Last-mile delivery is the process of getting goods from a delivery hub, warehouse, or business to the customer. It is also expensive, time-consuming, and prone to issues due to customer satisfaction, supply difficulties, staff shortages, and so much more.
And all of those concerns are without including the effects of the COVID-19 pandemic.
“Who expected the COVID-19 pandemic to have such a huge impact on everyday life? Even before COVID-19 hit, we saw continuous growth in last-mile delivery, which has dramatically accelerated over the past two years. Of course, this is related to the growth of consumer delivery and increased requests for goods being shipped directly to the consumer, especially grocery deliveries, which have spiked tremendously. This growth will probably slow down, but if it can stay cost-effective and green, it is here to stay,” said Barbara Roos, Managing Director, Ab Ovo North America, Inc.
Top Last-Mile Delivery Trends
We spoke with several subject-matter experts who shared what else they see as current trends impacting the last-mile delivery market.
1. Growth of Online Sales
Since the start of the COVID-19 pandemic, online sales and e-commerce traffic have skyrocketed, the labor force has also seen widespread shortages, and the demand for technology has taken off.
“Due to these factors, the supply chain has experienced major disruptions that directly impact our customers’ ability to deliver goods and services,” said Kevin Aries, global leader, product success at Verizon Connect.
With greater e-commerce demand, last-mile deliveries have increased.
“Customers are willing to pay more for faster deliveries and with today’s tech they can keep a close eye on delivery status. However, driver and retail employee shortages have slowed down operations. As last-mile deliveries have increased, the resources needed to complete these deliveries have been strained. Customers want their shipment delivered on time, so fleet managers have turned to technology to improve their last-mile delivery,” Aries added.
Another trend seen since the start of the pandemic is the substantial increase in consumer demand and online order volume across all product categories.
“A few of the categories that have been in high demand over the past 12-24 months are gifting or ‘treats’ like flowers, subscription boxes, and wine; and hobbies and recreational activities like electronics, gardening, and products for pets, especially as trusted bricks-and-mortar brands adapt or enhance their online presence. That growth is only now beginning to slow in the first half of 2022 across most geographies,” said Andrew Nowell, sales manager at Trimble MAPS.
Nowell noted the increase in volume is likely driven by new populations joining in the e-commerce shopping experience: both younger generations and older generations alike are feeling comfortable about ordering online, often for the first time.
“People are also repeating online orders more frequently, and are increasingly participating in ‘people to people’ selling through online marketplaces,” Nowell said.
However, Elizabeth Ong, senior manager of product marketing at TomTom, noted, “at the beginning of the pandemic, we saw an explosion of consumers relying on Instacart, Shipt, and other grocery delivery services as a result of lockdowns. Now that governments have loosened up restrictions, that demand isn’t as great, but there’s still a want for food and grocery delivery.”
2. Shift in Product Needs & Locations
Because there has been such a massive shift in how and where people work, product needs have shifted, and people are consuming products differently as well.
“We’ve also seen a vast change in delivery locations, as there have been some population shifts across different regions during the pandemic (e.g., migrating out of big cities and into warmer climates). For example, food and beverage brands have seen a shift in the orders they are receiving — moving away from fountain beverages and toward bottled shelf beverages, which are less exposed to germs by nature as well as being better fit for takeout and delivery options. Of course, there have been ebbs and flows to these type of order modifications, but the changes are apparent,” said Ryan Wilkinson, chief technology officer at IntelliShift.
3. An Increase in First-Time Delivery Rates
First-time delivery rates are increasing, which leads to many new addresses on each route, and the reach of the network may be stretched to capacity.
“The good news is, features such as photo capture, e-proof of delivery, and authority to leave are becoming more widely accepted and adopted, which in turn is reducing driver dwell time at doorsteps, allowing more parcels to be delivered on each route,” said Nowell of Trimble MAPS.
4. Demand for Transparency
Aries of Verizon Connect noted, “roughly 40% of overall logistics costs spent on the last-mile, there is a demand for last-mile technology solutions that can minimize cost, ensure transparency, and increase efficiency.”
There is also a need for smarter technology for improved trackability.
“Due to the unanticipated supply chain disruptions, there’s now a greater need for advanced supply chain visibility solutions for not only retailers and shippers, but also for consumers. Consumers want to know the on-route status and tracking for their orders, and retailers will need to give them that visibility. Shippers will want to ensure deliveries are being made, and last-mile delivery fleets (whether in-house or not) will want to show proof of delivery as well,” said Ong of TomTom.
5. Time-Sensitive Delivery Needs
Another major trend is increased consumer demand for a more precise delivery window for goods.
“This request exacerbates the need to optimize load planning with more detailed timing constraints. Businesses can reduce costs with effective combinations and provide customer choices on delivery,” said Roos of Ab Ovo North America, Inc.
