Many consumers don’t realize everything that goes into delivering a purchase that they made online. You click that buy button and, somewhere hundreds of miles away, your product is selected, wrapped, boxed and taped shut. It’s thrown down a few chutes and across conveyor belts, and prepared for shipping.
There’s countless shipping employees and truck drivers and infrastructure, but do you know the most expensive part? The last mile.
That’s right, getting from the post office or fulfillment center to your house is by far the most expensive aspect. It’s estimated that about 28% of total delivery costs for companies is incurred in the last mile of delivery. That’s an astounding number—and the reason that many companies should explore different options to mitigate delivery costs to become more profitable.
Transactions/delivery costs can be categorized into four main components: warehousing, fulfillment, delivery and technology. We’ll break down the measures that can be taken in each of these to reduce last mile expenses, and therefore overall shipping costs.
Warehousing strategy, if implemented correctly, can bring forth significant cost savings. The current trend is for companies to purchase or rent space in urban warehouses in order to quicken the delivery process. A prime example would be Amazon, which continues to purchase warehouses for its same-day deliveries, and in-store pickups.
The idea of creative warehousing solutions allows companies to hold inventory closer to customers. This is why Amazon’s warehouses are within 10 miles of 80% of population—it makes the logistics of getting products to customers’ doors far more manageable.
With prudent, logistical strategy, companies can mimic Amazon’s strategy and rent (or if they can afford to, buy) space in a well-located warehouse—or use a service like darkstore— which can lead to tons of expense savings.
Fulfillment is mainly concerned with packaging and shipping preparation. It isn’t the part of the delivery expense that allows for considerable money saving, but it plays a vital role in customer satisfaction. A mislabeled or damaged box leads to major inconveniences for customers. So while changes to fulfillment won’t make up for the inflated last mile costs, it can reduce chargebacks, customer service complaints, and help to retain loyal customers.
More logistical planning comes into play here. Companies must strive to avoid superfluous fuel and driver expenses. This means companies must ensure that their route optimization, truck capacity and timing are all properly calculated. Therefore, it may be pragmatic to spend additional money on a seasoned logistics manager to coordinate deliveries, because it could very easily pay for itself with the cost savings.
While drones, robots and autonomous vehicles are waiting in the wings to disrupt the way we deliver goods, there are many existing technologies that can help you save money today. Moving items from point A to point B more efficiently can save us time, money, and allow us to focus on the things we care about more than delivery.
A great example of leveraging an existing technology is Deliv. Our dynamic platform allows individuals and businesses to tap into the benefits of a crowdsourced delivery network. No need to invest in an in-house delivery driver, truck, and logistics strategy; Deliv allows companies to flip a switch and offer same day delivery.