Delivering for Customers from the Last Mile to the Final Inch
Whether the last mile of delivery is actually one mile or several hundred miles, shippers are meeting customer expectations and reducing costs by building carrier relationships and leveraging technology.
Before Dwayne and Richard delivered my new sofa, they walked the route from the curb through the front door and up the staircase to the second-floor loft. Dwayne recommended that I take down a few framed pictures hanging in the hallway.
Then they shouldered the heavy sofa purchased from a local retailer and climbed the staircase. Taking down the pictures was a good call, as the sofa may have knocked them off as it was twisted and turned into the tight space.
I couldn’t tell you the brand name of the sofa or the name of the carrier. But I know where I bought the sofa, and that’s where I would have turned if there had been a problem with delivery.
In this case, the last mile was about 15 miles from the furniture warehouse to my home. Sometimes, the last mile may be hundreds of miles and involve several carriers along the way.
No matter how long the last mile actually is, shippers build carrier relationships and use technology to meet customer expectations and reduce costs.
Not so many years ago, it wasn’t common to buy bulky items like furniture or exercise equipment anywhere other than a local store with its own delivery trucks. Like the hometown retailer with its name on the side of the box truck, last-mile delivery is intertwined with the consumer experience and the company’s brand.
Relying on Partners
Today, digitally native retailers like Peloton and Saatva rely on distribution centers and delivery partners to eliminate the expense of brick-and-mortar locations. E-commerce shippers have found that managing distribution and fulfillment in-house can be tough.
In early 2022, Peloton, beset by falling demand post-pandemic, outsourced fulfillment to third-party logistics (3PL) providers, including RXO (formerly XPO) and J.B. Hunt, to reduce fixed costs.
Peloton closed16 warehouses across North America and shifted to 3PLs to set up bikes and treadmills at customer homes and handle service and repair calls. The move would reduce delivery costs by up to 50% per product and improve on-time deliveries, CEO Barry McCarthy said in the announcement.
For direct-to-consumer e-commerce sales, regardless of the shipper’s size, owning a truck fleet with employee drivers is costly. The equation is different for retailers with physical locations, such as mattress and furniture retailers that serve a metropolitan area.
“If you sell exclusively online, the need to partner with the right carriers is more important than ever,” says Brian Bourke, global chief commercial officer at solutions provider SEKO Logistics.
The line between categories in the last-mile segment is blurring to some extent, so there are more choices than just parcel or LTL delivery. UPS, FedEx, and a growing roster of regional carriers deliver many parcel-sized shipments.
There’s an increasing number of oversize or non-conveyable parcels that are larger than standard parcels but don’t require LTL service due to weight or dimensions. The demand for LTL for larger products such as exercise gear or outdoor furniture is growing with consumer acceptance of online shopping for these types of products.
SELLING WITH SERVICE
Some e-commerce brands have made white-glove delivery a component of their premium branding.
One example is Saatva, a maker of premium mattresses, which counts on white-glove services to deliver and set up full-sized mattresses and a growing home furnishing collection in customers’ homes and remove old mattresses. Saatva’s competitors are “bed-in-a-box” mattresses compressed in a shipping box and delivered to the customer’s door by ground delivery such as UPS or FedEx.
“Saatva provides delivery, in-home set-up, and old mattress removal—a suite of services that is difficult to replicate,” says Richard Dimilta, senior vice president of business operations at Saatva.
Saatva uses more than 150 delivery carriers shipping from 19 U.S. factories. Although the company is setting up retail viewing rooms nationwide where shoppers can interact with products using technology, purchases will be delivered using the carrier network.
“If there’s an issue, we solve it in the best, most expedient way possible,” Dimilta says. “We always put the customer first and want to ensure that their experience with us is as exceptional as the products we deliver.”
Still, some retailers have invested in their own networks. Warehouse giant Costco acquired Innovel Solutions in 2020 to support the growth of online ordering and fulfillment.
Under the name Costco Logistics, the company uses 18 e-commerce fulfillment centers and 11 distribution centers in the United States to feed products through 100 last-mile delivery hubs. At the hubs, the products are slotted for third-party delivery.
