How to Plan Incentives for your Last Mile delivery operations

Incentives are successful in increasing output because they provide Last Mile Delivery workers with an added incentive to work harder.

What is Last Mile Delivery?

Last Mile Delivery is the final stage in getting a product to the customer. It's the last leg of the journey and it's often the most important, as it's the point when the customer finally gets their hands on what they've ordered. Last Mile Delivery is particularly important for e-commerce companies, as they rely on speedy delivery to get their products to customers as quickly as possible.

Delivery workers' role in your operations

The delivery agents are responsible and are essential to the process. Without efficient and reliable last mile delivery, e-commerce companies would struggle to meet customer demands for speedy delivery.

There are an estimated 2.5 million Last Mile Delivery workers worldwide.

There are a number of reasons why people might work as Last Mile Delivery workers. Some may see it as a way to make some extra money, others may enjoy the challenge of working in a fast-paced environment, and others may appreciate the opportunity to be their own boss.

Having happy delivery executives are essential to the success of last mile delivery. In order to keep your Last Mile Delivery workers happy, you need to provide them with adequate incentives.

How Important are Incentives and how to plan them?

Incentives are successful in increasing output because they provide Last Mile Delivery workers with an added incentive to work harder and more efficiently. When workers are given a monetary incentive, they are more likely to work harder in order to earn more money. In addition, when workers are given an incentive that is specific to their job, they are more likely to be motivated to work harder in order to meet the expectations of their employer.

Planning your incentives is key to the success of your last mile delivery operation. It needs to make sure that your most hard-working delivery workers are paid well and also to make sure that it stays within the budget. It is important to analyse your metrics before you plan an incentive. Some key metrics to analyse would be:

  • The average number of deliveries by a person
  • Number of deliveries completed in an hour/day/week/month
  • Time taken per delivery ( split in Travel and delivery time )
  • Quality of service ( Customer Feedback Loop )

All the above metrics need to be accounted for when planning an incentive because the motive of an incentive is to make sure the output increases as the delivery workers see this as an opportunity to earn more when they do more deliveries but also you need to keep a check on the Quality of the service provided, there are chances that the workers might compromise on the quality intentionally or unintentionally as they rush towards doing more deliveries to earn more.

There are several ways you can plan your incentives based on how your delivery team is performing. Every delivery team is different, you might see a Pareto of workers who worked very hard when compared to the others and there might be teams where you don't see a big standard deviation from the average deliveries done per person. How do we tackle both cases?

Personal Incentives:

  • These types of incentives are to motivate hardworking workers and enable them to earn more for the extra effort they put in when compared to other workers.
  • These incentives have a drawback sometimes where your low-performing workers would earn less and hence start churning out. So always plan for new hires and churn when you implement these types of incentives

Team Incentives:

  • These types of incentives are best when you know that the company needs to reach a goal and you know that it needs a group effort to make it achievable.
  • A good example of this would be handling the delivery of a Black Friday shopping surge, the number of deliveries to be done goes up drastically. To handle this you would need to either increase the number of deliveries done per person or increase the number of delivery workers. While the latter approach will cost you more as it involves hiring costs it's better to launch a team incentive where you propose a team-based goal and once it's achieved all workers get an assured monetary reward. This will make sure that everyone in the team will do a little bit extra themselves.

Combined Incentives:

  • While Team Incentives are short-term and personal incentives that don't benefit all cohorts of workers, it's sustainable to have a combined incentive plan to make sure your workers are happier throughout their lifecycle in your company as a delivery worker.
  • This will make sure that Hard workers are paid in a fair manner respecting their effort but also accounts for average and low performers who will earn a little bit extra and feel they are not left out hence reducing churn and reducing your hiring costs

In conclusion, a healthy incentive is key to make any delivery operation a sustainable one. Since it is a manpower heavy operation you need to keep into account the happiness and job satisfaction of your workers. In addition to just monetary rewards, you could also provide paid vacation days, gift vouchers for best performers.

Here is a Excel calculator we designed to help you understand how your cost per delivery gets affected by other metrics :

https://docs.google.com/spreadsheets/d/1dgS8vq_wwgaQxzlCn2hk-ZVelX4lkmVqj2UoFydUO88/edit?usp=sharing