Efficient delivery services are crucial for business success. However, the true costs of last mile delivery often go unnoticed.
A recent study highlights that last-mile delivery can account for up to 53% of the total shipping cost.1 As e-commerce continues to boom, business leaders must break down all the costs to ensure their delivery programs are competitive, cost effective, and improve customer satisfaction.
In this comprehensive guide, we’ll explore the clear and hidden costs associated with last-mile delivery and emphasize the importance of partnering with a reliable last mile carrier.
Understanding last mile delivery costs
Retailers, manufacturers, and distribution centers invest significant resources in the delivery process. To maintain smooth operations and stay within an allotted budget, it is crucial to have a comprehensive understanding of all associated expenses. This involves distinguishing between clear, easily identifiable, and hidden costs, which can often be overlooked but profoundly impact the bottom line.
Clear Costs
When considering last-mile delivery, several clear costs immediately come to mind. These are the expenses that businesses typically account for in their logistics budgets.
Labor, transportation, route planning, and packaging costs are the most significant anticipated expenses:
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- Fleet Management: Vehicle maintenance and fuel expenses frequently fluctuate based on market conditions, but they are a given that business leaders understand and manage.
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- Route Planning and Optimization: Investing in route planning and optimization software also falls under transportation costs, helping to enhance efficiency and reduce fuel consumption.
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- Packaging and Handling: Packaging and handling are other clear costs. Businesses need to invest in packaging materials to ensure goods are delivered safely.
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- Driver Costs: Driver salaries, benefits, and insurance costs form a substantial part of these costs.
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- Additional Labor Costs: Labor costs for packaging and handling also add up, especially when dealing with high volumes of shipments. The cost of specialized packaging can be significant for items that require special care, such as fragile goods.
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- Technology and Innovation: Technology investments are necessary for modern last-mile delivery operations. These include GPS and tracking systems to monitor deliveries in real-time, delivery management software to streamline operations, and mobile devices for drivers to stay connected and informed.
Hidden Costs
While clear costs are easier to identify and manage, hidden costs can substantially impact the overall expenses of last mile delivery.
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- Failed Deliveries: Failed deliveries are a common hidden cost. Reattempting failed deliveries incurs additional expenses, and customer dissatisfaction from missed deliveries can lead to a loss of loyalty. Managing returns also involves administrative costs that are often overlooked.
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- Order Changes: Last-minute changes can disrupt delivery schedules and increase costs. These changes might include route adjustments or additional labor to handle unexpected alterations, which can significantly impact delivery efficiency.
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- Regulatory Compliance at Various Levels: Compliance and regulations are other sources of hidden costs. Meeting local delivery regulations regarding issues like health and safety can be costly, and non-compliance can result in hefty fines.2 Investments in compliance management systems are necessary to avoid these pitfalls.
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- Customer Service: Customer service costs also add up. Handling customer inquiries and complaints requires a dedicated team, and providing real-time delivery updates demands robust systems. Investing in customer service training and tools is crucial to maintaining high service standards.
Make last-mile delivery your differentiator.
Managing delivery expenses
Managing the costs associated with last-mile delivery is a complex task that presents several business challenges. Both clear and hidden costs require meticulous attention and strategic planning to avoid unnecessary expenditures and ensure efficient operations.
Here are some strategies retailers employ to handle various costs, expected or not.
Managing Hidden Costs
1. Failed Deliveries:
Failed deliveries are a significant hidden cost. Redeliveries incur additional fuel and labor costs and may negatively impact customer satisfaction and loyalty. Implementing strategies to reduce failed deliveries, such as providing accurate delivery windows and improving customer communication, is essential but requires investment in customer service infrastructure.
2. Last-Minute Changes:
Handling last-minute changes and unexpected adjustments in delivery schedules or routes can disrupt operations and increase costs for retailers. These changes often stem from unforeseen circumstances, such as traffic delays or customer requests, necessitating flexible and responsive management systems. Businesses need flexible and responsive systems to manage such changes efficiently, which can be costly to develop and maintain.
3. Compliance and Regulatory Costs:
Compliance with local delivery regulations can incur substantial costs. These might include costs related to driver working hours, vehicle emissions standards, and data protection laws. Non-compliance can result in fines and legal expenses. Keeping up with regulatory changes and ensuring compliance requires continuous investment in training and compliance management systems.
