Unless a storm washes your shipping container off the deck of a ship, supply chains tend to work well—at least until the final mile. That last mile is fraught with logistical hazards that include confusing delivery instructions, signature issues and theft. With an estimate that final delivery represents one-third to two-thirds of overall transportation costs, it’s not surprising that the final mile of the supply chain attracts a lot of attention.

Organize that Final Mile

Whether business-to-business (B2B) or retail, customer service perceptions depend on two points of contact. The first is at ordering time. Smart companies use websites, call centers and interactive ordering systems to provide immediate feedback on stocking levels, shipment dates and delivery windows. The second touch-point is delivery. Unlike ordering, delivery is most often contracted to third parties who may or may not care about service perceptions. The good news is that efficient delivery equates to good service.

In a typical B2B stocking and delivery system, inventory is manufactured and stored at a central location. Demand forecasting systems guide inventory transfer to regional distribution centers, where it awaits delivery by common carriers. For these pallet-quantity shipments, the last mile is often a multi-state trip that ends at a loading dock. Barring storms, cross-docking errors or road closures, the last mile is simple, delivery times are predictable and a problem rarely exists.

Less-than-truckload and intermodal carriers use triangulation systems to identify backhaul opportunities and reduce empty mileage. There are several downsides to triangulation, however, including a reduction in delivery window flexibility. While not the enemy of last-mile service, triangulation can be a negative factor for B2B deliveries.

Less than truckload and intermodal carriers use triangulation systems to identify backhaul opportunities and reduce empty mileage.In our just-in-time world, planned shipments of palletized products are becoming the exception. Minimizing inventory is critical to lean manufacturing. Component shipments have become smaller and more frequent and excess inventory is limited to controlled safety-stock levels. While harder to manage, this type of scenario provides a lot of useful data because ordering patterns and delivery windows are predictable. Using data, automated routing and delivery optimization systems can build with efficient schedules and routes.

Routing optimization addresses one part of the retail delivery puzzle, but unlike B2B deliveries, retail presents its own set of hazards. Retail deliveries are small, scattered and often require signatures or other proof of receipt. Delivery density is higher in cities, but getting around in urban settings is more difficult. Routing systems must consider factors that include traffic patterns, one way streets, parking and customer availability. For retail, the last mile is where delivery profits are made or lost.

Delivery Windows - Problem or Cure?

Much recent publicity has focused on drones and quadcopters for retail package delivery, but small delivery vehicles will remain the standard for years to come. Much study has gone into making local delivery as efficient as possible, but some recent developments are worth watching.

First is the integration of delivery window planning with route sequencing. As Doug Brown, vice president of Critical Service Logistics for Kuehne & Nagel, says “It’s the time-sensitive delivery of parts to the ultimate end user in a way that’s time specific."

Besides its obvious customer-service attraction, delivery windows can cut delivery times in half. When a package requires a signature, finding no one at home will likely trigger a redelivery. But by obtaining a delivery-window preference at ordering time, fulfillment requires one trip rather than two or three. The downside to delivery windows—considered the “fourth dimension” of supply chain fullfilment—is that routes often require backtracking during the course of a day. While delivery windows reduce delivery costs in urban areas, they have not yet been shown to be profitable in rural areas.

Another recent development is creating drop-off points across large cities. Amazon is doing this in several ways, notably its “Amazon Locker” program. Here, the company provides a kiosk in a commercial store ( 7-Eleven, for example) where a customer can retrieve his or her package at any time. The program piloted in New York, Seattle and Washington D.C., is currently being expanded to other cities. Besides the benefits of single-point delivery, the program sidesteps delivery window headaches and signature issues.

Amazon Locker in NYC

Stand on a big city street corner long enough and you are likely to see delivery vans from FedEx, DHL and UPS passing by along with a host of other local delivery trucks. In Madrid, Spain, delivery companies are considering electronic supply chain collaboration to improve last-mile logistics. The MIT Last-Mile Delivery Roundtable described how on a typical day, one food company made several thousand deliveries, with 45% going to the city’s central district on 83 trucks. The Roundtable described the company’s delivery nightmare and how logisticians worked with city planners to create multi-company consolidation centers in downtown areas. By combining the routing and delivery process for several competing companies, the solution reduced drive times, ensured fully loaded trucks, minimized competition for parking and dock space and cut overall delivery costs by almost 50%.

One part of last-mile optimization can be addressed at order time. A 2007 study by researchers at Michigan State University examined the impact that Internet-based ordering has on last-mile logistics. The researchers examined the impact of order entry on supply-chain efficiency and operations, specifically for an online grocery service.

Some findings were predictable; for example, good user interfaces encourage larger orders, which are more profitable to deliver. Some findings were less obvious, however, such as the ability to change or update orders at the last minute, thereby preventing additional small-value deliveries of forgotten items. The ability to offer delivery discounts for discrete time windows also was noted as a way to better integrate route planning with delivery window commitments. In short, last-mile efficiency often can be improved by encouraging specific delivery options.

A final contributor to last-mile success is data communications. Material Handling and Logistics lists several critical data items that drive efficient retail delivery processes, including appointment changes and cancellations, traffic reports, redelivery instructions and mid-route redistributions between delivery vehicles. Knowing where every package is, knowing its status and having the ability to re-route deliveries in real time represent the key to mastering the final mile of the supply chain.

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