Currently, last-mile delivery is undergoing a significant transformation driven by technological advancements, changing urban environments, and customer preferences. Consequently, organizations face many challenges during delivery, such as driver shortages, slow delivery times, or unfavorable weather conditions. To stay ahead of competitors, logistics and supply chain managers must reconsider their delivery strategies to reduce costs while meeting modern consumer expectations.

To help you succeed, in this article we outline some of the effective strategies for last-mile delivery route optimization and how they will help you streamline operations and level up customer service for your ecommerce expansion.

What is last-mile optimization?

In logistics and supply chain management, the “last mile” represents the final and often the most crucial step of the delivery process. It is where products reach their ultimate destination from a distribution hub or warehouse – the customer’s hands. Even though it is the shortest part of the delivery process, it often takes up the largest portion of delivery costs and headaches. This is why last-mile requires optimization.

Last-mile optimization refers to the process of improving the efficiency of the delivery. It typically involves the use of technology, data analytics, and innovative practices to streamline delivery routes, reduce transit times, and keep costs low. Thus, the optimization of the last-mile process opens up many opportunities for modern ecommerce businesses.

The main advantages of last-mile delivery optimization

Here are the main reasons why last-mile optimization is worth companies’ attention: 

• Enhanced customer satisfaction: real-time tracking and timely delivery meet modern customer expectations, enhancing their satisfaction and loyalty to a brand;
• Competitive advantage: fast, reliable, and racking deliveries make the business stand out from its competitors, attracting and retaining buyers;
• Reduced operational costs: by optimizing shipping routes, companies can lower fuel consumption and minimize labor costs, resulting in significant cost savings;
• Eco-friendliness: using eco-friendly options reduces carbon footprints and encourages customers to support sustainable logistics;
• Better inventory management: usage of real-time inventory data allows companies to efficiently track and manage stock levels, reducing excess inventory and warehousing costs;
• Better operational decisions: last-mile systems rely on modern technology, enabling businesses to make informed decisions about route planning, delivery schedules, and resource allocation.

Despite the numerous advantages that last-mile delivery optimization offers, businesses often face a variety of challenges related to this process. 

Challenges of last-mile delivery

Understanding the common last-mile challenges is the number one step before implementing strategies for optimization. So let’s consider some of them:

• High costs: since last-mile delivery involves numerous small stops, that leads to increased delivery costs due to factors such as fuel expenses, labor costs for drivers, and vehicle maintenance;
• Customer expectations: consumers expect rapid and dependable delivery services with real-time order tracking, which requires robust logistics and advanced technology, increasing operational complexity;
• Traffic congestion: urban areas often face traffic congestion or parking issues, which can lead to delays in deliveries, customer dissatisfaction, and one else increased operational costs;
• Failed delivery: theft and damage of packages during last-mile delivery is a serious and common problem that increases the risk of dissatisfied customers;
• Labor shortages: lack of delivery personnel causes operational bottlenecks and delays, which increases costs and negatively impacts delivery efficiency.

These are only some of the potential problems associated with the final stage; this list goes on and on. To successfully address or mitigate them in advance, businesses need a strategy consisting of innovative solutions, technology, and careful planning of logistics operations.

Last-mile route optimization: 8 effective strategies

Ecommerce companies are constantly on the hunt to make their final delivery process as effective and efficient as possible. While some current strategies might be overlooked or not properly implemented, they remain relevant. Let’s look at them: 

Optimize routes

Routes and distance are the main factors impacting last-mile costs. The longer the distance, the higher the price. That is why route optimization for last-mile operations is vital for companies.

To achieve this, companies can implement advanced route planning software powered by AI and ML algorithms. These solutions can provide real-time data on traffic conditions, weather changes, vehicle capacity, and delivery schedules. By leveraging this data, drivers can plan the most efficient delivery routes, thereby minimizing both travel time and fuel consumption.

Map features, which convert customer locations into precise geographic coordinates, are another way to optimize routes. This improves the accuracy of delivery and reduces errors in route planning. Also, companies can optimize routes by evenly distributing delivery tasks among drivers using a load balancing strategy. This prevents delays and bottlenecks, ensuring timely deliveries and efficient resource utilization.

Use advanced analytics in logistics

Advanced analytics and ML are crucial in optimizing the last-mile delivery process. By analyzing historical data, companies can predict demand patterns and adjust routing schedules and routes accordingly. Also, analytics platforms can provide insights into:

• On-time delivery rates;
• Root causes of long shipping times;
• Performance of individual carriers;
• Package characteristics and factors affecting their costs.

Regular monitoring of delivery metrics helps companies identify bottlenecks, inefficiencies, and opportunities for further improvement. Additionally, last-mile analytics assist dispatch managers in predicting potential risks, such as daily or monthly traffic patterns, seasonal buying trends, and possible vehicle failures. With these insights, managers can proactively address and mitigate disruptions. Consequently, companies are able to improve delivery times, reduce fuel consumption, and cut their operating costs.

