What Is Final Mile Delivery?

Final mile delivery is about a lot more than just fast order fulfillment. Consumers expect fast and reliable fulfillment, but they also expect a highly-connected and carefully curated experience. Even in B2B sales, customers are increasingly expecting the kinds of experiences they get from B2C channels. Retailers, distributors, and last mile delivery companies need to provide customers with fast, transparent deliveries that can compete with the likes of Amazon Prime and Walmart.

In order to make any of this possible, you need strong final mile delivery capabilities. But what does that actually mean in practice?

Table of contents:

• What Does Final Mile Delivery Mean?
• What Is the Final Mile Problem?
• Final Mile Delivery vs Last Mile Delivery: What’s the Difference?
• How Can You Lower Final Mile Delivery Costs?
• What to Look for in Logistics Software
• Capabilities to Look for in Last Mile Logistics Software

What Does Final Mile Delivery Mean?

Final mile delivery, also known as last mile delivery, is the last step of the product's journey. It is the point at which the goods are finally delivered to the end customer. The final mile is the key to customer satisfaction, but it's often the most time-consuming and costly stage of the entire shipping process.

There are five key steps in the final mile logistics process:

• Step 1: Orders placed by customers are entered into a centralized system.
• Step 2: Goods ordered are shipped to the transportation hub before delivery to the final recipients.
• Step 3: Orders are assigned to delivery drivers based on the most efficient truck routes given the required locations.
• Step 4: Warehouse staff scan orders before they are loaded into delivery vehicles.
• Step 5: The order is successfully delivered to the customer and proof of delivery is captured.

What Is the Final Mile Problem?

Okay, it’s just five steps. Sounds easy, right? Not so fast...

Businesses of all shapes and sizes actually face big challenges in their final mile processes. All the potential delivery routing options, differing driver skill levels and service/installation times, changing road conditions, varying truck capacities, etc. create a level of complexity that makes the last mile inherently inefficient. In short, maximizing capacity and on-time delivery at the same time is a Herculean task. 

This makes the last mile the most time-consuming and expensive part of the entire shipping process in most cases. But most businesses can't afford to disappoint their customers, who will likely find an alternative source to fill their needs—which means that most businesses find themselves sucking up the costs and the inefficiencies in order to try and keep customers happy. 

Just how expensive is the final leg of the shipping process? Final mile deliveries make up around 53 percent of the total shipping costs, and businesses usually foot 25 percent of the cost. Final mile shipping can cost even more in supply chains that are plagued with inefficiencies.

Final Mile Delivery vs Last Mile Delivery: What’s the Difference?

You might be used to hearing one or the other of these terms more frequently in your day-to-day, but is there really any difference between final mile delivery and last mile delivery? The short answer is: No. Final mile delivery and last mile delivery are terms that can be used interchangeably. 

Anecdotally, we’ve found that last mile is a little bit more prevalent of a term among solution providers, whereas service providers (i.e. 3PLs) are a little more likely to call it final mile, but that’s very far from being a hard and fast rule. Whatever you choose to call it, last mile/final mile delivery is a crucial part of the logistics process and optimizing it is increasingly crucial to success.  

How Can You Lower Final Mile Delivery Costs?

Given the above, it’s easy to imagine how optimizing final mile shipping can result in serious cost savings for delivery businesses. 

Improving last mile delivery operations so companies can offer on-time, speedy delivery at a reasonable cost is crucial in offering customers a great delivery experience. Here, a last mile delivery management solution is crucial—the tool can do the heavy lifting for the business, allowing humans to pay more attention to other aspects of the business. 

Below are some of the ways the right technology solution can help you optimize your final mile logistics:

AI-powered route planning

Effective last mile delivery starts with efficient routes. The more stops your drivers can complete per day, the lower your cost-per-delivery and the shorter your delivery lead times. It’s a win-win.

Unfortunately, the complexity involved in creating efficient routes makes it hard to get it right by hand. It would be one thing if it were as simple as drawing a circle on a map, but every new variable you introduce into the process increases the possible routes exponentially. By the time you’ve factored in time window requests, differences in service time, driver skill requirements, and variables in truck capacity, it’s nearly impossible to find the most efficient routes without help. 

Luckily, this is a perfect use case for AI and machine learning.

AI-powered route optimization software helps businesses optimize their final mile deliveries by automatically factoring in different variables affecting delivery times, such as vehicle capacity, location, traffic patterns, and weather conditions—resulting in the most efficient routes and the best allocation of fleet resources. 

Crucially, the right route planning software will scale easily, so that you can create optimized routes in minutes or seconds. Not only does this decrease manual labor, it also increases the number of deliveries you can fulfill in a given day with the same number of trucks and drivers. 

Data analysis

A last mile solution should provide data that can help executives and fleet managers alike determine the weaknesses and bottlenecks in their operations. The solution should enable your business to keep track of key performance indicators (KPIs) such as on-time rates, success rates, customer feedback scores, service time, distance traveled, and so on. In this way, you can target the top areas for improvement and work to find solutions. 

Electronic proof of delivery

Many retailers and delivery organizations capture proof of delivery manually, e.g. by asking the customer to sign a paper proof of delivery slip—which is something that can easily be lost or damaged.

