Last-mile logistics in e-commerce - challenges and solutions -

Online commerce has shown considerable growth in the past decades. The B2C sector in particular recorded massive growth rates, leaving the B2B sector far behind. According to the statistics portal Statista, the turnover in e-commerce (B2C) has increased to 44 billion euros in 2016 and thus almost doubled compared to 2010. With the rising volume of orders in private households, the demand for courier express parcel services (CEP) inevitably also grew. As a result of the boom, some transport service providers have concentrated on delivery specifically for private consignments and have benefited from this. But now they are facing new challenges.

The last mile – a considerable cost factor

Especially the last mile, i.e. the last leg of the journey when transporting the goods from the parcel service provider’s depot to the customer’s door, often poses a major problem. The reasons for this are demographic factors, such as growing mobility and the increasing number of female employees and single households, which act as a growth accelerator for online trade. At the same time, this reduces the probability of the delivery being received personally, as the recipient is often not at home. But it is not only the unsuccessful delivery attempts that make the last few meters a permanent topic for CEP services. Either way, shipments to private households are above all one thing: expensive. Due to the small delivery quantities and distributed delivery points, the goods can rarely be bundled. As a result, they account for more than 50 percent of total costs, making them the largest cost factor in parcel deliveries.

On the brink of collapse: urgent need for city logistics solutions

While the cost issue of the last mile primarily affects parcel service providers, another symptom of flourishing online commerce is becoming increasingly evident in densely populated areas. In addition to the already large number of cars, more and more delivery vehicles are now entering the traffic flow. There are now so numerous that they account for up to 30 percent of traffic within cities and cause around 80 percent of traffic jams. This is a major impact on urban areas, especially since the transport vehicles produce considerable amounts of exhaust gases and noise. This not only affects the environment but also the efficiency of the delivery services. Traffic jams consume so much time that drivers can barely accomplish their tours. There is also a lack of parking spaces in the densely populated areas. The delivery of the parcels is considerably more difficult and the vehicles standing in the second row become a traffic obstacle.

“Customer to goods” option: clear advantage for delivery services

As a result, discontent is growing – among customers and delivery staff alike. For this reason, both logistics service providers and other providers are fine-tuning solutions specifically for the last mile in urban logistics. Two basic concepts can be distinguished: those that define the customer’s route to the goods and vice versa. The former includes, for example, parcel shops and packing stations. The advantage for the deliverers is that they can deliver the shipments in bundles and the recipient of the goods does not have to be present. For the customer, however, this variant means that the receipt is associated with additional travel and time. Thus, the comfort associated with online purchasing is practically no longer valid. However, this is the main reason for the majority of customers to order goods home.

Safe delivery to the front door – even in the absence of the recipient

Whereas the recipient previously had to be present for delivery to the front door, parcel cabinet or parcel box systems enable secure delivery even when the customer is not at home. Multiple trips are thus avoided. As with a packing station, the shipments can be placed in the container and sealed by the delivery service. These solutions are suitable for both homeowners and customers in multi-story apartments, as the systems can be mounted either in front of the front door or directly on the apartment door. The disadvantage for the consumer, however, is that he has to pay for a corresponding box himself and the respective box systems can usually only be operated by one CEP service provider.

As a further solution, delivery services increasingly offer delivery within a certain time window. This delivery alternative is additionally supported by notifications by e-mail or SMS. This means that many CEP service providers have adapted to the wishes of their customers.

Parcel delivery soaring

Besides the comparatively simple service enhancements, other new concepts are taking off to take over the airspace. Parcel drones have already been successfully tested by several logistics companies. The flying parcel carriers are particularly useful for use in remote and difficult-to-reach regions or for urgent medicine deliveries. Whether they can replace “classic” delivery services is unlikely with over two billion parcel shipments per year in Germany alone. Also due to technical constraints, drones can only cover relatively short distances with a small load. At present, flying objects are not a realistic alternative. Furthermore, drone flights for commercial purposes over longer distances are not permitted in Germany. Even in the United States, the commercial use of drones is only permitted under strictly regulated conditions.

Copied from retail: the warehouse principle

This is another reason why further “down-to-earth” concepts are being developed to make the Last Mile more effective. These include City Hubs and their mobile versions. These concepts are based on the principle of warehouses, which are located either close to the city or – in the case of the mobile city hub – in the immediate vicinity of the recipients. In principle, this form of delivery logistics can be integrated into existing processes of CEP service providers or used as an independent service. IT-based solutions that link dispatchers and courier drivers, for example, are also becoming increasingly popular. The items ordered on the Internet can thus be transported to the recipient within a short time. So far, these courier-like solutions are mainly used in the food sector. Even private individuals can offer themselves as transport service providers via special platforms and take over courier trips.

Every ride counts: increase the drop factor

Again, other, operator-independent services focus on overcoming the last mile problem by bundling all deliveries to the recipient and delivering to a single address. These solutions eliminate the need to travel to different delivery points, such as home addresses, parcel shops, and packing stations. This saves customers and deliverers a great deal of time and several trips. Depending on the provider, the collected deliveries are delivered within a certain time window or – as especially desired by employees – directly to the workplace. This is made possible by special cloud-based systems, for example. These provide the basis for the professional handling of private packages in the company.

In addition to these concepts, countless other concepts are already in use worldwide or are still being tested. Which will ultimately prevail as the ideal solutions to the last mile problem remains to be seen. Only one thing is certain: both e-commerce and large cities will continue to grow, so new delivery concepts are urgently needed. However, the problem is not solely a matter for CEP service providers. In order to successfully implement new solutions, politics, logistics, and trade must work together so that these solutions can be realized.

Further information on route-optimized logistics can be found in the article: Retailer integration.

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