Integrate innovative technologies

The last-mile process starts in a distribution center. To keep every element of your operations running smoothly and add more visibility into your last-mile delivery operations, integration of advanced technologies is crucial. They include: 

• Tracking systems: you can implement GPS tracking and Internet of Things (IoT) solutions to monitor the precise location of delivery vehicles and provide real-time updates to customers;
• Order Management System (OMS): this solution collects order data from every channel into a single view, resulting in more accurate order capture, tracking, and fulfillment, thus reducing delivery errors;
• Electronic Proof of Delivery (ePOD): companies use digital signatures, timestamps, and photos to confirm delivery in real-time, enhancing transparency and efficiency over traditional delivery methods;
• Drones and autonomous vehicles: they can deliver goods faster, cheaper, and more sustainably than traditional vehicles, particularly in urban areas or remote locations;
• Smart lockers: these secure, automated storage units enable users to access their packages using digital codes or apps, replacing traditional parcel delivery.

Based on these technologies, businesses can weed out bottlenecks in their last-mile delivery process and make it smooth, cost-efficient, and customer-oriented.

Offer multiple delivery options

Online buyers have different preferences when it comes to delivery methods. For example, French consumers have a strong preference for delivery to service points, while Spanish ones prefer cash-on-delivery. By offering customized shipping options, such as same-day, next-day, or day-specific, you can deliver orders in a convenient manner.

Depending on your client’s needs, you may consider the following delivery options:

• Express and same-day delivery: perfect for customers needing fast shipping, such as for last-minute gifts or urgent supplies;
• Click and collect: a combination of online ordering and in-store pickup that allows customers to pick up their purchases from nearby stores at their convenience;
• Crowdsourced delivery: improves delivery speed and flexibility, especially in urban areas or during peak shopping periods, by leveraging a network of drivers matched to orders via technology platforms.
• Green delivery: focuses on sustainability, using eco-friendly options like bicycle couriers or electric vehicles that satisfy eco-conscious consumers and boost brand reputation via corporate social responsibility initiatives.

By offering multiple and convenient delivery options, you can increase your conversion rate at checkout while reducing the risk of delivery failure, which can lead to cancellations or wasted time. This way, you can not only take care of your customers, but also optimize last-mile routing.

Partner with local carriers

Local carriers excel in navigating local traffic patterns and road conditions, which directly improves your delivery operations. They coordinate routes, hire drivers, and maintain vehicles, offering a more responsive delivery service than national carriers. Also, partnering with local carriers allows businesses to extend their distribution network without significant investments in infrastructure. Therefore, companies can reach challenging or costly areas for national carriers, thus improving service coverage. 

When choosing local carriers, consider their:

• Cost
• Service levels
• Reputation and reviews
• Delivery speed 
• Geographic coverage
• Extra services

To further optimize the last-mile process, you can implement a multi-carrier strategy. This last-mile strategy allows you to select the best rates and maintain flexibility if a carrier faces disruptions. For this, you can use shipping platforms that integrate multiple carriers for discounted rates, find the best shipping times, and track packages efficiently.

If you’re looking to enhance visibility in your logistics operations to gain better control, consider integrating real-time visibility tools, such as Warehouse Management Systems (WMS) and Transportation Management Systems (TMS).

WMS software controls warehouse operations, from receiving and storage to picking, packing, shipping orders, inventory tracking, and all the steps in between. WMS provides real-time visibility into inventory levels, storage locations, and order statuses. It automates inventory management, reducing errors and improving efficiency.

In turn, TMS software optimizes transportation logistics, selecting the best routes and carriers to deliver orders to customers promptly and cost-effectively. It includes planning, execution, and optimization of transportation activities. Together, WMS and TMS are powerful solutions for optimizing the entire logistics process and ensuring an efficient last-mile process for customers. 

Most customers value package tracking and check its updates. Implementing real-time package tracking will enhance the customer experience by offering both transparency and convenience. This visibility allows them to plan their day around delivery times, preventing missed deliveries and rescheduling. 

To achieve this, companies need to offer an intuitive tracking portal. This portal should provide not only the number of days for delivery but also a specific estimated time of arrival (ETA). In case of unforeseen delays, such as bad weather or other disruptions beyond your control, you must keep your customers informed about delivery. Consequently, this optimizes last-mile delivery by enabling dynamic route adjustments and efficient resource allocation based on the real-time location of orders.

Sustainable practices

In an era of growing environmental awareness, the integration of sustainable practices into last-mile optimization is a common but necessary practice. These eco-friendly practices may involve adopting electric or hybrid vehicles, optimizing shipment routes, using ePOD or TMS solutions, and using waste-reduction packaging options. By adopting eco-friendly initiatives into their operations, businesses can reduce their environmental impact, enhance public reputation, and, together with their consumers, contribute to a greener planet.

Final thoughts

Last-mile optimization is a vital aspect of modern logistics that requires a blend of strategic planning and technologies. By adopting one of the above-mentioned strategies, ecommerce owners can better control and plan their delivery, reduce operation costs, and greatly enhance customer service. The use of route optimization software, drones, smart lockers, and crowdsourcing delivery can all contribute to achieving these goals. But, rather than implementing everything at once, companies should prioritize and continuously adapt their last-mile delivery route optimization strategies to meet their own business goals and market needs.