There is a better way. Modern driver mobile apps can enable your drivers and other agents in the field to capture pictures, signatures, and notes for proof of delivery via their phones. The whole process takes a matter of seconds, then the time-stamped and geostamped information is immediately sent back to the dispatcher for easy documentation and transparency.  

Ensuring the availability of proof of delivery is important especially in cases when there are false claims of missing or damaged deliveries. If you can show exactly what was delivered and the condition that it was delivered in, you can easily head off claims of damage before they become an issue.

Two-way communication

Often, the lack of communication between delivery drivers and customers is the root cause of failed or missed deliveries. Providing a way for customers to receive updates from the delivery driver directly can minimize failed deliveries, as the customers can provide additional instructions or coordinate with drivers in case they can’t receive the package in person. 

Offering consumers a way to communicate with drivers also reduces their need to call the customer support team. By the same token, automating communications (e.g. via a driver mobile app) between dispatchers and drivers can reduce phone time and increase agility on the day of delivery. 

The final mile is a crucial element of the entire logistics journey—it’s the one that most directly affects consumer satisfaction. It may be an expensive part of the shipping process, but businesses can find ways to optimize final mile delivery. In this way, you can satisfy your customers’ need for fast and reliable delivery—without breaking the bank.

What to Look for in Logistics Software

When it comes to getting the kinds of benefits that we've described above, choosing the right software solution is crucial. So let’s take a look at some of the must-haves for logistics software that apply beyond specific individual technology deployments. 

SaaS Technology

Different logistics functions require connectivity if you’re going to effectively coordinate across the fulfillment process. That means finding solutions that work nicely together—and can continue to work nicely together over time. 

That second part is crucial. SaaS technology already has the upper hand when it comes to connectivity, but the real value comes down the line when the software provider takes on the onus of ensuring ongoing updates, patches, improvements, and enhancements over time. 

Ease of Use

Any given software solution is only as valuable as the use you’re able to get out of it—and that depends largely on how effectively your people can utilize the features and functionality you’re paying for. 

If you have a software solution deployed that requires the help of outside specialists in order for your team to do what it needs to do, you’ll never really be able to get your money’s worth out if. Obviously, some solutions are going to be complex and solve complex problems, but that doesn’t mean UX and UI don’t matter.

Scalability

This one is related to SaaS technology. After all, on-premise deployments are much harder to scale up—whether it’s because your business is growing or simply because it’s the holiday rush. A SaaS solution that’s architected to scale will give you a lot more freedom to up the number of trucks you’re routing, for instance.

But scaling isn’t just about software architecture. It’s also about empowering scalable processes, including software deployment. You want technology that can be rolled out to new branches without requiring months and months of frustration. By the same token, you want to know that when you deploy software to new branches they’ll be using in the approved way and running the most up-to-date version of the software.

Capabilities to Look for in Last Mile Logistics Software

So much depends upon the last mile. What you pay drivers and what you bill to customers are going to be determined by what actually transpires on the road. Did the customer receive their order in full? How many hours did the driver take to finish their route?

That’s a big part of why we recommend leveraging SaaS-based last mile delivery technology for your fulfillment needs. Specifically, we recommend finding a last mile solution that can offer:

• Route optimization
• Strategic route planning
• Shuttle route planning
• Customer communications via email and text
• 2-way customer chatting
• Real-time delivery visibility
• Driver mobile app
• Electronic proof of delivery capture
• Sales/merchandising app
• Billing and settlement capabilities
• Visibility across roles and functions

If that sounds like a lot of things for one solution to do well, you’re not wrong. But by consolidating all of these within your last mile technology, you do more than just decrease your IT spending. You actually create visibility and connectivity across the entire process. 

By way of example: 

Let’s say you’ve got a slate of orders to deliver. You send out customer communications to confirm delivery schedules, then you route the ones that haven’t canceled, and send out another notification that includes an accurate ETA derived by the routing engine.

The routes are dispatched to the drivers via the mobile app, and as they start and finish deliveries those updates are reflected on the solution’s dashboard. Dispatchers, managers, customer service staff, and even sales can see which deliveries are underway, which are running on time, and which have exceptions.

For deliveries with exceptions, the team can jump on them right away to smooth the situation over. The salesperson can call the customer directly after logging into the system and seeing that their order is going to be late based on the ETA being projected by the routing engine. For deliveries that go off without a hitch, you can send a delivery receipt with proof of delivery, and based on the information collected at the job site (e.g. for extra time or accessorial charges) you can invoice the customer and pay the driver or carrier. 

When all that’s through, you can send a survey to the customer via text to capture a CSAT score along with all your other analytics. 

Sure, there’s a lot that has to happen before and after this process that will require interconnection with other solutions. But you can see how housing different functions under one umbrella—within a platform that’s purpose built for the last mile—can create efficiencies, boost visibility, and ultimately reduce costs and improve customer experience. 

What’s the right logistics software for your operation? If the example above resonates with you at all, then it’s probably a comprehensive, highly-connected last mile delivery solution.

Want Tips on Reducing Last Mile Costs? Read The Last Mile Cost Reduction Playbook: