Shippers face many challenges in successfully delivering products to end-users, and last mile logistics will be a core focus of change in the coming months. Consumer demands and expectations are rising, and up to 25 percent of consumers are willing to pay extra for same-day delivery. Also, same-day delivery will reach a 25-percent market share by 2025. By 2018 alone, same-day delivery and last mile logistics will be valued at more than $1.35 billion. E-commerce is the driving force behind the sudden uptick in last mile logistics, and as explained by Logistics Management, e-commerce is expected to grow to $2.4 trillion by 2018 as well. To gain a competitive advantage in last mile logistics, shippers need to understand the top seven trends in last mile logistics.
1. Last Mile Logistics Gets Faster Fulfillment
Fulfillment timetables are changing. Consumers want faster fulfillment, and shippers need to move more product at a faster pace. Shipments that previously required one hour to process are now being forced into three-minute intervals, if not faster times. Consequently, last mile logistics is finally in a position to become part of this push toward faster fulfillment. Among millennials, consumers are willing to pay a premium up to 30-percent more for same-day delivery, reports McKinsey & Company, with an overwhelming majority willing to pay extra for guaranteed delivery, as shown below:
2. Supply Chain Disruptors Impact Last Mile Logistics
Supply chain disruptors, such as venture capitalist start-ups, previously discussed in the Uberization of Trucking, are also impacting last mile logistics. Up to 84 percent of global freight spend on trucking costs, including fuel, labor, technology and asset tracking, amounting to more than $800 in the industry. According to Business Insider, Amazon is already well on its way to creating and managing its comparable Uber-like app for trucking. Unfortunately, the tech landscape is riddled with cases of supply chain disruptors failing, but the trend is clear and shows little indication of regression.
3. Shippers Turn to Smart Tech for Tracking
The use of Uber-like apps implies another impact and trend in last mile logistics, the use of smart technology for tracking purposes. Through the Internet of Things (IoT), smart technology and sensors can successfully track shipments in real time. Consumers and shippers can both receive SMS alerts, email notifications and even Google notifications for every movement a shipment makes. Combined with the upcoming electronic logging devices (ELD) mandate, the use of smart tech to track last mile logistics will grow.
4. Analytics Will Drive Last Mile Logistics Costs Down
The amount of information coming from automated systems and smart technology can have another purpose when applied through analytics. Analytics allow supply chain entities to isolate the cost-impacting factors across all shipments. Although subtle changes may not have a major impact on initial costs, data analytics provide a means of pushing costs to infinitesimal limits. As a result, the overall costs of last mile delivery can be pushed further down, encouraging more consumers to use same-day delivery and faster delivery options.
5. Insourcing Reaches Into Last Mile Logistics
Outsourcing seems to be the topic of the year, especially among companies providing third-party logistics (3PL) services. However, the sudden spike in last mile delivery encourages more shippers to begin insourcing last mile deliveries. In other words, shippers are using their trucks to reach their immediate, local consumers. Yet, 90 percent of shippers have fewer than six trucks, so outsourcing may be necessary for increasing shippers’ last mile delivery options.
6. Autonomous Vehicles and Trucks (AVs and AT), Drones and Robotic Delivery Grow More Important
AVs and ATs, otherwise known as self-driving vehicles or trucks, will impact last mile logistics as well. Self-driving vehicles, drones, and robots will become key to increasing last mile delivery options, while maintaining high reliability and same-day delivery, in both rural and urban areas. However, existing regulations around the trucking industry are not likely to enable wide-scale implementation of driverless delivery options within the next two years.
7. Drivers Become Merchants
Shippers need to find ways to reach more shoppers and convert them into consumers. While up to 65 percent of all purchases use the internet for research purposes before making a purchase, putting information and product in front of consumers remains the strongest way to encourage this conversion. In conjunction with faster, better technology, including driverless trucks, the role of the driver will evolve. Drivers will become merchants, selling items from trucks, but there are several challenges shippers face in accessing this new resource, reports Susie Walker of Veriship. These include the following:
- Who assumes the burden of risk for merchandise that has not been paid for?
- What happens if consumers wish to return merchandise purchased from drivers?
- How will drivers process payments and handle their accounting?
- Will there be a charge per transaction to the original shipper?
- In interstate or international shipping regulations, who will be listed as the official owner of merchandise being sold by drivers?
The Last Mile Logistics Revolution Is Coming: Will You Be Prepared?
Exciting things are happening in last mile logistics, and the level of technology leveraged to push the frontiers of last mile delivery and same-day delivery is growing in complexity and scope. Shippers must take note of the trend in last mile logistics today, or they face losing their competitive advantage, especially with e-commerce giants, like Amazon, Walmart, and Target, moving toward instant delivery as part of last mile logistics. How will your organization prepare to handle the growing complexity of the rising demand for more last mile logistics deliveries by consumers?