How to Improve Last Mile Strategies with Outsourcing
Estimated reading time: 2 minutes
As we enter 2022, supply chain disruptions, pandemic-related safety concerns, labor shortages, and rising costs continue to make last mile delivery a significant challenge for shippers. Waiting the situation out is not an option, as the “Amazon effect” will continue to put pressure on supply chains. Given its importance to the customer experience, last mile delivery strategies need to include flexible capacity and approaches that won’t harm customer loyalty.
Evaluating Last Mile Delivery Strategies
Consumer demand for online shopping has taken hold, and it’s probably here to stay. According to EY, 60% of consumers are shopping less in brick-and-mortar stores, and 44% of those consumers say delivery is a key factor in their buying choices. This notable shift in consumer behavior has increased demand for fast, flexible, timely, and dependable last mile delivery—requiring shippers to seek more and better alternatives to traditional approaches.
An effective last mile delivery strategy hinges on two key considerations: cost and service. When evaluating options, shippers need to find the right balance of both.
Cost is always a factor in shipping decisions, but it’s particularly important when evaluating the last mile because it represents 53% of total logistics costs. While certain shippers may benefit from building out a private fleet and hiring their own drivers, it is expensive to hire and train drivers, lease or buy vehicles, and maintain a fleet. And shippers who take on these fixed costs do so for the long term, even when demand slows.
More than any other point in the supply chain, last mile delivery acts as the face of a brand. Research shows that 74% of customers who are pleased with their delivery experience are likely to spend more with a brand, and 82% will tell their family and friends about it. As the final and most visible touchpoint in the customer experience, the last mile leaves a lasting impression. It’s critical to get it right.
Optimizing Last Mile Delivery Capacity
Today, shippers are diversifying their mix of last mile providers to gain access to more capacity. Common options include adding local carriers, regional carriers, and crowd-sourced “gig” carriers to their existing provider list. Diversifying in this way helps ensure needed capacity during demand surges while reducing costs and keeping shipping delays to a minimum.
To optimize the last mile provider mix, it is important to thoroughly analyze and understand the costs of each option. For example, shippers may charge customers a $5 to $10 delivery fee when using a crowd-sourced platform like Shipt or Postmates, but the fee may not be sufficient to cover the total cost because these platforms also charge shippers a percentage of each sale.
Similarly, the cost of traditional last mile delivery providers like FedEx and UPS can be high. Although each of these companies announced rate increases of 4.9% in 2021, surcharges make the true increase as much as 12%. As a result, shippers are considering regional carriers to expand last mile delivery options beyond traditional providers.
When to Outsource Last Mile Delivery
As 2022 unfolds, shippers need innovative ways to bolster last mile delivery strategies. Outsourcing is not for a one-size-fits all solution, but it can be an excellent approach for shippers who need to:
- Keep up with demand, but don’t need to make last mile delivery a core internal capability
- Gain access to capacity without investing in capital assets like trucks and warehouses
- Avoid the costs and responsibilities of hiring and training employees
- Create a flexible and adaptable last mile delivery strategy for the long term
- Minimize risks from delivery delays, damages, and other customer-experience failures
Are you ready to address weaknesses in your last mile delivery strategy? Capstone Logistics offers last mile delivery solutions designed to meet high customer expectations and support your brand’s success with cost-saving technologies, a vetted network of carriers, and more.
Contact us to learn how to expand your last mile capabilities today.