Delivery innovations to reduce last mile costs

Anna Thompson
Anna Thompson
Discover content team
3 min read
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When was the last time a customer asked you to deliver a package slower? Exactly. Speed matters. Really matters. According to SaleCycle research1, 77% of online shoppers are willing to pay for expedited shipping, whilst 41% have ordered items for same day delivery.

This year, global retail e-commerce sales are forecast to hit 6.3 trillion US dollars2 – and in a competitive market, offering fast delivery options can help your business attract new customers. So, how can you ensure you get the “final mile” of fulfillment right?

Time for a truth bomb

On average, the last mile of a product’s delivery accounts for more than 53% of its total shipping costs3.

Getting lots of individual parcels to a whole neighborhood’s worth of addresses safely (and on time) is a pretty tough task. But now, despite these challenges, even the smallest retailers have got to live up to the high standards set by global marketplaces. Tough ask, right?

Well, that depends. When it comes to last-mile solutions, they are as varied as the deliveries they expedite. So, with that in mind, we've picked out a few options that we think are worth your consideration. 

Tap into tech

In 2018, DHL ran a successful three-month test of its Parcelcopter in the Bavarian community of Reit im Winkl. The flying technology enables easy shipping to areas with poorly developed infrastructure, or those blocked by natural barriers, such as water and mountains. Users simply inserted their parcel into the allotted Skyport (that’s a dropbox to you and me) to begin automatic shipment.

Research suggests consumers are open to such technology. According to a McKinsey & Company survey4, 60% of respondents said they would use a drone-delivery service today if it were available in their area.

Back on solid ground, DHL’s Logistics Trend Radar forecasts outdoor autonomous vehicles will transform the final mile landscape. “The dream of self-driving vehicles has been decades in the making. Bolstered by rapid developments in artificial intelligence (AI), edge computing, and sensor technologies, it has come even closer to reality in recent years with all modes of highly automated vehicle making an appearance on the market and fully automated vehicles making test debuts.”

Watch this space…

There’s no such thing as being too local

Many forward-thinking businesses are already taking a more localized approach. Acting like traditional bricks-and-mortar stores, they shift their stock to smaller regional warehouses, selecting the most popular – and often seasonal – items to hold. The net effect? Shortened last-mile logistics. 

According to Roy Hughes5, EVP Network Operations Europe, DHL Express, several ‘power cities’, such as New York and Beijing, are “facilitating and driving this localization trend,” and should be your focus from the get-go – especially if you ship internationally.

While your business may not yet be able to afford to own warehouses, renting space in several locations is an option. Could this route equip your business to provide same-day delivery for nearby customers? If so, what are you waiting for?

The forgotten time wasters: traffic and weather delays

Inefficient journey planning can add hidden costs to already expensive services, so it's important to get the best from your route. But what's the answer? Simple – better planning.

DHL eCommerce management found that, in some markets, couriers were spending nearly an hour planning their routes manually – only to have them disrupted by weather delays or traffic. In the age of modern technology, that seemed insane.

The process has now been improved with geo-map reading to update routes in real time – and it's improved last-mile productivity by between 20 and 40%. Mei Yee Pang6,  Head of Innovation at Asia Pacific DHL Customer Solutions and Innovation, highlighted the “importance in enabling a data driven approach in servicing customers.” And the bottom line agrees with her. 

What last-mile innovations does the future hold?

We asked Lee Spratt7, CEO of DHL eCommerce Americas, what he believes online retailers need to do to stay ahead. “Being more agile in adjusting to market trends, maintaining an openness towards learning and reinvention, and promoting a newfound flexibility as a baseline for the transport industry,” he said. So, there’s your strategy in just one sentence: keep moving, stay agile, and shift with the tech to make sure you don’t get left behind in the race to your customer’s door. And to understand just what that tech is, be sure to check out DHL’s Logistics Trend Radar. You might just find the golden insight to keep you ahead of your competitors!

1 - SaleCycle, September 2021

2 - Statista, published September 2022

3 - OptimoRoute, May 2022

4 - McKinsey&Co, March 2022

5, 6, 7 - Shortening the last mile: Winning logistics strategies in the race to the urban consumer, DPDHL