Last Mile Logistics: definition, challenges and optimization

In the era of ever-growing e-commerce, last-mile transportation solutions have become a critical component in meeting consumer demands and ensuring an exceptional delivery experience. From route planning to inventory management and efficient execution, companies face a number of challenges and opportunities to optimize this crucial stage of the supply chain. In this FM Logistic article, we’ll explore last mile logistics in depth, the challenges it faces and the optimization strategies that are revolutionizing this area. We will discover how technology, flexibility and customer satisfaction are key pillars for success in last mile logistics.

Last mile logistics solutions refer to the process of delivering products from a distribution center or warehousing point to the final destination, which is usually the customer’s home. It is the final and crucial stage of the supply chain, where direct contact with the consumer is established. This phase involves efficient route planning, inventory management, vehicle and driver coordination, as well as the precise execution of deliveries. Last-mile logistics has become specially relevant in the era of e-commerce, as the demand for fast and convenient deliveries has increased significantly.

Last mile logistics is vitally important to supply chain success and customer satisfaction. In an increasingly e-commerce driven world, consumers expect fast and efficient deliveries. The ability to provide timely and convenient delivery is a key factor in earning customer loyalty and maintaining a competitive advantage in the marketplace. In addition, effective last-mile logistics can help reduce operating costs by optimizing delivery routes, minimizing downtime and avoiding missed deliveries. By focusing on improving this critical stage of the supply chain, companies can enhance the customer experience, strengthen their reputation and achieve a higher level of efficiency and profitability in their logistics operations.

In Spain more than 80% of its inhabitants live in cities and it is predicted that by 2050 this figure will rise to 88%. This means, according to Statista data, that we are at much higher values than the global ones because 56% of the world’s population lives in cities and 75% of the European population.

The last mile encompasses all product supply and delivery activities within cities. According to a study conducted by Roland Berger for FM Logistic called Urban logistics facing economic and environmental challenges, we found that the urban logistics market will grow by an annual average of 8% until 2030.

For all these reasons, it is important to understand the challenges facing last-mile logistics:

The population of cities is expected to reach 6 billion by 2045. This translates into the creation of new buildings to live in. It also means more stores, more cars circulating in the city and a greater volume of needs to be met. In many cities, there is no urban planning in place, let alone one that takes last-mile logistics into account.

According to data from the National Commission for Markets and Competition (CNMC), ecommerce in Spain grew by more than 20% in 2020. This trend continues to increase because according to data provided by the same source, ecommerce in Spain grew again by 13% in the second quarter of 2021. Last-mile logistics is increasing at a faster rate than long-distance transport. Do you want to know all the details about ecommerce logistics? Find out all the details in our Ecommerce Logistics Guide.

In many cities such as Madrid and Barcelona there are restrictions on access to the city centers. This measure is aimed at polluting vehicles in order to reduce the emission of polluting gases in the city center. There is also legislation that regulates access times for delivery vehicles. This leads to an accumulation of vehicles at rush hour, a higher concentration of traffic and delays in the delivery of packages.

Last-mile logistics in urban environments also plays a key role in promoting sustainability. The adoption of eco-sustainable logistics practices, such as the use of electric vehicles or cargo bikes, can significantly reduce greenhouse gas emissions and improve air quality in cities. In addition, shipment consolidation and route optimization can reduce traffic congestion and minimize fuel consumption, thus contributing to the reduction of the environmental footprint of delivery operations.

Efficiency is a critical aspect of last-mile logistics. The implementation of advanced technologies, such as real-time tracking and process automation, enables more accurate and efficient delivery management. Intelligent routing algorithms can calculate the best route and allocate resources optimally, reducing delivery times and associated costs. In addition, the implementation of strategically located urban warehouses can speed up delivery by reducing the distance between the storage point and the final destination.

Last-mile logistics also faces a number of challenges. Handling different types of packages, from small parcels to bulky products, requires adaptable logistics solutions. In addition, delivery conditions can be challenging, especially in densely populated urban areas or areas with access restrictions. The absence of the recipient at the time of delivery and the lack of adequate parking spaces can also create logistical difficulties. However, through innovation and collaboration with urban stakeholders, it is possible to overcome these challenges and continuously improve the efficiency and delivery experience in last mile logistics.

Throuh the confinement, last-mile logistics became a vital element in delivering essential goods to households. Increased demand for products through e-commerce drove the need to adapt quickly and meet delivery deadlines. Companies faced unprecedented logistical challenges in ensuring worker and customer safety, implementing hygiene protocols and social distancing.

Flexibility and resilience became critical to overcome obstacles such as travel restrictions and staff shortages by collaborating with local services and adopting advanced technologies.

Transportation routes are critical to the efficiency of last-mile logistics. Companies must plan optimal routes that minimize the distance traveled and maximize the number of deliveries made in a single trip. This is where technology plays an important role, with fleet management systems and routing algorithms allowing routes to be optimized in real time, considering factors such as traffic, load capacity and destination locations.

In last-mile logistics, there are different types of deliveries that are tailored to customers’ needs and preferences. In addition to standard home deliveries, services such as pick-up point delivery have been developed, where customers can pick up their packages at convenient locations, such as stores or automated lockers. There are also scheduled deliveries, which allow customers to select a specific time slot to receive their orders, providing greater flexibility.

Delivery conditions are also key in last mile logistics. This includes aspects such as delivery at specific times, especially in the case of deliveries to businesses or workplaces, where precise scheduling is required. In addition, contactless delivery has become relevant, especially during the pandemic, to ensure the safety of customers and delivery drivers. Situations such as delivery to apartment buildings or residential complexes, where there may be access restrictions or parking space limitations, must also be considered.

The solution to decarbonize urban logistics lies in the use of electric or manual delivery vehicles (such as bicycles) to deliver packages in the last mile. Many cities, such as Madrid, for example, prohibit the entry of non-electric or zero-polluting vehicles. It is a measure created to eliminate the emission of greenhouse gases in the city center and increase people’s quality of life.

FM Logistic has developed a network of strategically located urban hubs. These hubs function as distribution centers close to areas of high population density. Having convenient locations allows us to optimize delivery routes and reduce the distance traveled, which translates into greater efficiency and less traffic congestion.

To further enhance the customer experience, FM Logistic has created Click & Collect spaces in strategic locations, such as retail stores, gas stations or even shopping malls. These spaces allow consumers to pick up their products at flexible and convenient times, thus avoiding the need to wait at home to receive shipments.

Another solution that has been implemented is delivery lockers. These lockers are located in accessible and secure locations, such as public transportation stations or residential buildings. Customers can choose to receive their packages in these lockers and pick them up at a time that is convenient for them, providing flexibility and security in delivery.

It is essential to make consumers aware of the importance of buying the products they need. Many people buy the same product, for example a piece of clothing, in different sizes because it is “easy” and “fast” to get and then return and keep the clothes that finally convince them. In the end, when we carry out actions like these, we are unnecessarily saturating the last mile logistics and this has a significant environmental and operational cost.