By Frank Kenney
The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
E-commerce spending is growing rapidly, with total spending in 2022 exceeding $1.03 trillion, an increase of 7.7% from the previous year. With more orders being shipped directly to their destinations, last-mile delivery has become an integral part of efficient supply chains.
Technology plays an increasingly important role in making it even more efficient. When considering the challenges of last-mile delivery, leveraging ecosystem integration software and strategies provides significant benefits to — and a smoother enablement of — efficient last-mile delivery.
Challenges of last-mile delivery
The expenses associated with increased labor and additional vehicle mileage when transporting products to customers’ homes in final-mile delivery operations can be significant. Paying for last-mile delivery makes up 41% of all supply chain spending. This is why logistics companies are looking for ways to streamline the process and optimize supply chain spending. Associated costs include packaging materials and fuel expenses, as well as storage and warehousing for items that require refrigerated transport. Navigating these budget-breaking challenges requires well-thought-out strategies that optimize operations across the entire supply chain ecosystem to improve efficiency.
Despite these challenges and the costs associated with final-mile delivery, companies must recognize that customers and consumers absolutely love rapid delivery. In fact, nearly half (44%) of consumers are only willing to wait two days for an order to be delivered, and 72% of Amazon Prime users cite unlimited free delivery as the most important benefit of the service. This shows that rapid delivery, without significantly extra cost, is a driver of consumer loyalty that will bring customers back to a company again and again — so long as that company can fulfill rapid delivery promises.
Innovation in last-mile delivery
With Amazon Prime, Target, Walgreens and others offering same-day delivery, there is a greater need for faster and more reliable last-mile delivery solutions that are competitive with similar services. Customers have come to expect almost instantaneous delivery, while logistics and transportation companies continue to struggle with the challenges of same- or next-day delivery — largely due to workforce recruitment and retention, increasing fuel costs and the complexity of coordinating rapid deliveries. This is forcing logistics experts to innovate approaches to moving goods through the final mile. Some of the cutting-edge technology being utilized includes using autonomous drones, automated warehouses, self-driving vehicles and robots to increase speed and efficiency in the last mile.
An ecosystem-enablement approach to last-mile delivery
Last-mile delivery, whether automated or traditional, often involves utilizing various distribution channels and partners across a business’ supply chain ecosystem. It is also likely that the companies operating those various distribution channels have different delivery tracking and planning systems, capabilities and requirements.
To have clear communication between partners and logistic companies, data must be connected across various silos throughout the entire ecosystem by deploying integration technology. To have full visibility and control of final-mile deliveries, businesses must invest in an ecosystem integration platform that enables real-time sharing of data and updates across partner systems and workflows. This enables enhanced tracking and communication across all distribution channels and stakeholders involved in the last mile.
Integration software is necessary to navigate hectic supply chains, especially at the last mile. By connecting business systems between suppliers and partners that enable final-mile delivery, organizations can gain full visibility into what is happening in outsourced or partner-provided logistics operations. In fact, 99% of companies acknowledge they are losing money and missing out on business opportunities due to supply chain integration problems. This impact has motivated most companies (80%) to allocate 10% or more of their budget toward advancing their supply chain technology and integrating their business systems to enable greater visibility and efficiency in the last mile.
This is especially important as portions of last-mile delivery become autonomous. For example, if a fleet of unmanned drones is delivering along the last mile, it is imperative that it has direct communication with human-in-the-loop controllers as well as access to real-time updates from business systems that manage customer orders and preferences.
These human-in-the-loop controllers are not responsible for flying the individual drones. Rather, the human controller resolves flight path issues and scheduling conflicts stemming from multiple drones on delivery missions — one human can manage multiple drones, enabling a single human worker to execute multiple final-mile deliveries at once.
Possessing real-time access to customer and order management systems enables drones to incorporate last-minute requests and preference updates from the customer into active delivery missions.
Benefits of integration for last-mile delivery
Integration across the supply chain — all the way down to the final mile — is a crucial step that can offer tremendous benefits, especially as the last mile becomes more automated. The automation of final-mile delivery significantly reduces the level of human involvement required to ensure orders are delivered rapidly and in full. This not only reduces the cost of successful final-mile logistics operations but increases customer loyalty. However, enabling efficient automation requires connections between business systems that can facilitate real-time information exchanges and ensure last-mile delivery operations are executed in an optimal fashion.
Organizations that embrace ecosystem integration will not only find that they are able to automate last-mile delivery sooner but that the automated functions are more robust, controllable and predictable.
About the author
Currently a market evangelist and the strategy director at Cleo, Frank Kenney is widely credited as the creator of the term managed file transfer (MFT). He previously served more than 10 years as a research director at Gartner, where he defined the MFT, B2B gateway, SOA governance and cloud service brokerage markets.