Last-mile delivery: The final frontier of retail supply chain efficiency

 A last-mile delivery experience that is free of delays or miscommunication shapes your customer's satisfaction, builds loyalty, and strengthens brand reputation.

Why should retail supply chain managers focus on the last-mile experience, the final leg of a fulfillment process? Because the last mile is where the customer journey culminates. 

And customers today expect more than just their packages to reach them on time. 

Their expectations during the last-mile delivery include:  

• Speed: Fast and timely Delivery (same-day, next-day, or two-day).

• Real-time tracking: Full visibility with updates and accurate delivery windows.

• Flexibility: Options for delivery time slots, alternate addresses, and rescheduling.

• Convenience: Home delivery, curbside pickup, lockers, or click-and-collect.

• Contactless delivery: Safe, no-contact drop-offs with proof of delivery (e.g., photos).

• Reliability: Accurate deliveries, undamaged packages, no mistakes.

• Low-cost or free delivery: Affordable delivery options, with many expecting free shipping.

• Sustainability: Eco-friendly delivery options, like carbon-neutral or reduced packaging.

• Easy returns: Simple, hassle-free return options, including same-day pickup or drop-off points.

• Safety: Secure delivery with anti-theft measures and notifications. 

An impactful delivery experience, unmarred by delays or miscommunication, determines your customer’s satisfaction, predicts their loyalty to you, and adds to your brand reputation. 

Moreover, 40% of consumers say they wouldn’t make a purchase if delivery options were inconvenient. 25% of customers abandon their carts if the retailer does not offer same-day or next-day delivery options. 

They also need to know where their package is at all times. So if you can offer them swift deliveries, flexibility, and transparency, you are better positioned to retain customers and foster brand loyalty. 

The stakes are high — research shows that 84% of consumers are unlikely to return after a poor delivery experience. This places immense pressure on retailers to not just meet but exceed delivery expectations. In this context, last-mile delivery is more than just a logistical challenge; it is a strategic priority that can differentiate a brand in a highly competitive market.  

Challenges: Urban congestion and rising delivery costs

Every retail supply chain has to face two biggest challenges: urban congestion and rising costs, and both are interrelated. Last-mile delivery is where the customer finally receives their product, and customers are often located in densely populated residential areas, urban centres, or commercial districts. 

Urban centers, with narrow streets, heavy traffic, and limited parking, pose several challenges for the delivery partners. Additionally, they must also navigate restricted delivery windows and ensure packages reach customers when they're home, all the while managing complex routes in congested areas. 

Urban areas also come with stricter environmental rules, so companies are investing in eco-friendly vehicles like electric trucks, which aren't cheap. Plus, to make deliveries smoother, businesses need to adopt tech like route optimization software and GPS tracking, which brings even more costs into the mix. 

Last-mile delivery is the most expensive part of the fulfillment process, accounting for over 41% of total shipping costs. Failed or missed deliveries, where multiple attempts are required to reach the customer, further exacerbate these costs by driving up labor, fuel, and vehicle maintenance expenses.  

The World Economic Forum suggests that urban last-mile delivery is expected to grow by 78% by 2030. There is a dire need for innovative solutions that can help you manage the increased volume without stringing the urban infrastructure and environment.  

Strategies for optimizing last-mile delivery

The fastest way to improve and sustain your last-mile delivery is to optimize it. Here are some strategies that can help your retail supply chain.

1. Micro-fulfillment centers (MFCs) for localized delivery

Micro-fulfillment centers are an ideal solution for offering next-day or same-day delivery options to your customers. These small warehouses, strategically located closer to the urban area, efficiently handle e-commerce orders that require fast turnaround times. 

MFC’s have three major benefits: speed, efficiency, and cost control. They can be up and running in a few months, giving you the flexibility to adjust to the online demands. Also, you can opt for automated systems like computer vision that help optimize space utilization. 

You can also automate material handling and use shelf-scanning robotics for automated storage and retrieval systems. In fact, some organizations are even experimenting with humanoid robots for inventory management, order pick-up, and customer service.  

Furthermore, MFCs help you keep track of data from online purchases, making them perfect for using predictive technologies to ensure popular items stay in stock. These centers can significantly cut down on overhead costs for each order as they are located in densely populated urban areas.  