Ong of TomTom agreed consumer desire for faster order fulfillment is growing exponentially.
“This change was already set in motion due to the ‘Amazon effect,’ but because of local government lockdowns due to COVID-19 and the convenience of a short turnaround for shipping and delivery, consumers now want and expect faster order fulfillment, which means the expectation for faster shipping and delivery. Almost a quarter of consumers are even willing to pay a hefty premium for same-day delivery (approximately 23% consumers survived by McKinsey in 2016). Given this statistic is a few years old, I can only imagine this number being higher now,” she said.
6. New Partnerships
What used to be more of a business-to-business transaction is becoming more of a partnership.
“Carriers have become a partner to a shipper’s operations rather than just being a service provider. As we progress, shippers will need to work more closely with the carriers to meet the demands of the customers,” said Krishna Vattipalli, CEO of Fleet Enable.
7. Need for Optimized Resources
In today’s pandemic-impacted world, there is a much higher focus on optimizing available resources than there was in previous years.
“We are also facing challenges in both hiring drivers as well as forecasting the supply chain effectively. As a consequence of both of these trends, there are more last-minute, same-day changes to routes and workloads than before. Luckily, with the right routing solution in place — as well as a predictive maintenance solution — these current trends don’t cause as many challenges when it comes to planning and optimizing as it would for companies who are still utilizing old paper route planning sheets,” said Wilkinson of IntelliShift.
8. Need for Technology
Technology has moved from being a differentiator to a survival factor.
With the growing need for last-mile carriers, there is also competition coming up and challenging existing players. The margins are small in last-mile delivery and technology is one of the primary factors that can enable the carrier to deliver more with less,” said Vattipalli of Fleet Enable.
Another growing technological trend Ong of TomTom noted is the use of drones and robots to overcome last-mile delivery challenges, especially in the mobility on-demand space, such as food delivery.
“I expect there will be a lot of growth around this as well as the increased use of commercial autonomous vehicle (AV) fleets,” Ong added.
9. Importance of Warehouse Operations
The importance of warehouse operations has also grown significantly.
“With more items being shipped to homes, there is a growing demand for local warehouses to enable faster deliveries,” said Vattipalli of Fleet Enable.
Another challenge connected to warehouse operations is returns management has become a challenge.
“With the rise and reliance on ecommerce, it has become easy for customers to purchase and once they receive the product the customer decides if they would like to keep it or return the item. This has put strain on the last-mile carriers to pick up the item and store it in a warehouse which are already challenged with available floor space,” Vattipalli added.
10. COVID-Related Precautions
Ending the second year of a worldwide pandemic means some trends that may have caught us off guard in 2019 are becoming more anticipated now.
“Contactless delivery is offered by most companies and service-related companies have been careful to mask up, limit contact, and wear gloves. All of this is done to give the customer better piece of mind, ” said Raj Bajaj, VP, Webfleet Solutions International at Bridgestone Mobility Solutions.
11. In-House Last-Mile Delivery
There has also been a rise in in-house last-mile delivery.
“For example, Amazon has started to rely less on national shipment companies, like FedEx, UPS, and even USPS by offering AmazonFlex in an effort to crowdsource last-mile delivery in-house. Since then, they have expanded and built out their own last-mile delivery fleet. Walmart has followed suit and I anticipate other retailers will adopt this trend too,” said Ong of TomTom.
12. Need to Go Green
Consumers are becoming increasingly conscious of using sustainable and green methods.
“This, of course, can go against same day delivery and other fast delivery options, but some companies are taking measures to offset their carbon footprint for deliveries,” said Ong of TomTom.
Unexpected Last-Mile Trends
With the many changes in trends related to the last-mile delivery market, not everything was expected. Here are a few trends experts didn’t see coming:
- “Covid has fast-forwarded the growth of the last-mile industry by at least five years. Delivery volumes and reliance on the last-mile carrier has grown tremendously,” said Vattipalli of Fleet Enable.
- “An unfortunate trend we weren’t able to anticipate was the fact all the increased volume has not converted into increased profits for carriers; last-mile is still one of the most costly parts of the shipping process, estimated at about 40% of the total process. In addition to the rising cost of transportation, we are also anticipating price increases in the overall cost of goods, such as packaging costs and inter-state or border/customs taxation changes,” said Nowell of Trimble MAPS.
- “Something I didn’t expect was how fast companies are moving towards hybrid fleets and increasing their flexibility,” said Roos of Ab Ovo North America, Inc.
- “We also didn’t anticipate how much storage space would be impacted in this new normal: return volumes have been astronomical, for example, which is causing space issues in warehouses and distribution centers. We have also been surprised to see parcel lockers and pick up/drop off (PUDO) volumes have held stable, even through global lockdowns,” said Nowell of Trimble MAPS.