Last Mile Delivery

“Last mile delivery” is the term we use to denote the final stage of the supply chain: the delivery of goods from the warehouse to the end consumer.

What is last mile delivery?

Initially, the last mile concept predominantly existed in the telecommunications field. The term was used to refer to the link between the carrier's access point and the customer's equipment—for example, between an ISP switch and a home router.

Last mile is also used to refer to other routes connecting the final destination with the previous waypoint.

  • In the passenger transport industry, the last mile means the last leg of the journey. When a passenger gets home from work by bus, the last mile of the work-to-home route will be the trip from the bus stop to the apartment.

  • In the power supply industry, the last mile means the communications that connect the power company's facility and the consumer's site—the power lines and the gas pipelines leading to residential or commercial properties.

  • In logistics, the last mile delivery means the delivery of goods to the final customer, whether it be an individual or a company:

    • The last mile delivery in B2B is the delivery of raw materials to production and the distribution of goods to retail outlets.

    • The last mile delivery in B2C is courier delivery to the customer's door, as well as delivery to pick-up points or parcel lockers.

    • Last mile delivery problems

      1. High costs

      Last mile delivery is both the most expensive and the most vulnerable link in the supply chain.

      In 2016, last mile delivery costs averaged over 50% of a company's total logistics costs, according to Business Insider. Since then, e-commerce has made a major leap forward. High competition, accompanied by technological advancements, has led to a situation in which the main means of retaining a client has become an increase in the level of service.

      However, client expectations are getting higher year by year, and service requirements are getting stricter, so last mile delivery costs keep skyrocketing. When today's consumers place an order online, they don’t just want the purchase to be delivered—they expect the delivery to be prompt, high-quality, and free.

      During the COVID-19 pandemic, when the global volume of online sales increased tenfold, express delivery became the gold standard for the quality of service. We can see an increased demand for speed in such categories of goods as food, clothing, gadgets, and drugs. In fact, according to the DI's survey, 15% of customers are inclined to refuse a ready-made food order if the delivery takes longer than 2 hours. At the same time, according to a new study by Capgemini Research Institute, customers are not willing to pay more than 3.3% of the purchase amount for fast delivery. Yet, speed remains a familiar part of the consumer experience, which they are not ready to lose.

      What affects the cost of last mile delivery?

      1. Fleet and drivers

        In order to deliver orders in the shortest possible time (for example, day-to-day), you need a large fleet and a sizable staff of drivers. The greater the need for fast delivery, the higher the fleet maintenance costs and employee salaries will be.

      2. Fuel and mileage

        Cargo transportation within the city is rarely a predictable linear path from A to B. The driver has to constantly change their speed, adjust the route depending on road situations, and look for parking lots. This increases mileage and fuel consumption.

      3. Complexity of routes

        Unlike long-haul transportation, last mile delivery deals with relatively short distances. However, plenty of departure points and the mixed urban landscape form complex routes with many stops and maneuvers. This increases both costs and the risk of errors. At the same time, as the business grows, last mile delivery routing takes more and more time.

      4. Consumer behavior

        During the trip, the client can postpone the delivery time, add an item to the order, or cancel the order altogether. While receiving the order, the consumer may want to return or exchange the goods. Finally, the delivery may not be fulfilled at all because the client isn’t home or can't agree with the courier on the exact delivery time. All of this increases the number of trips and, hence, the transport costs.

      2. The importance of service quality

      Last mile is the stage in which direct contact with the consumer occurs. Along with the opportunity to strengthen customer loyalty, there is a serious risk of losing the client and suffering reputational damage.

      If the courier is late, mixes up orders, does not agree on a delivery time, or simply behaves rudely, clients will be annoyed and dissatisfied. Driven by emotions, they can write a negative review about a store or brand—after all, they will associate it with poor-quality service, even if the delivery was carried out by a courier service rather than the store's own employees. The next time, the client is likely to choose a competitor, and then you may lose them forever. To illustrate this, 13% of respondents in a 2019 Oracle Retail survey, in which 15,800 people participated, reported that they would never reorder from a retailer who was late with delivery—even if only one instance of lateness occurred.

      At the same time, it is not enough for a modern consumer to simply receive their order on time. As technology develops, the requirements for service and comfort are constantly growing.

      • More than 90% of Oracle Retail survey participants prefer free same-day delivery by the fastest method, whether by courier or self-driving vehicle.

      • According to a Convey study, 93% of consumers want to know where their order is currently located. 47% of respondents note that non-transparent delivery will cause them to refuse further purchases from this store.

      Finding a balance between a high level of service and efficiency is not easy to tackle. According to a study carried out by AliExpress in Eastern Europe, 60% of sellers believe that the customer should pay for shipping. At the same time, the vast majority of entrepreneurs agree that the optimal delivery time is from 2 to 7 days. Only 6% of sellers are ready to spend more than 10% of their profits on the transport logistics operation.

      Last mile delivery challenge complexity

      On paper, the balance between delivery costs and quality of service looks like a pretty simple idea, but its implementation faces a lot of difficulties.

