What is Last Mile Delivery and how does it work

Why is last mile delivery important for a business and how to manage it effectively?

It's Thursday afternoon and someone knocks on your door. You open it and it's a parcel from Amazon. Did this mean that the person from Amazon carried this package all the way from the manufacturer? Of course not. This delivery person takes care of delivering the package from the closest warehouse to the destination to your home or office. He's part of the Last mile delivery unit. 

Last mile delivery is the final part of the supply chain process for businesses. It refers to the last stretch of the journey for a package or parcel, from the warehouse to its destination. This final step involves getting goods from a central shipping location to their end user. 

It is also called local delivery or final mile delivery. This article explains what last mile delivery is and how it works in practice.

Why is Last Mile Delivery Important?

Delivery is the most cost-intensive and resource-intensive phase of the supply chain. It is also the most customer-facing part of the business. A single incident can have a big impact on a business’s reputation and customer retention. Remember the last time your food delivery service delivered the wrong food item? Mistakes are unacceptable. If there is an issue with last mile delivery, you will hear about it right away. For these reasons, setting up the last mile delivery the right way is very important. This means selecting the right delivery partners, establishing a standard delivery schedule, SOP (Standard Operating Procedure) to check the quality of product delivered, keeping the delivery partners happy and many more. 

How Does Last Mile Delivery Work?

The last mile delivery partners typically pickup the product from the closest location like a warehouse or a dark store or a restaurant, travel towards the customer’s location via a vehicle and deliver it to the customer. 

The last mile delivery part can be divided into the following 3 sections. 

  • Pickup of the product from the warehouse
  • Travel towards the customer location
  • Deliver the product to the customer

Each of these steps work in a different way depending on the type of the business or the mode of delivery. 

Different types of Last Mile Delivery

There are different ways businesses run their last mile delivery operations. It typically depends on their business model. Some common models are

On demand delivery

These are typically orders delivered one by one in a short amount of time. Typical examples are restaurant food delivery, quick commerce grocery delivery.

Scheduled Delivery

Most ecommerce deliveries are scheduled. The ecommerce company estimates a delivery slot for the product to be delivered and batches all the deliveries at the same time.

Milk Runs

Milk runs is a kind of scheduled delivery but happens on a daily basis. This is typically used for subscription businesses like Milk deliveries (duh!), grocery deliveries etc. 

How to set up last mile delivery in your company?

There are two main options for last mile delivery. You can either outsource last mile delivery to a logistics company or you can handle the process in house. If you outsource the process, you can use a third-party logistics (3PL) company or a logistics service provider (LSP). There are many factors to consider when selecting a partner for last mile delivery. Some of the most important considerations include: 

  • Pricing: How much will the service cost to operate? 
  • Customer experience: How will the service impact customer satisfaction? 
  • Service offerings: What additional services will the team provide?

If you want better quality control and run the operations yourself, you can use several technology providers in the market or build your own internally. At Zorp we enable companies to build their Operations products 100x faster. 

How to manage a last mile delivery team?

Managing the last mile delivery team is a very critical part of the business. The high labor cost, churn and hard working conditions makes it difficult to nurture and retain talent. Providing the right technology support can make lives easy for the delivery team and manage their work properly. 

Look at several employee engagement principles like attendance, leave policies, flexible shifts, capacity planning, incentive programs etc. We will talk about each of these separately in detail in the future posts. 

Some key metrics for last mile delivery

Some of the key metrics in last mile delivery are 

  • Cost - Cost per delivery
  • Labor cost - Amount paid for labor per day
  • Quality of delivery - This can be calculated with error % and customer NPS. 
  • Revenue per delivery

We have written a detailed unit economics calculator for managing your last mile delivery. You can access it here.

Conclusion

Having a clear understanding of the last mile delivery process could make or break your business. According to research, 40% of the customer NPS depends on the quality of the last mile delivery. As a business owner, you are at the right place to understand what type of last mile delivery works for your business, which metrics to track and how to ensure quality products are delivered to your customers.