Customers today want their deliveries to be free and fast. Even one extra day of waiting can mean the difference between a repeat shopper, and one who switches to a competitor.
Supply chain logistics have improved dramatically in recent decades, but the last stage of a package's journey remains the most costly and challenging – it’s what’s known as “the last mile problem.” Industry giants such as Amazon, as well as startups, are hard at work developing innovative solutions for the last mile problem that can get goods to a home or business without sacrificing profit margins.
What is the Last Mile Problem?
The last mile problem refers to the inefficiencies, costs, and challenges associated with delivering a package from a warehouse to a customer’s doorstep. This final step in the delivery process is the most expensive and time-consuming part of the supply chain and can account for up to 53% of total shipping costs.
The last mile problem impacts customer satisfaction and business profitability, and while it is very important in ecommerce, it also applies to the areas of urban transportation, energy delivery and telecommunications connectivity.
Many challenges contribute to the last mile problem including:
High Shipping Costs: Delivering to individual locations is labor intensive. It requires more staff and vehicles than delivering to centralized locations and this drives up operational costs. The stop-and-go nature of last-mile deliveries also increases fuel consumption.
Complex Routes and Destinations: Urban areas are difficult to make deliveries in because traffic and parking restrictions increase delays and inefficiency. Rural areas require more driving between stops, making per-package costs significantly higher.
Delivery Inefficiencies: Failed delivery attempts, package theft, unpredictable package sizes all complicate the process and increase stress on delivery companies.
Customer Expectations: Consumers are now accustomed to speedy delivery, including same-day or next-day options, but they don’t want to pay a lot more. This has put pressure on logistics companies to optimize speed without increasing costs. Customers also increasingly want precise delivery windows, requiring complex scheduling.
Scalability Issues: The last mile problem is magnified during peak shopping seasons such as holidays or special sales events like Black Friday, which require operations to temporarily scale.
Why Is It Called the Last Mile?
The term “last mile” originated in the telecommunications industry. It was originally used to describe the final stretch of wiring connecting telecommunication service providers to individual homes. This “last mile” of cable or wire is only used by one customer, making it more difficult and costly to install.
In logistics, the same concept represents the last leg of a package’s delivery journey, from a central logistics hub to its final destination.
How Amazon Is Solving the Last Mile Challenge
As the world’s largest e-commerce platform, Amazon has invested heavily in overcoming the last mile challenge. Here’s how the industry leader is tackling the issue:
Micro-fulfillment Centers - Amazon has opened "micromobility hubs" in several cities. These are strategically placed warehouses where packages are sorted and then delivered by cargo bikes or on foot. This replaces traditional van deliveries with a lower-emission option that also lessens road congestion. In Paris, two thirds of Amazon orders are now completed with zero-emission last mile deliveries.
Amazon Flex Drivers - A vast network of Amazon Flex drivers use their own vehicles to deliver packages for Amazon, similar to the model used by Uber, but for packages.
Electric Vans - Amazon’s fleet of electric delivery vans were developed in partnership with the American electric vehicle manufacturer Rivian, and provide an eco-friendly solution for last-mile logistics. These vehicles are also equipped with features like advanced driver assistance systems (ADAS) which have decreased van collisions.
Drone Deliveries - Through its Prime Air program, Amazon is testing drones for rapid, lightweight deliveries in suburban and rural areas. This could transform last-mile logistics by avoiding traffic and minimizing human effort. Amazon’s drones are currently flying in two U.S. locations – College Station, Texas and Lockeford, California – and there are pilot programs in the U.K. and Italy.
Lockers and Pick-Up Points - To streamline deliveries and minimize failed attempts, Amazon has installed secure lockers in urban areas. These self-service pick-up points reduce the number of individual delivery stops. Amazon also partners with local businesses through Amazon Hub Delivery, a program in which Amazon pays businesses to handle Amazon deliveries nearby.
Dynamic Delivery Planner (DDP) - Amazon has developed a routing software for customers called Dynamic Delivery Planner (DDP) that incorporates machine learning into the last mile. DDP uses AI to calculate the best route, delivery time window, and re-routing in real time.
In 2021, Amazon also held a “Last Mile Challenge” to encourage the development of solutions incorporating AI and other emerging technologies. The company awarded a total of US75,000 in cash prizes to three teams of academics and students.
Innovative Solutions Proposed by Startups
Amazon isn’t the only company working on last mile solutions. Startups have introduced creative ways to tackle the last mile problem:
Autonomous Delivery Robots - Companies like Starship Technologies and Nuro are deploying small, autonomous vehicles to navigate sidewalks and deliver packages. These robots are cost-effective and sustainable, making them ideal for urban environments.
Crowdsourced Delivery Platforms - Companies such as Roadie and Shipt connect local drivers with businesses, creating an Uber-like model for last-mile delivery. This approach leverages existing resources to reduce operational costs.
Electric Cargo Bikes - Startups like Zoomo and Rad Power Bikes are developing electric bikes designed specifically for package delivery. These bikes can bypass vehicle traffic making them ideal for busy urban areas.
Smart Lock Technology - Smart locks and smart delivery boxes like those made by Ultraloq and August allow delivery personnel to leave packages inside homes or garages securely. This solution minimizes theft and weather-related damage.
Last Mile Solutions Charging Stations - As electric vehicles increasingly make up last-mile delivery fleets, startups like Amply Power (now acquired by BP) have developed specialized charging hubs for delivery vans and bikes.
Electric Vehicles, Drones, and Other Last Mile Advancements
Technological advancements are getting us closer to solving the last mile challenge, with EVs, drones, and other innovations playing key roles:
Electric Vehicles (EVs) - EVs offer eco-friendly and cost-efficient solutions for last-mile deliveries. Enhanced battery technology and regenerative braking will further improve their efficiency.
Drones - Drones can bypass road traffic and reach remote areas, providing fast and contactless deliveries. But regulatory hurdles and limited goods capacity still need to be addressed before drones can be in wide usage for deliveries.
Dynamic Routing Algorithms - AI-powered software can optimize delivery routes in real time, while factoring in traffic, weather, and priority shipping. Companies like OptimoRoute and Onfleet are leading in this space.
As urban areas grow and customer expectations rise, the last mile problem will continue to evolve. These sustainable solutions and technological advancements have the potential to revolutionize the way goods reach customers, and ensure a faster, greener, and more efficient last mile.