      Last mile delivery consists of numerous processes that can be influenced by various external and internal factors. Managing them and maintaining the quality and stability of delivery service operations is a complicated and time-consuming task.

      • Time windows, driver shift schedules, vehicle availability schedules, mileage and utilization, the duration of work at each point of the route, the dimensions and compatibility of cargo—all these parameters (and many more) must be considered by the logistician during last mile delivery planning. At the same time, when scaling the business, new significant data may appear—for example, after expanding the delivery zone, a new tariff may be introduced.

      • Randomness and uncertainty are always present in reality. Regardless of how good the routes look on paper, the transportation costs and quality of delivery will also be affected by eventualities, such as traffic jams, a lack of parking spots, clients being away from home, and sudden cancellations of orders. This must be taken into account when delivery planning, and you should be able to promptly adjust the plan when something changes.

      • The last mile is the most dynamically changing link in the whole supply chain. Here, the ability to promptly respond to any new data, such as traffic jams, order cancellations, new applications, etc., becomes of fundamental importance. Therefore, the route calculation and adjustment must be done quickly enough to avoid delays and downtime as well as to maintain the required level of service.

      If last mile delivery planning is carried out manually, then compiling and adjusting routes can take up most of the logistician's working time. As the amount of orders grows, not only does the monotonous workload increase, but the employee's level of personal responsibility also rises. The more trips you need to manually plan, the higher the risk of mistakes.

      How to enhance last mile delivery?

      Transportation analytics

      Examine feedback from your customers and employees to identify possible issues. Then collect data on transport logistics and perform analytical calculations.

      1. Recognize bottlenecks and evaluate potential risks. Test different scenarios to determine how heavy of a load your logistics can handle.

      2. Calculate the optimal fleet size, taking into account the current load. Find out what is more profitable: using your own fleet or renting it.

      3. Estimate the costs needed to meet customer requirements. Find a balance between increasing the level of service and feasibility.

      4. Test hypotheses for improving the performance of the delivery service and develop an optimal transport strategy.


      Logistics automation allows you to solve several possible problems at once:

      • If an employee has to manually perform a large amount of monotonous, low-level tasks, such as application processing and route planning, the risk of errors increases due to fatigue or inattention. Automation reduces the number of such errors and frees up employees' time to perform more complex and creative tasks.

        Read about how Veeroute helped solve this problem for a premium appliance retailer premium appliance retailer.

      • Automate the interaction with your clients and speed up the processing of applications—this improves both performance and service quality. It’s a win-win strategy: the customer does not have to wait long for feedback (for example, information about the location of the order), and the employee manages to process many more requests.

        A security system provider partnered with Veeroute to automate their service engineer scheduling. Check out the results here.

      • Logistics automation simplifies further business scaling. If the company has built modern and flexible logistics, it won’t take extra effort to open new delivery centers and pickup points.


      Last mile delivery optimization is a necessary technological step that allows you to decrease transportation costs, reduce route planning time, and improve the quality of service.

      Route optimization makes it possible to plan last mile delivery while considering all possible requirements and restrictions, such as time windows, cargo compatibility, driver schedules, current road situations, and much more. It is physically impossible to take into account all these factors manually, but logistics optimization software does this with ease. Moreover, the optimizer builds routes in order to improve them according to a given criterion, whether it is travel time, fuel consumption, mileage, or quality of service.

      Optimization software can be used to enhance every stage of last mile delivery. It helps you fully automate delivery planning as well as to continuously analyze the transportation system and adjust it to changing environments.

      What are the benefits of optimization?

      1. Cost reduction.

        Optimal delivery planning allows you to reduce transportation costs. The better the routes, the less fuel will be wasted, and the higher the utilization of the available vehicles will be.

        After the implementation of Veeroute, a DIY retailer noted an increase in courier capacity by 30% and in vehicle utilization by 23%.

      2. Resource optimization.

        Optimization gives businesses the opportunity to more efficiently use available resources. Through optimization, a company can reduce the required fleet, increase vehicle utilization, and minimize mileage.

        Veeroute allowed one online retailer to increase the number of orders downtown by 20% without expanding its fleet.

      3. Improving the planning.

        Due to optimization, the time the logistician spends on route scheduling, adjustment, and other operations is reduced. At the same time, delivery routing becomes more convenient and easier.

        The joint project of Veeroute and a logistics IT ecosystem vendor shows a brilliant result: a 95% reduction in route planning time.

      4. Improving the quality of service.

        Optimization allows you to reduce time windows and meet SLA requirements even while tackling unprecedented loads on the transport system.

        Thanks to Veeroute, an online retail store managed to reduce the minimum time window from 90 to 30 minutes with a several-fold increase in the volume of orders.

      Last mile delivery optimization helps you maintain a balance between reasonable transport costs and a high service level. Whether you plan to perform same-day delivery or reduce the time windows, the optimizer will find the perfect solution for your business challenge