Optimizing e-commerce last-mile delivery: 5 proven strategies for success

What is last-mile delivery?

Last-mile delivery, sometimes referred to as ‘final mile’, is the movement of goods from a transportation hub or local distribution center to their final destination—typically a customer’s home or business address.

But why is the last mile so challenging? Complex networks of rail, sea, road, and air transport whisk billions of parcels around the world every year, across controlled and orchestrated routes. However, the crucial final leg of the journey—the last mile from a local hub or distribution center to the customer— doesn’t operate with anywhere near the same level of control, consistency, and scale found in long-haul transportation.

Local delivery drivers need to tackle unpredictable traffic, road closures,  weather conditions, and numerous other difficult-to-plan for obstacles.

From the delivery company’s point of view, the last mile is among the least efficient parts of the logistics chain; van drivers make short and frequent stops to deliver just one or a few parcels at a time. Moreover, for most e-commerce deliveries, they need to do this while acting as the only customer-facing human representing the business.

Why online businesses must prioritize last-mile delivery efficiency

Efficient last-mile operations directly impact customer satisfaction. A smooth, reliable delivery experience fosters trust and encourages loyalty, making customers more likely to return. Conversely, inefficient last-mile distribution leads to higher operational costs. Failed deliveries, longer routes, and excessive fuel consumption compound on each other and eat into profits, highlighting the financial need for optimization.

Optimized final mile logistics provide a significant competitive edge. Meeting or exceeding delivery expectations not only attracts customers but also drives repeat business, turning logistics into a growth lever.

How to improve last-mile delivery: 5 things to consider

1. Take advantage of localized storage and dark stores

One effective delivery solution for e-commerce last-mile delivery businesses is decentralizing inventory through localized storage or 'dark stores' (retail locations converted solely for order fulfillment).

By strategically placing popular products closer to customer clusters in smaller, regional warehouses or dark stores, you significantly shorten the final delivery distance. This directly translates to faster delivery times – often enabling same-day service – and reduced transportation costs for your last-mile distribution. This e-commerce trend is particularly strong in what some experts call 'power cities' – major metropolitan areas like Tokyo or Osaka, when considering shipping within Japan. 

These large, dense urban centers drive high demand for hyper-local fulfillment options.

Here’s how your e-commerce business can implement this strategy:

• Analyze your sales data: Identify your best-selling products and pinpoint geographic areas with high customer concentration. Use this data to determine the most effective locations for local warehouses or dark stores.
• Consider scalability: Evaluate your needs realistically. Do you require dedicated space, or would partnering for shared warehousing or using flexible, on-demand storage solutions be more cost-effective, especially when starting?
• Choose the right logistics partner: Select a provider like DHL Express that offers flexible warehousing solutions or possesses a robust network capable of supporting localized fulfillment models and efficient final mile delivery from dispersed inventory points.
• Integrate inventory management: Ensure your inventory management system (IMS) or warehouse management system (WMS) can accurately track stock across multiple locations in real-time to prevent stockouts and enable seamless order processing.

This localized strategy offers distinct advantages across different e-commerce verticals. Fashion retailers, for instance, can stock seasonal bestsellers or popular items locally for rapid delivery during peak shopping periods or promotions. Similarly, grocery or FMCG businesses often utilize dark stores within urban areas for ultra-fast fulfillment (often within hours) of daily necessities and perishable goods, while electronics retailers also benefit by positioning high-value or frequently ordered items closer to consumers for faster and more secure final delivery.

Even if operating your own network of warehouses isn't feasible, many logistics partners offer access to shared or temporary storage facilities, allowing smaller e-commerce brands to leverage localization benefits without significant upfront investment.

2. Use ad hoc resources for faster delivery

E-commerce businesses can strategically use ad hoc resources, like crowdsourced delivery platforms, as a flexible last-mile delivery solution. This is especially effective for managing demand surges during peak seasons or promotional events without overstretching your core logistics capabilities.

This approach taps into a network of local, often pre-qualified drivers available on demand, allowing you to scale your delivery capacity rapidly when needed. It can be particularly useful for achieving faster, same-day deliveries within specific urban areas, meeting urgent customer needs.

When considering this option, here’s how to approach it:

• Selecting a crowdsourced partner: Choose a crowdsourced last-mile delivery service carefully. Evaluate potential partners based on their driver screening and vetting processes, the robustness of their real-time tracking technology, insurance coverage for goods in transit, and how easily their platform integrates with your existing e-commerce or order management systems.
• Maintaining quality control: Actively monitor the performance of any crowdsourced deliveries. Keep track of key metrics like on-time delivery rates and delivery success rates. Review customer feedback specifically related to the delivery experience, and prioritize platforms that offer clear service level agreements (SLAs) to ensure consistent quality.

