Final Mile Delivery: The Role of TMS and Predictive Analytics

Even though shipments may be transported over hundreds of miles, or just a few miles, the main focus today is on the final mile — that is, making sure the delivery experience for the end-customer (which in many cases is a home delivery) is a positive one.

What factors are driving this growing attention to final-mile delivery? Why is it important? How can technology, specifically transportation management systems and predictive analytics, help shippers and third-party logistics providers (3PLs) excel in this area?

Those are some of the questions I addressed with Karen Sage, Chief Marketing Officer at MercuryGate, in a recent episode of Talking Logistics.

Three Reasons Final Mile is Hot

Discussions about transportation management have traditionally centered on how to get shipments from point A to point B most inexpensively, whether that is across the world, across the country, or within a region. Those discussions have shifted dramatically in the past year or two to focus on final-mile delivery. Why is it such a hot topic today?

Karen says there are three reasons last mile is so hot: “First, with the fast rise in e-commerce deliveries, whether to homes or businesses, last-mile deliveries are more prevalent and important. Second, companies are realizing the tremendous costs associated with last-mile delivery, which can account for over 30 percent of shipping costs. It’s also one of the most inefficient parts of delivery. And finally, there is growing awareness that final-mile delivery is the way most people experience a brand and has a profound influence on the perception of the quality of the brand. It can be a competitive differentiator and impact future sales.”

Last Mile Delivery Challenges

Besides the significant cost factor, there are many unique challenges with last-mile deliveries. Karen points out that “in urban areas you can have road closures, traffic delays, delivery time restrictions, and parking problems. In rural areas, a lack of density makes deliveries inefficient and time-consuming. In both areas, you can have failed deliveries due to no one being available to receive and sign for the delivery. This all adds to the cost. Beyond that, there are challenges from stolen packages, weather issues, returns, and the need for white-glove services for some deliveries. It’s a big problem to solve.”

The Role of Transportation Management Systems (TMS)

As with so many challenges in supply chain, we often look to technology to help, and as Karen explained, transportation management systems (TMS) play an important role here. “Transportation management systems can better position and aggregate shipments to drop points to shorten last-mile deliveries and times. A TMS can also monitor performance over time for quality and efficiency of service, especially for white-glove service options. It also analyzes costs over the full lifecycle of the order and can determine the full cost to serve and the efficiency of the last mile segment.”

Another challenge is that last mile deliveries are often performed by a wide range of small couriers and delivery companies that typically have little to no systems support. Karen says, “Predictive analytics can help shippers and transportation companies to analyze past trends, including delivery times, quality and costs, to estimate future needs, to evaluate which couriers to use, and to reroute or change delivery times for better efficiency and service.”

The Future of Last Mile Delivery

With so much recent hype around drone deliveries, driverless vehicles, and other futuristic technologies, I asked Karen what the future might hold for last-mile delivery. She feels the biggest impact will come from predictive analytics — gathering data from many sources we may not be considering today to better understand expected demand and preposition products to fulfill that demand, perhaps even before customers know they need it. Karen provided a number of really interesting possibilities of how this technology could potentially be used. She also provided some assessment questions that companies should ask themselves to evaluate how well their practices and technology aligns with current and future last-mile delivery needs. I encourage you to watch the full episode for these insights and more. Then post a question or comment and keep the conversation going