With the hubs, Costco can provide accurate inventory information and estimated arrival times to shoppers, notes Jorge Cerda, Costco’s assistant general merchandise manager of e-commerce merchandising. Depending on the item, shoppers can choose from delivery at the curb, or threshold, or complete set-up delivery. Shoppers can view delivery dates, select a preferred date for fulfillment, and track the location.
Giving consumers delivery options can help drive sales. Some customers will shop by expected delivery dates, especially for larger items such as furniture.
If a shipper can promise shorter delivery windows for some products, consumers are more likely to click the buy button. The shipper can offer faster shipping for a fee, giving customers information so they can balance cost and service levels.
“Even if the consumer doesn’t want to take full advantage of the optionality, just by offering it, retailers put themselves at a competitive advantage,” Bourke says. “Their customers know that they at least have the option to choose a higher level of service.”
BUILDING A NETWORK
To maintain flexibility and redundancy in their last-mile network, it’s critical for shippers to diversify their carrier base. During the pandemic, some carriers capped the number of parcels a shipper could submit to the network, delaying shipments.
It’s wise to use multiple carriers for specific niches or geographies. For example, SEKO uses its own box trucks and vans for bulky, medium-sized deliveries like flat-pack furniture. It contracts with other carriers for smaller parcel sizes and larger, heavier products. If a shipper has a broad range of products, the 3PL chooses the correct mode for each type.
“If a retailer ships everything from socks to bed frames, the socks may go by parcel while the larger items go by crowd-sourced delivery options such as Roadie or Axle Logistics,” Bourke says.
Diversifying the carrier base can help shippers find alternatives to companies adding peak surcharges and general rate increases.
Online retailer Uncommon Goods wanted to offer faster shipping for its unique artisanal and artistic products at lower costs. 3PL ITS Logistics developed a strategy that could support Uncommon Goods’ 3,000% volume increase during the holiday surge and reduce delivery times.
Previously, Uncommon Goods stored and shipped all products from a single distribution center in Brooklyn, New York. ITS opened a West Coast distribution center that accommodated same-day shipping for most of the country. ITS consolidates West Coast vendor inbound shipments, fulfills orders and handles the returns process.
“We needed a custom solution that efficiently scaled to adjust to our drastic seasonality swings, especially for the holiday season peak,” says Robert Carucci, head of operations at Uncommon Goods.
taking the right route
Quirch Foods, a food product distributor in the United States, Latin America and the Caribbean, has adopted last-mile delivery software DispatchTrack to support its growing network.
Over the past two years, Quirch Foods acquired smaller brands and increased its fleet by 400%, managing 21 distribution centers and 400 trucks that make more than 7,000 stops per day. Using the technology, Quirch has cut routing time by 50% with deeper visibility, creating more efficient routes faster, says Luis Porto, director of operations development at Quirch Foods. Real-time information improves communication with customers and internally.
To help avoid shipping delays that disappoint customers, Fleet Enable, an end-to-end final mile management system for carriers, has developed artificial intelligence tools that optimize loading for final-mile delivery trucks. The new technology ensures that deliveries will fit on a truck, replacing manual calculations.
The system takes electronic requests from shippers to generate orders, and a dispatch scheduling tool calculates truck capacity and delivery appointments to generate delivery routes that consider all the variables. The tool helps carriers reduce the risk of missed deliveries if shipments are too heavy or won’t fit on a truck. Shippers can avoid missing delivery promises or using costly emergency moves to satisfy customers.
The dark side of the e-commerce boom has been reverse logistics or product returns.
In the United States, retailers spend more than $760 billion each year managing returns. Some e-commerce retailers have paused or stopped accepting returns to reduce costs and supply chain volumes. Removing the old items in some segments, such as appliances and bedding, is part of the delivery experience.
To help retailers get a handle on returns, SEKO Logistics launched its SEKO Live consumer app to manage delivery, installation, and returns for big and bulky items.
With the SEKO Live app, last-mile delivery staff and consumers can contact product technicians and exception management specialists at SEKO’s control tower and network operations centers or a retailer’s product and customer service teams. Users can connect with resources during product installation or self-installation to get answers to questions or concerns that could lead to the customer returning the product.
The app allows delivery staff and customers to report damaged or incorrect items or ask questions about assembly and use. A fast response could make the difference in whether an item gets returned.