Beyond using ad hoc drivers, leveraging alternative delivery points offers another valuable layer of flexibility and customer convenience:

• Lockers and Service Points: Collection options like secure parcel lockers (such as the extensive DHL Express Packstation network available in various countries) or designated service points within local retail stores provide significant benefits for the end consumer. These allow customers to collect their parcels securely at a time and place that fits their daily schedule, greatly reducing the frustration of missed delivery attempts and boosting overall satisfaction.
• Operational Efficiency: For your business, these alternative delivery points can also streamline last-mile operations. Consolidating multiple deliveries destined for lockers or service points can lead to more efficient routing for drivers and can help decrease failed delivery rates and the associated redelivery costs.

3. Using AI and analytics for better routes and greener deliveries

Manually planning delivery routes is time-consuming and often inefficient, leading to wasted fuel, increased operational costs, and longer delivery times. On top of that, crowdsourcing solution is still not ideal for transporting more expensive, bulkier packages, which is when you will probably want to use a more established shipper. 

However, such deliveries present their own issues, with trucks having to find a suitable unloading spot or navigate smaller inner-city roads. As out-of-route miles account for 3-10% of a driver’s total mileage, inefficient route planning can add a hidden cost to already expensive services.³

Artificial Intelligence (AI) and data analytics offer powerful last-mile delivery solutions for e-commerce businesses looking to optimize this critical stage. These technologies automatically analyze vast amounts of data—including traffic patterns, delivery addresses, specified time windows, vehicle capacity, and driver availability—to calculate and assign the most efficient routes dynamically.

Implementing last-mile delivery route optimization through AI can directly reduce fuel consumption and costs, cut down on unnecessary mileage, shorten overall delivery times, improve customer satisfaction, and lower the carbon footprint of your delivery fleet, sometimes by as much as 25%.

Some sources suggest⁴ that couriers and courier route planning staff could be spending 3-4 hours a day manually planning their routes.

Taking a data-driven approach is vital to provide industry-leading services today. Data analytics provides clear insights into delivery performance, so logistics professionals can easily identify operational bottlenecks, predict potential delays more accurately, and make informed decisions to continuously improve both the customer experience and bottom-line efficiency.

Here are the types of AI-powered tools e-commerce businesses can leverage:

• Route Optimization Software: Specialized platforms that automatically calculate the most efficient multi-stop routes based on various constraints. Examples include dedicated tools or modules often found within comprehensive last-mile delivery management systems.
• Predictive Analytics Tools: Software designed to forecast delivery demand geographically, predict traffic congestion hotspots, or estimate delivery times (ETAs) with greater accuracy for better customer communication.
• Telematics Systems: Modern vehicle tracking systems (GPS) integrated with analytics platforms provide real-time data on driver location, behavior (like speed or idling), and vehicle performance, enabling ongoing monitoring and optimization opportunities.
• Warehouse Automation (AI-powered): Within fulfillment centers, AI enhances robotics used for sorting, picking, and packing orders. This accelerates the preparation stage, impacting how quickly parcels are ready for dispatch into the last-mile network.

In the distribution centers, AI and robotics are coming together to automate repetitive tasks, But does that mean humans are no longer needed? Tim Tetzlaff, Global Head of Accelerated Digitalization, DHL Supply Chain: “The more we can use robots to complete repetitive or distant tasks in highly predictable, structured environments, the more we free up our employees to leverage their unique human capabilities.” AI and robots are another tool to help humans—not to replace humans.

Perhaps most importantly, route optimization AI can reduce carbon emissions from a last-mile road fleet by as much as 25%. Software company Descartes’ route optimization tools have been shown to reduce CO2 emissions by over 552,000 tons and decrease fuel usage by 5% to 25%⁵. That’s a huge impact, all achieved by simply finding the best route.

4. Explore future delivery: Drones and robots

Alternative delivery options are growing; the use of smart delivery lockers located in high-traffic public spaces such as supermarkets and town centers is growing at 25% every year.

Some companies are even exploring delivery via drones and bots. These innovations offer potential ways for businesses to overcome persistent challenges such as urban traffic congestion, the need for faster delivery in certain niches, and perhaps eventually, driver shortages.

While drones are already being used for delivering high-value items such as medication and blood, advancements in technology have broadened their potential role in delivery logistics. This can help relieve the strain on the supply chain caused by increased e-commerce orders, escalating urban traffic congestion, and the growing shortage of truck drivers.