4. Customer Service:
Providing high-quality customer service is crucial for maintaining customer satisfaction and loyalty since 87% of shoppers stop shopping with a brand after two poor experiences. Customer service includes handling inquiries, managing complaints, and providing real-time delivery updates. These activities require a dedicated team and robust systems, adding to the overall cost of last-mile delivery.
Strategies to Overcome Challenges
1. Investing in Technology:
Leveraging advanced technologies can help manage both clear and hidden costs. For example, AI-powered route optimization software can reduce fuel costs and improve delivery efficiency. Similarly, investing in real-time tracking systems can enhance customer communication and reduce failed deliveries.
2. Enhancing Collaboration:
Collaboration with reliable last mile carriers can help distribute the costs and complexities of last-mile delivery. These carriers often have the infrastructure and expertise to manage deliveries more efficiently, allowing businesses to focus on their core operations.
3. Training and Development:
Regular staff training, particularly for drivers and customer service representatives, can improve efficiency and reduce errors. This training should cover new technologies, regulatory compliance, and effective customer communication.
4. Continuous Improvement:
Adopting a culture of continuous improvement can help businesses identify and address inefficiencies in their last-mile delivery processes. Regularly reviewing and updating processes, investing in new technologies, and seeking customer feedback can drive ongoing improvements.
Mitigating last mile expenses
Partnering with a Last Mile Carrier
One effective strategy for managing last mile delivery costs is partnering with a specialized last mile carrier focused on speed and reliability. These carriers bring expertise and efficiency to the table, helping businesses optimize their delivery processes with the latest technology and a diligent team.
By leveraging the expertise of a last mile carrier, businesses can benefit from optimized routes, which reduce fuel consumption and vehicle wear. Advanced technology for real-time tracking ensures that deliveries are on schedule and customers are kept informed. Access to a network of delivery professionals further enhances efficiency and reliability.
Partnering with a last mile carrier also offers significant cost savings. Outsourcing delivery reduces overhead costs and minimizes the rate of failed deliveries due to the carrier’s experience and efficiency. Additionally, businesses can lower their technology investment costs by using the carrier’s infrastructure.
Implementing Cost-Effective Strategies
Businesses can implement several cost-effective strategies to further mitigate last mile delivery costs.
Optimizing routes is a key strategy. Advanced route planning software helps to identify the most efficient paths, and real-time adjustments based on traffic conditions and delivery changes can further enhance efficiency. This not only reduces fuel consumption but also minimizes vehicle wear and tear.
Improving packaging processes can lead to significant cost savings. Using cost-effective and sustainable packaging materials helps reduce expenses, while training staff on efficient packaging techniques ensures that goods are handled properly. Automation in packaging and handling can streamline these processes, reducing labor costs.
Enhancing customer communication is essential for managing expectations and improving satisfaction. Providing accurate delivery windows and real-time updates keeps customers informed and reduces inquiries and complaints. Offering flexible delivery options caters to customer preferences, enhancing their overall experience. Investing in robust customer service platforms helps manage these interactions efficiently.
Finding cost-effective delivery solutions
Understanding and managing the cost of last mile delivery is essential for maintaining profitability and customer satisfaction. By recognizing both clear and hidden expenses, businesses can take proactive steps to optimize their delivery processes and reduce costs.
Bungii has an established network of big and bulky delivery professionals across more than 75 U.S. markets, along with the technology and operations businesses need to improve the last-mile delivery experience.
Our advanced technology for route optimization and real-time tracking ensures that deliveries are efficient and on schedule, significantly reducing transportation and labor costs. Our robust customer service platform enhances communication, minimizing the impact of failed deliveries and last-minute changes. Additionally, Bungii’s commitment to compliance with local regulations helps businesses avoid costly fines and legal issues.
By partnering with Bungii, businesses can leverage a network of delivery professionals, access state-of-the-art technology, and benefit from cost-effective and efficient delivery solutions. This not only improves operational efficiency but also enhances customer satisfaction and loyalty.Ready to streamline your last mile delivery process and reduce costs? Contact Bungii today to learn how we can help you achieve seamless, efficient, and cost-effective delivery.
