The challenging logistics of last-mile delivery
The “last mile” has long vexed ecommerce businesses and shippers as the most complex and costly link in the supply chain. What can be done to make last-mile logistics fast, cheap, reliable – and yes, green? The answers can be found in a surprising diversity of emerging logistics trends.
Last things first: What is last-mile delivery?
Last-mile delivery, or last-mile logistics, is just what it sounds like: the movement of goods on the last leg of their journey from manufacturer to warehouse to local fulfillment center to final destination – the doorstep of the customer. Most of us know this last “out for delivery” step well from impatiently tracking our orders online. Covering this last mile in a way that is simultaneously fast, cheap, reliable, and green is tremendously challenging – yet critical to gaining market share in the highly competitive post-Covid ecommerce sector.
Just to be clear: The proverbial “last mile” might be 30 kilometers to a customer at the end of a rural road or just a few blocks in dense city centers. Urban, suburban, and exurban environments pose unique problems requiring diverse last-mile delivery solutions – and this very diversity defines the challenges that ecommerce businesses and supply chain managers face in their last-mile logistics. There’s a lot to know about last-mile logistics and the advantages of using last-mile delivery services.
The explosion of ecommerce as a driver of last-mile logistics
Ecommerce exploded onto the scene a generation ago as the internet became widely available. It has steadily gained market share every year since then. But this gradual growth became a sudden surge when the Covid-19 pandemic brought brick-and-mortar retail to a near standstill in March 2020. Ecommerce is now predicted to account for a whopping 24% of total retail sales worldwide by 2026. This puts pressure on e-tailers and shippers to find sustainable solutions for getting all those goods across the last mile and into the (impatiently) waiting hands of customers. It has also increased demand for reverse logistics.
Despite robust demand, ecommerce remains highly competitive. The primary factor in getting customers to click the “Buy” button is fast, cheap, and reliable shipping. Oh, and don’t forget green: Today’s customers are more environmentally aware and increasingly demand planet-friendly delivery options.
More ecommerce sales need more last-mile delivery solutions
Ecommerce as a percentage of total retail sales worldwide, 2015–2026 (projected)
Source: Statista 2023
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The four imperatives of last-mile logistics
Success in the high-stakes ecommerce sector means delivering – literally! Customers have come to expect a delivery process that is fast (preferably yesterday), cheap (free is good), reliable (one strike and you’re out), and green (no paper clips wrapped in plastic and shipped in refrigerator boxes filled with packing peanuts, please). This presents a lot of challenges for ecommerce businesses and logistics providers. Let’s look at these factors more closely:
Studies consistently show that orders with a delivery time over two days are often not completed. Amazon changed the game with the same-day delivery option. Then came food apps, which boomed during the pandemic and introduced us to on-demand delivery, also known as quick commerce. The old adage “time is money” certainly applies here. Getting goods where they’re going quickly means embracing smart storage concepts such as predictive warehousing and micro-hubs, smart routing software fed by real-time data, and smart vehicle concepts tailored to urban, suburban, and exurban environments.
Free shipping has become so ubiquitous that it is now expected. People will not hesitate to abandon their shopping carts before checkout if they see a shipping charge. E-tailers must incorporate shipping costs into their prices, so minimizing them is a key competitive factor. Making the delivery process fast and efficient can also make it cheaper by driving down personnel costs, so there’s synergy at play here.
The customer’s first interaction with a product is when it arrives at their doorstep, so last-mile logistics planners need to ensure that goods arrive on time and undamaged. Secure drop-off locations like DHL’s growing network of 11,500 parcel lockers in Germany alone are a crucial component in reliable last-mile delivery.
Urbanization is an unstoppable trend: Cities already contain 56% of the world’s population and account for 80% of global GDP. By 2050, some 68% of the world’s population is expected to be urban. This means that last-mile logistics is overwhelmingly urban logistics. Conventional delivery trucks and vans are still the norm, but they’re far from green – and if they’re stuck in traffic, they’re not fast, cheap, or reliable either! Smaller vans, increasingly electric, are a good start, as are cargo e-bikes and even boats!
Ecommerce by the numbers: expensive and expanding
Projected share of ecommerce in global retail sales by 2026
Average percentage of shipping costs incurred in the last mile
Percentage of global GDP generated in urban environments
Projected value of global Quick Commerce segment – enabled entirely by last-mile logistics – in 2027
Emerging trends for lean, green last-mile logistics
Successful last-mile logistics means knowing what’s available and around the corner. Here’s a sampling:
Smaller, all-electric vans are a quiet, zero-emission option that vastly improves the carbon footprint of last-mile urban logistics. Their efficiency is heightened even further when their movements through cities are tracked and guided by smart route optimization software fed by real-time traffic data. At DHL, we’re proud of the 27,000 e-vans already in our global network, a key component in our campaign for net zero by 2050, and we’ve set a goal to electrify 60% of our last-mile delivery fleet by 2030.
Electric cargo bikes are the gold standard for last-mile urban logistics, able to navigate narrow or crowded streets that vans and trucks can’t penetrate. Our green DHL fleet of cubicycles can even use bike lanes, which is why we’ve expanded our successful European trials to cities in North America and Asia.
Rivers and waterways running through urban areas can offer perfect opportunities to increase the speed, efficiency, and sustainability of last-mile delivery. They can replace larger delivery trucks bringing shipments in from suburban depots or fulfillment centers and thereby ease congestion on busy city streets.
Last-mile deliveries for quick commerce are facilitated by “dark stores” – micro–fulfillment centers in former retail spaces where optimized, predictive product selections can be kept close to the customers who want them ASAP. Dark stores can lower the cost per pick and delivery, despite the additional real estate costs, and make a difference in last-mile delivery.
Not the first thing you think of in terms of last-mile delivery, but electric cargo planes like “Alice” – built by Eviation with a range of 200+ km – are showing how regional aircraft can be a successful component of a green logistics strategy. Alice is the future, and we plan to deploy up to 12 Alice planes in 2027.
Like electric aircraft, trucks running on green hydrogen will eventually replace long-haul diesel trucks, significantly cutting the carbon impact of how last-mile delivery hubs are supplied and connected. Trials that began in the Benelux countries have since spread to DHL operations in China, contributing to our efforts to green our entire fleet and achieve net zero by 2050.
Last-mile delivery by drone is expected to have a moderate impact over a 5- to 10-year period. Drones today still account for only a miniscule fraction of daily global deliveries, but the hurdles are primary regulatory: airspace controls and stringent human oversight requirements. Once these issues are sorted out, the cost and acceptance hurdles should also fall rapidly. Use cases include high-priority quick commerce items such as food and medical supplies.
Big challenges, bold solutions
The upward trends of both ecommerce and urbanization will certainly continue. Fast, cheap, reliable, and green last-mile logistics remains a critical factor in making these trends sustainable and keeping ecommerce businesses competitive. We’re hard at work implementing cutting-edge last-mile delivery solutions on the road to achieving carbon-neutral global logistics operations by 2050. Getting to zero ain’t nothing: It’s actually a very ambitious challenge, but one we’re proud to embrace. The future of last-mile logistics is green – with a dash of yellow!
Published: May 2023