Posted On April 1, 2025
Amazon, Walmart and Target have nailed last-mile delivery. What about you?
This final step can make or break your bottom line, especially in an age where customers demand speed. Get the last-mile right, and you gain an edge. Get it wrong, and you risk losing them. But last-mile delivery is a beast—traffic, failed deliveries and empty trucks drain profits fast. If you’re not optimizing this final stretch, you’re losing money.
What is last-mile delivery, and why does it matter?
Last-mile delivery is the final stretch of shipping when a product leaves a local distribution center and arrives at the final delivery destination—the customer’s address. It’s the most visible part of the shipping process as the customer anticipates the delivery, directly shaping the customer’s experience and perception of a company.
Optimizing the last mile is necessary for three key reasons:
- To meet customer expectations
Today’s consumers demand fast and affordable options, such as next-day or same-day delivery. Providing real-time tracking and accurate delivery windows builds trust and transparency. Companies that fail to meet these expectations risk losing customers to competitors who prioritize convenience and speed.
- To contribute to customer satisfaction
Since the last mile is the most customer-facing stage of delivery, it plays a major role in the customer’s experience. Reliable, on-time and well-communicated deliveries lead to happier customers and positive reviews. Conversely, poor experiences like delays, lost packages or damaged goods can negatively impact your brand reputation.
- To create a competitive advantage
Investing in innovative last-mile solutions helps businesses stand out in a crowded market. Consumers are drawn to brands that offer faster, more affordable delivery options. Reducing final-mile delivery costs allows businesses to provide competitive pricing or even free shipping, making them more attractive to customers.
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The hidden costs of last-mile delivery
As important as last-mile delivery is, it’s also the most expensive step in the supply chain, eating up 53% of total shipping costs. Understanding where these costs come from is key to finding solutions. Here are the biggest money drains:
- Failed deliveries: A missed delivery costs retailers $17.20 on average due to redelivery fees and labor.
- Poor routing: Inefficient routes waste fuel and time. UPS famously saved $300+ million annually by simply eliminating left turns.
- Empty trucks: 35% of trucks return empty, costing mid-sized fleets $50K+ in wasted capacity every year.
How Walmart cut last-mile shipping costs by 20%
Walmart uses machine learning to predict demand spikes, allowing them to pre-position inventory closer to customers. By shortening the average delivery distance by 15 miles, they slashed last-mile costs by 20%.
How to reduce last-mile costs without sacrificing service
Technology is your best friend when it comes to saving money on last-mile delivery.
AI-powered route planning, optimization and GPS tracking can help drivers find the fastest routes, minimizing fuel consumption and delivery times. Think of it as a GPS for your entire delivery operation—steering drivers away from traffic jams and straight to the customer’s door.
Strategic partnerships are another key element. National carriers are reliable, but smaller local carriers in rural areas often know the region better and can offer more competitive rates. Pairing their expertise with a broader logistics network creates a powerful cost-saving combo.
Optimizing your fulfillment centers and network is also essential. Storing products closer to your customers can shorten delivery distances, reducing both time and transportation costs.
The gig economy has also emerged as a viable solution for last-mile delivery. Gig drivers offer flexible, on-demand delivery solutions, often cheaper than traditional delivery services.
Finally, consider implementing centralized parcel lockers or designated pickup points. This can help reduce failed deliveries, as customers can pick up packages on their schedule. It’s all about making the delivery process as smooth as possible for your business and customers.
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Technology that makes the last-mile delivery process smarter
With constant technological breakthroughs, there are many tools, platforms and strategies you can use to optimize your last-mile delivery. Here’s how you can use it to your advantage:
➤ Automated proof of delivery (POD)
Digital signatures, photo confirmation and GPS timestamps improve last-mile accountability. This helps ensure deliveries are completed, helping reduce potential disputes.
➤ Real-time tracking
Customers want to know exactly where their package is and when it will arrive. Real-time tracking keeps them in the loop and reduces “Where’s my order?” calls.
➤ AI-powered dispatching
AI can take the guesswork out of how deliveries are assigned and managed. It analyzes factors like driver locations, traffic and delivery windows to send the right driver to the right job. For example, Coca-Cola uses predictive analytics to auto-assign the routes of about 10,000 trucks.
➤ Emerging technologies
While AI and GPS tracking have become mainstream, emerging technologies like drones, autonomous vehicles and delivery robots are capturing headlines. But are they truly ready for widespread use?
- Drones: Amazon Air currently delivers small packages in under an hour in lightly populated suburban areas of California and Texas.
- Autonomous vehicles: Georgia-Pacific uses driverless trucks to deliver paper goods to a few of its Texas clients, aiming to cut operating costs by up to 30% in the
- Delivery robots: Although primarily used for food deliveries, these robots are gaining popularity. College campuses, in particular, are adopting them, and they have already completed over 5 million autonomous deliveries.
How to choose the right last-mile delivery partner
Your last-mile partner isn’t just a delivery service—it’s an extension of your brand. Here are the things you should look for to pick the right one:
Scalability and flexibility
Your business isn’t static, it’s growing (or at least, that’s the goal). Your delivery partner needs to be able to scale with you, handling fluctuations in demand, especially during peak seasons like holidays and promotional periods. Ask about their capacity planning process and how they handle unexpected spikes in demand. Do they have access to a large pool of drivers? Can they easily adjust their delivery routes and schedules?
✔ Look for a partner with a robust network, flexible resources and a proven track record of managing peak season volumes without compromising service quality.
Technology integration and visibility
Your delivery partner should offer seamless technology integration into your existing workflows, providing you and your customers with complete transparency in the delivery process.
✔ Look for features like real-time tracking, automated notifications or digital proof of delivery.
Cost transparency and value
Cost is, of course, a major consideration. But don’t just focus on the dollar amount. A good partner will be upfront about their pricing structure and provide you with detailed invoices. Beware of hidden costs or complex pricing models that can make it difficult to predict your expenses. It’s also important to consider the value you’re getting for your money.
✔ Look for a partner who offers transparent pricing and clearly outlines all fees and surcharges.
Customer experience focus
Your delivery partner is an extension of your brand, representing you when they arrive at the customer’s doorstep. Are their drivers reliable, courteous and professional? Ask about their driver training programs and how they handle customer complaints. A good partner will prioritize the customer experience and go the extra mile to ensure every delivery is smooth and hassle-free.
✔ Look for a partner with a strong track record of on-time deliveries and excellent customer service.
Data and analytics
Data is king in the world of logistics. Your delivery partner should provide you with access to data and analytics that can help you optimize your delivery operations.
✔ Look for features like performance dashboards, delivery reports and insights into key metrics like on-time delivery rates, cost per mile and customer feedback.
Pro Tip: Before committing to a long-term contract, conduct a trial period with new partners to assess their performance.
Make last-mile delivery work for your business
Last-mile delivery isn’t something you set up once and forget—it requires ongoing optimization. Monitoring performance, analyzing data and making strategic adjustments will help you cut costs and improve deliveries to keep customers happy and coming back.
Getting last-mile right can be a challenge, but when done well, it becomes a powerful competitive advantage. Reach out to Flat World Global Solutions and let’s talk.
