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The last mile challenge: an uphill climb for the logistics sector at the moment



In any relay race, you don’t send the snail to run the last mile, because you might fail. In any marathon, stumbling and falling on the last mile can be a disaster. In logistics, the last mile is even more important. From the transportation hub to the final destination, the last-mile delivery is a crucial turning point which needs further research and innovation, especially in the actual context. 


The COVID-19 will not disappear anytime soon. The logistics sector has already suffered significant disruptions, and by the look of it, there will be no recover phase, but rather a “move-forward-with-the-wind-of-change” stage. 


As a result of the global pandemic, the UK has seen a 20% increase in online retail sales during the crisis. The e-commerce business has reached 33.4% of the total retail channel sales. The demand for home deliveries tripled. Most of these changes and disruptions hit hard on the last mile transportation services. They began to show their age. 


Why? Because e-commerce demands low-volume, but tailor-made and on-demand, fast deliveries. Most retailers, manufacturers and logistics services were not used to this. They were suddenly overwhelmed. 


Of course, some acted efficiently and fast, like the UK retailer Tesco, which managed to double its delivery capacity to 1.2 million orders per week, facing the crisis. However, most companies involved in the logistics chain faced a series of challenges. 


Challenges can open the door of opportunity for the last mile delivery 


The last-mile delivery capacity cannot be extended overnight. You need people, you need more hours in a day, and you need money. Usually, the last mile is the most expensive cog in the logistics machine. The lesser the optimized the supply chain, the more expensive the last-mile delivery can be; it can take up to 30% of the whole logistics expenses. That’s tremendous. 


So, a company dealing with skyrocketing online orders of on-demand deliveries as a result of the COVID-19 outbreak needs to get back to the drawing board and think a more efficient last-mile delivery system. There are a few variables to take into consideration: 


  • Delivery route design 

  • High incremental cost due to low delivery volume per zone 

  • Staff 

  • Vehicle capacity 

  • Fuel 

  • Low delivery value per parcel 

  • Fail to monitor and optimize delivery in real-time 

So, where does opportunity enter in this grim, and uninviting environment? The first ray of opportunity comes from the spatial spread of distribution centres. This is an emerging trend with the actual increase in e-commerce shopping and on-demand deliveries. Increasing the spatial range of more distribution centres have become crucial to optimizing the route and parcel allocation and efficiently cutting costs of the last-mile delivery process. 


Aberdeen Standard has increased the portfolio value of its last-mile logistics fund with 4% just by investing in 14 warehouse properties in the EU. 


Better last-mile delivery can lead to better supply chain cost and lean management for SME manufacturers. 


Solutions? 


Where there is an opportunity, there is also a solution, a whole lot actually. The creative solutions to last-mile delivery include automation, smart tracking, drone delivery and are usually funded by through private capital. However, the public infrastructure improvement is also needed, and to make it more efficient, governmental support for innovation should step on the stage as well. 


However, let’s start with the private sector, and the actors engaged in the last mile delivery sector. The first in the line of fire are the mega-retailers and e-commerce giants, like Amazon investing in fast and efficient deliveries. Then come the shipping and freight companies like FedEx or DHL, which have a considerable interest in working on improving efficiency. 


There are also other technology-oriented companies working on new technologies, like fully-autonomous vehicles or mobile platforms for optimization and real-time monitoring. The startups are also offering designated solutions. 


The stats as we stand now look pretty promising: 


  • There has been a 76% increase in logistics funding since 2014. This is a good barometer which shows us the demand and potential of the market and the actual innovation buzz that seems to take up speed and ride on the momentum. 

  • Most of the funding in LogTech is directed to LM startups (11.1 billion dollars in 2017) 

  • Supply chain and LogTech should increase by 12% in 2020. 

The government sector has also got a stake in the game. Big lorries and freight diesel cars are a severe source of air pollution and traffic congestion in urban areas. Governments are working on reducing just that. Moreover, the municipal and national planning of commercial and logistics centres development looks promising. All in all, strong 


connections link the electric revolution and zero-carbon initiatives to the last-mile delivery challenge. 


Conclusions on the present day 


The pandemic can be deemed as a change accelerator, providing both augmented challenges and opportunities for the public and private sector involved in the last mile sector. There might be some good coming out of it, after all. 


“Post-credits” on Looking to the future


We are still making baby steps in regards to mature technology, implemented at a large scale. The actual exciting prospects and automation systems look from Back to the future, but they do not bear much commercial value. The upfront cost is a lot, and the unpredictable return on investment is still a severe impediment. 


This leads us to the question: why do some ideas fail? Let us tell you the story of the physical internet concept, and then you draw your own conclusion on that. 


The physical internet was a concept that would enable all the stakeholders in the logistics chain to gain access to symmetric information on the idle capacity of assets that could be leveraged through a simple application process. The goal was to avoid sector fragmentation, interconnecting freight transport and logistics services for more flexible use of resources, cargo consolidation and routing. 


The concept was raised in 2006. Fourteen years later, its commercialization value is still a big question. 


If you also face logistics challenges click here to see our 8 Key challenges summary.


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