2. Supercharging delivery: Tech solutions

To meet the rising customer demands, it is important to look for alternate last-mile delivery methods, such as:

• Crowdsourced delivery platforms connect local drivers through apps to handle deliveries. Instacart and Uber Eats have enabled gig economy drivers to handle last-mile deliveries, providing more flexibility and scalability without maintaining dedicated fleets. However, the drivers are not trained in handling and maintaining the quality of the package, and their behavior towards the clients can lead to problems.
• Electric vehicle fleets are another sustainable solution, with companies like Amazon and Walmart adopting them to reduce emissions and fuel costs. While beneficial for the environment, challenges include limited charging infrastructure and range constraints.
• AI-enabled smart routing and optimization software like Pando TMS streamlines delivery by analyzing real-time data to create efficient routes. This helps minimize fuel consumption, reduce delivery times, and maximize deliveries per route. 

Collaborative delivery networks allow multiple retailers to share resources and deliver packages more efficiently. You can pool deliveries destined for the same area, thereby lowering operational costs and decreasing traffic congestion.

3. Delivery optimization technologies

FedEx’s SenseAware system allows customers to monitor their packages’ location and status in real time, improving delivery accuracy and reducing customer inquiries. Such delivery optimization technologies can reduce delivery times by up to 20% by finding the most efficient delivery routes, even in congested urban areas.  

• Route optimization software: In retail supply chains, AI and machine learning-enabled transportation management systems (TMS) analyze real-time data, such as traffic, weather, and road conditions, to optimize delivery routes. Assistant General Manager of VIP confirms that TMS solutions (Pando) offer the best and optimized dispatch plans for their primary shipments, and are optimized for both cost and SLAs.
  It integrates with GPS tracking, fleet data, and customer preferences to continuously adjust routes, reducing fuel costs and delays.
• Dynamic delivery scheduling: This technology dynamically adjusts delivery schedules based on real-time factors such as weather, traffic, and vehicle availability. If a delivery vehicle faces unexpected traffic congestion or a storm, the TMS detects the issue via GPS and real-time traffic data. The system reroutes the driver, possibly splitting deliveries between multiple vehicles, ensuring the overall delivery window is still met. Customers receive instant updates on revised ETAs, maintaining transparency.
• Automated dispatch systems: AI-powered dispatch systems assign the best delivery personnel or vehicles for each order based on proximity, capacity, and priority. For example, DoorDash uses an automated dispatch system to assign nearby drivers to food delivery orders, ensuring timely deliveries while optimizing driver routes and reducing idle time.
• Real-Time tracking and visibility: GPS-based tracking offers transparency by letting both you and your customers monitor deliveries from warehouse to doorstep. This real-time visibility reduces missed deliveries and enhances customer satisfaction by providing accurate delivery updates.
• Drones and autonomous delivery vehicles: Drones and autonomous vehicles are innovative solutions for last-mile deliveries, especially in areas with traffic congestion or difficult access. These technologies can lower labor costs and speed up deliveries by bypassing traditional routes. 

Last-mile success stories 

Many retailers have embraced innovative last-mile delivery solutions, setting new standards for the industry. Take Amazon, for example. With its Prime Now service, it’s completely turned the tide by offering delivery in under two hours in select cities. By tapping into its massive network of fulfillment centers and advanced delivery tech, Amazon has raised the bar for both speedy deliveries and customer satisfaction. 

Walmart is another standout. They’ve made big investments in last-mile delivery, using in-store fulfillment centers, and teaming up with services like DoorDash. This allows Walmart to provide same-day delivery to over 70% of the U.S. Not only does this speed things up, but by optimizing routes and reducing trips, Walmart is also cutting down on its environmental impact.

Last-mile delivery: New game plan 

As the demand for faster, more reliable deliveries continues to rise, the pressure on retailers to optimize last-mile delivery will only intensify. The future of retail supply chains hinges on the ability to innovate and adapt to the changing trends in urban logistics, cost management, and customer expectations.  

Retailers who have partnered with Pando have seen significant improvements in customer satisfaction and cost efficiency. One Pando user reduced their carbon footprint, enhanced loadability, and sped up dealer orders with the help of Pando’s digital platform. They emphasized the value of real-time visibility and predictive analytics in driving efficiency. 

Pando's intelligent delivery management platform offers you the tools you need to meet the challenges of modern retail. By integrating AI-driven route optimization, real-time tracking, and predictive analytics, Pando enhances delivery speed and accuracy while reducing operational costs. With Pando, you get seamless coordination across multiple delivery partners, ensuring that every package reaches its destination on time, even in the most congested urban environments. 

Ready to refine your last-mile delivery? 

Schedule a demo with Pando today and discover how our platform can help you meet the demands of modern retail and exceed customer expectations.