The challenges of last mile delivery logistics and the tech solutions cutting costs in the final mile

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As consumers increasingly turn to ecommerce for all their shopping needs, speedy fulfillment and distribution isn’t just a “nice to have” — it’s the expectation of every online shopping experience. And if logistics companies and their retail partners want a shot at thwarting the ever-looming threat of Amazon Prime, it needs to be a priority. A UPS truck transporting vaccine shipments away from the Pfizer manufacturing site in Kalamazoo, Michigan.

As a result, businesses have begun racing to develop new technologies and experimental supply chain models to increase parcel volume, expedite deliveries, and delight customers — all while trying to cut costs. Unfortunately, one of their biggest expenses and challenges is same-day, final mile delivery.

What is last mile delivery?

In a product’s journey from warehouse shelf, to the back of a truck, to a customer doorstep, the “last mile” of delivery is the final step of the process — the point at which the package finally arrives at the buyer’s door. In addition to being a key to customer satisfaction, last mile delivery is both the most expensive and time-consuming part of the shipping process.

What is the last mile problem?

If you’ve ever tracked a package in real time online and saw that it was “out for delivery” for what felt like forever, you already understand that the last mile problem is inefficiency. That’s because the final leg of shipment typically involves multiple stops with low drop sizes.

In rural areas, delivery points along a particular route could be several miles apart, with only one or two packages getting dropped off at each one. In cities, the outlook isn’t much better; what urban areas make up for in stop proximity is quickly negated by the near constant delays of traffic congestion.

The costs and inefficiencies of the last mile problem have only been further compounded by the continuous rise of ecommerce in US retail sales, which has dramatically increased the number of parcels delivered each day, as well as raised customer expectations to include not just fast, but also free, delivery.

What are the costs of last mile delivery?

As a share of the total cost of shipping, last mile delivery costs are substantial — comprising 53% overall. And with the growing ubiquitousness of “free shipping,” customers are less willing to foot a delivery fee, forcing retailers and logistics partners to shoulder the cost. As such, it’s become the first place they’re looking to implement new technologies and drive process improvements.

Technology solutions to improve last mile logistics

With the rise of the gig economy, many consumers are already familiar with the concept of crowdsourcing local services through digital platforms like Uber, Airbnb, and Postmates. Location-based crowdsourcing allows consumers to open a mobile app to hail a ride, book a place to stay, order coffee to the office, hire a handyman to mount a TV, send flowers to that special someone, or even schedule takeout to arrive just as they’re walking through their apartment door.

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The crowdsourcing model has been prevalent in transportation, hospitality, and food delivery for some time now, and retailers are eyeing its low startup costs, asset-light operations, and improved customer experience to ease their last mile delivery woes.

With crowdsource technology, retailers, logistics partners, and consumers can connect directly with local, non-professional couriers who use their own transportation to make deliveries. Companies can get their online orders to customers faster, and customers can get their items when and where they want them. The freedom to make on-demand and scheduled deliveries also ensures that customers are home at the time of delivery — eliminating the need for a second (or third) attempt.

And with the ongoing integration and enhancement of automation across industries, it’s likely we’ll start seeing delivery robots, drones, and self-driving vehicles making many of these drop-offs in the not-so-far future.

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SEE ALSO: Crowdsourced delivery explained: making same day shipping cheaper through local couriers

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Top VCs say they want to fund startups that solve retailers' biggest problem — e-commerce logistics

Summary List PlacementThe COVID-19 pandemic has forced all kinds of retailers to double down on e-commerce like never before. 
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“We believe that the best time to start a company is during times of uncertainty because both the cracks and innovation become more evident in a given sector,” Hans Tung, managing partner of GGV Capital, said. “If e-commerce is growing, then it’s only logical that new demand for infrastructure and analytics will be there.”
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Gautam Gupta, a partner at M13, said the firm is “looking for critical, not just nice to have, infrastructure that drives growth for independent sellers.”
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Delivery startup Bringg used this pitch deck to raise $30 million from the likes of Salesforce and Siemens' Next47

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Delivery software startup Bringg raised more than $30 million in a fundraising round backed by Salesforce and Siemens’ investment wing Next47. 
Bank of America analysts have hyped the online delivery sector as being “on fire” due to COVID-19, with retail and logistics giant Amazon seeing sales jump 26% in the first quarter of 2020. 
Bringg’s customers are among the biggest companies in the world, including McDonald’s and Walmart. 
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Bringg, the Israeli delivery software startup, raked in more than $30 million in a fundraising round backed by the likes of Salesforce and Next47, the investment arm of Siemens. 
Founded in 2013, Bringg counts major retail and restaurant players among its biggest customers around the world, including Walmart and McDonald’s, which use its software to coordinate deliveries. 
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As COVID-19 puts paid to high-street shopping, CEO Guy Bloch told Business Insider he had seen a surge in demand for online deliveries – with some clients reporting an 800% jump month-on-month. 
Amazon recently revealed its first-quarter sales had jumped 26% to $75.5 billion, with Bank of America analysts describing the wider sector as “on fire”.  
Failure to pivot to online deliveries has proven lethal to some firms, with the UK discount clothing store Primark’s monthly sales nosediving from £650 million to £0. 
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