An Amazon.com Inc. delivery driver carries boxes into a van outside of a distribution facility on … [+]
One of the most difficult and expensive aspects of the supply chain is last mile delivery. Broadly speaking there are first mile, middle mile, and last mile deliveries. First mile is a trip from a factory to a local or regional transportation or distribution hub. The middle mile connects a distribution hub on one side of the country to a hub on the other side. And last mile involves delivery from that destination hub to businesses, stores, and consumers in the destination region. The survey results from APQC provide a cross-industry perspective on last-mile logistics including delivery methods used, the extent of customer real-time visibility, and average vehicle capacity.
From a customer experience standpoint, last mile deliveries are the most memorable and possibly important. Last mile delivery has become an increasingly hot topic, as companies look at ways to optimize final mile deliveries.
APQC Last Mile Delivery Results
APQC does research in benchmarking, best practices, process and performance improvement, and knowledge management. Among other areas, APQC conducts research on supply chain and logistics to help organizations assess the performance of their own processes and functions compared to their peers. Most recently, APQC has conducted best practice and benchmarking research on last mile delivery. This survey-based research gathers quantitative data as well as information on practices or performance drivers. This survey focuses on the current state of key practices in last-mile logistics, spread across multiple industries and over 1,100 respondents.
According to the APQC data, the most common method of last mile delivery among respondents is via in-house delivery fleet (42%). The second most common method is a third-party provider other than parcel / post (33%). While we have seen a lot of interest around gig economy and crowdsourced delivery companies, according to the data from APQC, a mere 2% of respondents are using these companies for last mile delivery. This speaks to the desire of companies to maintain more control, ensure service levels, and ultimately protect their brand. Additionally, there are specific industries, such as grocery, where this model is more mature and commonplace.
One area where companies have been focusing their attention regarding last mile delivery is proof of delivery. When I receive a package from Amazon, I will often also get an email with a picture of the package on my front steps. This is due to the rising instances of “porch pirates.” There was recently a report that estimated that “porch pirates” stole up to 260 million packages in the last year alone.
According to the APQC survey, obtaining electronic proof of delivery for customer deliveries is a fairly common practice that may include customer electronic signoff, delivery snapshots, and more. On average, 79% of respondents engage in this practice, and at the 75th percentile, 90% obtain electronic proof of delivery. When looking at the 25th percentile versus the 75th percentile, the difference is significant, as 20% more of the top performing companies are obtaining electronic proof of delivery on the last mile delivery.
A second key area where the APQC survey focused was on visibility for last mile delivery. Consumers want visibility into their deliveries, but they also expect faster delivery speeds. For almost half of respondents (47%), customer visibility into real-time status extends into the “last mile” of delivery. For almost one-quarter of respondents, though, this visibility is only present to a small extent (or not at all for 3%). Respondents also rated the extent to which their organizations provide digital assistants that enable customers to view the real-time status of their order or shipment. For one-third of respondents, this real-time view is only present to some extent. For almost half, though, this is available to a significant or very great extent.
When it comes to delivery efficiency, whether it is first mile, middle mile, or last mile delivery, capacity is at the heart of the issue. Companies have a clear focus on ensuring that trucks are loaded at an optimal level. This means not having extra capacity that is going to waste. When it comes to last mile delivery, this is especially true. And the results from the APQC survey show that top performing companies are taking the issue more seriously.
For the final segment or last mile of deliveries, respondents reported the average vehicle capacity used when the vehicle departs their location is 84% – in other words, the truck is 84% full in terms of the total space available or the total amount of weight that truck is allowed to carry. For last-mile, trucks usually pack out before they weigh out.
For the top quartile of respondents, their trucks average 90% full, compared to only 77% for organizations at 25th percentile. This delta of 13% may not sound significant, but it has a two-fold effect. First, a truck that is packed more fully is more profitable.
Secondly, trucks more fully packed lead to reductions in carbon emissions because there are fewer trucks on the road. Sustainability can result from efficient routing which reduces the number of miles traveled, packing cartons or boxes more fully so that more can be put in a truck, or by reducing the number of trips to a specific house. Consumers that order multiple items from the same retailer and tell the retailer they are in no rush, allow the retailer to consolidate the shipments and make fewer (ideally just one) trip to customer location.
Looking at sustainability from a supply chain standpoint, the beauty in efficient transportation is that sustainability also results in savings for the shipper. In short, there is often no tradeoff between going green and saving money.
The Technology that Supports Last Mile
There are a variety of ways that companies can manage their transportation spend. In terms of last mile, if a company does not own a fleet, they would typically use a transportation management system (TMS), transportation execution system (TES). The TMS would be used if they manage multiple modes across first, middle, and last mile in one application. TES solutions are single mode of transportation solutions, in this case it would be a multi-carrier shipping software solution for high-volume parcel shipping.
If the company does own a fleet used for last mile deliveries, they would use the routing solution in a TMS. If it is a hybrid situation, where some goods are delivered by carriers and some by the company’s own fleet, a TMS is used to manage that.
Kudos to APQC; getting 1,100 qualified respondents to answer their survey is quite an accomplishment. The APQC last mile delivery survey sheds new light on a hot topic.
The primary author of this article is my colleague, Chris Cunnane. Mr. Cunnane is a Research Director for Supply Chain Management at ARC Advisory Group.
