Mike Elton, Director at FarEye, a digital logistics and supply firm, reports on the complexities and unpredictability of last-mile deliveries and how retail businesses can reduce rising costs whilst ensuring they keep their customers happy.
Retail e-commerce sales in the United Kingdom reached £129B in 2021, a whopping 73% increase from 2019. By 2025, e-commerce is projected to account for 38.6% of total retail sales in the UK. However, developing economic concerns amid changes in government make this future outlook uncertain. Strikes, rising inflation and interest rates are all putting pressure on supply chains. So whilst the volume of parcels shipped in the UK in 2021 alone reached 4.1 billion, last-mile delivery networks are really feeling the burn.
The Last Mile and its importance for retailers
The last mile is critical because it is the physical connection between retailers and online consumers, and is fully part of the online shopping experience. For retailers looking to satisfy consumer expectations, boost brand loyalty and drive repeat sales, creating a superior delivery experience is critical.
In today’s online shopping environment, consumers no longer evaluate product quality and price alone – they also weigh heavily on the delivery options that various retailers have to offer them. Delivery is a service that adds value to the product being purchased. Consumers seek fast, low-cost, flexible and sustainable deliveries and the retailers that can offer them can deliver a more valuable consumer experience. Doing so, however, can be a challenge for retailers as the last mile is complex and unpredictable.
The Complexities and Unpredictability of Delivery
The last mile is the most complicated leg of the supply chain because of its unpredictability and the inherent requirement to cover large footprints quickly. Unlike the first and mid miles – which move products between a few known locations on a cadenced basis with a few stops – the last mile involves loading vehicles across various fulfilment centres and routing them to multiple destinations at a moment’s notice. This makes last-mile deliveries inefficient, unsustainable and prone to risk. It is because of this that the last mile accounts for 53% of total shipping costs.
There are four key challenges that need to be tackled in order to help solve the complexity and unpredictability of last-mile delivery:
Lack of Visibility and Transparency
Complete order visibility is generally lacking for most retailers. In many deliveries, there is a blind spot once a truck leaves a dock, with no accurate visibility of where the product is and when the customer can expect their order.
Poor Integrations and Control of Carrier Partners
For retailers, partnering with carriers to execute last-mile deliveries requires fewer resources and investment, making this a popular consumer delivery method. However, poor visibility, communication, capacity and price management give retailers little control over their delivery experiences.
Retailers not using a cloud-based software solution may face challenges with creating new offerings to enhance customer experience or expand service offerings, update new routes, track product status, and communicate with drivers and customers. Advanced technology increases efficiency, which improves the last-mile delivery experience.
Inefficient Omnichannel Fulfilment
To offer fast, flexible deliveries, retailers have begun using new fulfilment methods such as micro-fulfillment centres, brick-and-mortar stores, and drop-shipping. Although these fulfilment methods can add flexibility and capacity, they can further complicate last-mile deliveries and can generate inefficiencies.
Can UK Government Help?
Not only is last-mile delivery itself unpredictable, but the retail sector is, too. If the past two years were any indication, we can anticipate further uncertainty and volatility in the retail sector in the UK in the coming years. Consumer confidence in the country is at historically low levels as inflation continues to threaten the economy and energy prices have skyrocketed.
Retailers will be keeping a close eye on potential policy changes too as Rishi Sunak establishes his office. A weak pound, tight labour market and government budget concerns will likely prompt action. Already, additional business rates are set to increase to £800m and will hit retailers in April. This has received backlash from the British Retail Consortium (BRC), a trade association for UK retailers, who believes the government should freeze business rates and reform the broken transitional relief system rather than expecting households to pay higher prices. Some are hoping for policy intervention around fuel prices that can shield retailers from increasing cost pressures that affect deliveries and the last mile, with many looking to Rishi Sunak to finally provide this.
However, many businesses can’t wait for a white knight to charge in and save the day. They need to solve the last mile conundrum now. So, to combat the uncertainties of both the last mile itself and the retail sector as a whole, retailers themselves must look to create more efficient delivery networks that can keep costs down and weather any economic environment, regardless of government intervention.