The most costly portion of a delivery is the last 5,280 feet – the last mile and maybe the most difficult portion of the supply chain is the last fifty feet.
With an extraordinarily expansive array of fulfillment centers, which range from gargantuan to small, and its commitment to shorter and shorter delivery schedules, Amazon has profoundly altered last mile delivery, that final link in the transportation supply chain.
Amazon is attempting to buttress its warehouse infrastructure with a transport prowess to match. To get, oh, 400 million-plus packages a month into the hands of its customers, Amazon increasingly relies on its own fleet of specially fitted delivery vans rather than outsourcing to UPS or the Postal Service. In the none-too-distant future, the e-commerce behemoth will turn as well to Amazon-branded electric vans, autonomous drones and robots named Scout to rush all those goods to consumers.
In its classic definition, “last mile” means “the delivery of the parcel or product from the destination terminal or hub to the recipient,” according to Dean Maciuba, director of consulting services at Logistics Trends & Insights and an authority on the subject. But these days, “last mile” represents deliveries to final destinations.
Last-mile delivery is playing a starring role in the age of Covid. More consumers worldwide than ever before have turned to e-commence for convenience, safety and necessity. “The pandemic has actually highlighted the last mile and the delivery system to consumers, because consumers have become much bigger users of that system,” said Anne Goodchild, the founding director of University of Washington’s Supply Chain Transportation and Logistics Center. In turn, “that’s helped to highlight the importance and the complexity of last mile.”
The statistics are telling. According to the US Census Bureau, e-commerce for the first seven months of 2020 was up about 20% over a year earlier in the US, while traditional retailing was down 2%. Dig deeper and the figures are more dramatic. Retail furniture store sales were down 13.5%, while clothing store sales have plummeted and dropped a whopping 36.5%.
What’s more, retail and supply chain experts alike believe this isn’t just a temporary phenomenon and that the acceleration of e-commerce will continue. “Covid forced retailers to figure out a solution because people just weren’t coming to their stores,” said Lawrence McCord, the founder and CEO of Frayt Technologies, a Cincinnati-based on-demand shipping service. “It’s not going away. it’s here to stay.”
Amazon has advanced last mile delivery in ways that leave everyone else gasping. “It’s like Amazon is playing 4D chess.” said Jack Buffington, a professor at University of Denver’s Denver Transportation Institute. “Amazon’s making the whole commerce model more complex and everybody else is trying to keep up.”
Jostling for the Pricey Last Mile
But Amazon and its sometimes fanciful delivery devices aren’t the only stories that resonate. Large and small businesses, transport operators and logistics providers are all trying to maneuver through the last mile, with a variety of approaches and solutions.
In the Netherlands, the country’s second largest e-tailer, Coolblue, expects to deliver one million parcels this year by a kind of tricked-out cargo bicycle. Two months back, it expanded its bicycle delivery service into Germany.
Automated parcel lockers are commonplace in Europe as well. In the US, shippers are pushing so-called “third-party, retail access points.” Consumers can pick up their parcels at local CVS, Walgreens or Michaels.
Large retailers are attempting to fight back, using their retail stores to expedite e-commerce delivery. Most notably Walmart, but also Target, BestBuy and AutoZone are designating certain stores as forward stocking facilities. They’re not really last mile, because they have to be sorted elsewhere, but they stand as one way to counter Amazon’s micro-fulfillment centers, the small warehouses Amazon is building in and on the edge of cities. These kinds of warehouses, said Maciuba, represent “the hottest trend in last mile right now.”
Last mile is expensive. It accounts for anywhere from 30% to 50% of total shipping costs, according to estimates and totals many billions of dollars each year. It’s also inefficient, especially when it comes to e-commerce. “It’s a single package delivery to a residence that often isn’t located in close proximity to other stops,” said Maciuba. “So the residential delivery is ugly and it cost a lot of money.”
That becomes even more apparent as demands for immediate delivery grow. “On-demand delivery that supports same day and next day delivery is not usually structured within a route that allows you to gain efficiencies,” explained Maciuba.
Take crowd-sourced delivery services, just one way retail businesses are trying to counter Amazon. Dozens of startups compete for business including AxleHire, DoorDash, Roadie and PostMates in the US.
Frayt is one such operation. It offers pickup within an hour and delivery the same day. Now active in 35 major markets across the US, the company expects a fleet of available delivery vehicles — mostly vans, but also trucks and cars — will top 8,000 by mid-September. These are mostly small, independent commercial van operators, whose vehicles are often idle half the day.
Retailer Response
To survive, more national retailers are turning to this kind of service, McCord said. He cited the case of Menards, the Midwestern home improvement chain. “Menards is competing directly with Amazon for the same things,” McCord said. “They’re using Frayt for not only same-day delivery, but in many cases the same hour delivery.”
Covid has accelerated the necessity of retailers promoting home delivery. “There was a massive shift already in place. We were going 20 to 30 percent month over month,” said McCord. “Now, it’s just off the tracks.” Frayt has grown some 500% since the outbreak of Covid, according to McCord.
Frayt works like Über or Lyft, offering an app that matches deliveries with available transport. But, there’s one big difference. The shipper, usually a retailer, is Frayt’s client, not the consumer. “We’re a technology company,” explained McCord. “We connect retailers with the people who already do deliveries to maximize their capacity.”
Individuals are free to download the app and get an instant quote on how much a delivery would cost. So, for example, you buy something at Lowe’s and it won’t fit into your car. Frayt can provide delivery, usually at a much cheaper rate and with immediate results. “We can probably beat you home,” he quipped.
According to McCord, Frayt, which launched in 2017, now has more than 800 customers, although one customer may book thousands of deliveries every month.
Compared to line-haul, a lot is still unknown about last-mile transport. “The complexity of how these goods move around and shift vehicles in cities is not transparent at this point,” said Goodchild. “I’ve spent the last decade trying to uncover that.”
One of the biggest conundrums in last mile logistics isn’t transport at all. “The bulk of the cost of the urban delivery system is not about moving that vehicle around, it’s about what else is happening,” Goodchild explained. “The driver is finding the package in the back of the truck. He’s finding a parking space. He’s walking across the sidewalk. He’s taking an elevator. He’s finding the customer. He’s getting a signature.”
A few years back, Goodchild’s lab coined the term for this logistics head-scratcher. They called it “the final 50 feet.”