“In most cases, home deliveries of big and bulky items are completed exactly as planned, but if a customer has questions or uncertainties about their purchase, the time window to save the sale and prevent a return can be literally minutes,” says James Gagne, president and chief operating officer of SEKO Logistics.
SEKO had used a similar app for commercial deliveries and installations, such as the installation of parcel lockers, isolation booths, and server racks in data centers. The consumer app lets the shipper configure interactions with the customer.
If the shipper has a customer service team, calls can be directed to the in-house experts or even segmented by product complexity and cost. Or SEKO’s team can handle some or all of the customer service calls.
Saatva uses DispatchTrack to provide real-time visibility into deliveries, including scheduling and customer acceptance of the order.
“If there are any issues between the customer and our delivery partner, we hear about them right away,” says Dimilta. “It has become an invaluable part of not just our delivery business but also our customer service experience.”
Especially in the consumer realm, the last-mile experience is intertwined with the seller’s brand reputation, regardless of the delivery contract’s details.
Finding last-mile partners is as much an art as it is a science, Dimilta notes, and Saatva has developed its own process for selecting and vetting carriers.
“Partnering with smaller delivery partners suits the type of hands-on experience we offer more than dealing with larger delivery companies,” he says.
The Saatva vetting process focuses on whether the carrier has mattress-handling and furniture assembly experience, two-person crews, and can commit to the four-hour window for scheduling and delivery times. Other vetting questions dive into the business, such as whether the fleet is company or contractor owned and its technology capabilities.
Once Saatva brings a carrier onboard, detailed daily, weekly and monthly internal carrier reporting takes place. Carriers that fall below service thresholds are selected for review. Based on monitoring more than 150 carriers over many years, the Saatva team can spot problems and take action.
“We are so good at monitoring our partners that we can tell whether or not it’s a new delivery team, even when there’s a mechanical breakdown in our delivery partner’s day-to-day operations,” Dimilta notes. Saatva’s claim rate is less than 1% of all deliveries.
When selecting carriers, ask them to provide quotes for actual shipments, using six to 12 months of anonymized data to give a realistic view of lanes and volumes. “The more data shippers can provide to a carrier, the fewer surprises they have when engaging in negotiations and contracts,” Bourke says.
Some 3PLs recommend shopping carrier rates for every shipment. “If you aren’t shopping carriers on every order, you are overspending and under-delivering,” says Sean Henry, co-founder and CEO of supply chain start-up Stord. “At the same time, robust technology to intelligently shop carriers is critical the more you add to your portfolio.”
Saatva looks at online reviews during the carrier vetting process but takes them with a grain of salt because it’s rare for satisfied customers to leave positive feedback.
“If we used Google or Yelp reviews during the initial stages of our vetting, we wouldn’t have been able to build our network at all,” Dimilta says.
Disruptions Mean Business
Supply chain disruptions have had a positive impact on expedited final-mile providers. Shipments that used to go less-than-truckload (LTL) now go to last-mile carriers, says The Customized Logistics and Delivery Association (CLDA), which represents the first to final miles of the supply chain in the United States and worldwide.
“The delays in the supply chain mean that shippers can’t always depend on LTL transportation to get things where they need when the customer needs them,” says Tim Cocchia, COO of Xcel Delivery Services and CLDA board member. “In these cases, they turn to last-mile delivery partners.
“Before the disruptions, LTL could get products to their destinations in a timely manner,” Cocchia says. “But with the disruptions that’s no longer the case. Last-mile providers take delivery of the items, store them in our warehouses until they are needed, and deliver them when it’s time. We have always done some of these deliveries, but the demand has dramatically increased.”
Impact on Just-in-Time
Supply chain issues have had a dramatic impact on companies that depended heavily on the just-in-time model. “Right now, just-in-time doesn’t work,” says Cocchia. “In the past, just-in-time made economic sense. It worked because those in procurement knew they could wait until the last minute to order what they needed and get it right away. The customer could keep their money in the bank, order at the last minute possible, and have it show up on the day it was supposed to without redelivery and warehousing fees.
“Not anymore,” he adds. “Today, companies order products ahead of time because they’re not sure when they’ll come in. They ship those products to last-mile providers’ warehouses to hold them for as long as needed, and then deliver them exactly when needed.”