers increasingly fixated on cost efficiencies around last-mile deliveries amid rising inflation and fuel costs. The study by Bringg of 500 U.S.-based retail managers with responsibility for supply chain or digital functions delineated the top-six cost-related pain points for last mile operations as:

Working with carriers (42 percent)
Reliance on manual processes (41 percent)
Driver retention (41 percent)
Fuel costs (32 percent)
WISMO (“Where is my order?”) calls (28 percent)
Cost of returns (28 percent)

The study also found the lack of available vehicles to be the top challenge to delivering on time. Inflexibility is affecting both cost and capacity, with 49 percent of retailers still lacking flexibility during peak seasons, and 37 percent unable to scale up or down the number of drivers as necessary, resulting in reduced profits. Overall, 89 percent indicated they were struggling with their last-mile delivery operations. The top pain points overall were complexity of tech stacks (cited by 37 percent), followed by rising delivery costs (36 percent), lack of real-time visibility after order placement (35 percent), having multiple fulfillment channels managed by disparate technologies (34 percent), working with multiple delivery fleets (33 percent), and inefficient manual processes for planning/dispatching orders (also 33 percent). The study found that retailers are looking to reduce costs via technology and automation while looking to further amplify convenience for consumers by adding real-time delivery tracking and services such as self-scheduling and delivery subscriptions. Last-mile delivery on average costs $10.10 per package, but the customer only covers $8.08, according to an often-quoted study from Capgemini based on a survey of retailers in 2018. A new report from Capgemini concludes that finding cost reductions across operations will be critical for retailers looking to serve inflation-fatigued customers. “Transforming the way organizations use labor, adopting a tech-led supply chain and automating warehouse operations can also go a long way in improving last mile delivery while also bringing down costs.”

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