While still evolving and facing significant regulatory hurdles in many regions, progress is accelerating. DHL Express, for example, successfully tested its Parcelcopter for specialized deliveries to remote areas in Germany. Companies like Zipline are already federally certified in the United States for specific deliveries, such as medical supplies via drone, while other innovators continue to develop larger cargo drones (like Dronamics) and various autonomous ground vehicles for last-mile applications.

For e-commerce businesses considering these technologies, it's important to weigh the potential benefits against the current limitations:

Potential benefits:

• Speed: Capable of very fast point-to-point delivery, especially for short distances or bypassing road traffic.
• Accessibility: Potential to reach remote, rural, or geographically challenging locations more easily than traditional vans.
• Efficiency: Possibility of lower operating costs per delivery in specific, optimized scenarios (e.g., reduced fuel, potentially lower labor costs).
• Sustainability: Electric drones and robots offer a potentially greener delivery alternative compared to fossil-fuel vehicles.

Current Limitations:

• Regulatory hurdles: Complex, evolving, and often restrictive regulations govern airspace (drones) and sidewalk usage (robots).
• Payload capacity: Significant limitations on the weight and size of packages most current models can carry.
• Range & weather dependency: Battery life restricts operational distance; adverse weather conditions (wind, rain, snow) can ground operations.
• Infrastructure requirements: Needs dedicated landing/takeoff zones, charging stations, secure drop-off points, and sophisticated command-and-control systems.
• Security & safety: Concerns regarding theft of vehicle or parcel, potential for accidents, and public acceptance.
• Cost: High initial investment required for the technology, infrastructure, and operational software.

5. Balance Delivery Costs and Customer Expectations

Meeting high customer expectations for fast, reliable last-mile delivery while managing the significant costs involved (which can represent a substantial portion of total logistics expenses) is a critical balancing act for e-commerce last-mile delivery businesses. Getting this balance right is directly linked to profitability, customer loyalty, and brand reputation, highlighting why last-mile delivery is important beyond just the physical act of fulfillment.

Here are strategies to help balance costs and expectations effectively:

• Offer tiered delivery options: Provide customers with clear choices at checkout. Include options like standard delivery (most cost-effective, longer timeframe), expedited delivery (higher cost, faster), and potentially premium options like same-day or nominated-day delivery where feasible. This allows customers to choose based on their individual needs and budget.
• Set clear expectations upfront: Transparency is key. Clearly communicate estimated delivery timeframes and all associated costs before the customer finalizes their purchase. Display this information prominently on product pages and during the checkout process.
• Consider strategic free shipping thresholds: Instead of universal free shipping, offer it only for orders exceeding a certain value. This encourages larger purchases while helping to offset delivery costs on smaller orders.
• Optimize packaging: Reduce package size and weight through right-sized packaging strategies. Minimizing dimensional weight can directly lower shipping fees charged by carriers.
• Leverage partner negotiations: Work closely with your last-mile delivery service provider(s), such as DHL Express, to negotiate the best possible rates based on your shipping volume and profile. Explore different service levels they offer to find cost-effective solutions that still meet customer needs.
• Promote alternative delivery points: Encourage the use of secure lockers or local service points as a potentially free or lower-cost delivery option compared to home delivery. This adds convenience for the customer and can increase delivery density for the carrier.

The future of last-mile deliveries

E-commerce businesses’ approach to last-mile delivery is constantly evolving, driven by technological innovation and shifting customer expectations. Key trends like the increasing localization of inventory closer to consumers and the widespread adoption of digital technologies – including AI, advanced analytics, and automation – are fundamentally reshaping how goods reach their final destination.

For e-commerce last-mile delivery businesses, adapting to these shifts is necessary for staying competitive and meeting customer demands effectively. 

Future success will likely depend heavily on leveraging technology for greater efficiency, offering demonstrably sustainable delivery options, and providing highly flexible, transparent, and customer-centric delivery experiences. For B2B last-mile delivery, similar demands for speed, enhanced visibility, and specialized handling capabilities are also driving innovation in logistics networks.

Preparing for this future involves building a resilient and adaptable last-mile delivery business strategy. This means actively staying informed about relevant technological advancements (from route optimization software to warehouse robotics), continuously monitoring changing consumer preferences (including a growing emphasis on environmental sustainability), and forging strong, collaborative partnerships with logistics partners who are investing in future-ready solutions.

How DHL Express can help

Optimizing your last-mile delivery is simpler with the right partner. DHL Express empowers e-commerce last-mile delivery businesses using our extensive global network, local expertise (including for complex requirements like shipping), advanced tracking for end-to-end visibility, and flexible On Demand Delivery options to meet diverse customer needs. 

We leverage technology-driven solutions for route efficiency and can support localized storage strategies, working to enhance your entire last-mile delivery service.

Sign up for a DHL Express business account and unlock exclusive benefits for your E-commerce store.

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