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What is last-mile delivery? The problem and solutions

The challenge of getting goods from one place to another is not new. And while the modern era has brought its share of advancements that help—from vehicles to highways to delivery management software—businesses today still face a serious hurdle: the last-mile delivery problem.

What is last-mile delivery?

Last-mile delivery is the final step in getting an order to its ultimate destination, usually a customer’s home. For most businesses, the supply chain includes multiple delivery steps before last-mile delivery. The process of getting inventory and other supplies to a company’s warehouse or storefront is an important part of keeping the business running, and one that can be challenging in many ways.

But the challenge of getting items from the business or warehouse to the customer tends to be more complex. Making deliveries to a list of residential addresses throughout a city is a more complicated process than delivering them all to one set location—like a warehouse or retail store. Last-mile delivery is also a special delivery category for businesses, since it’s the one that most directly involves the customer. That makes it an important part of the customer experience. If you want to keep customers happy, prioritizing last-mile delivery matters.

Unfortunately, getting it right isn’t always easy. But there are solutions—and businesses often need to use a mix of them to make last-mile delivery work. As we’ll discuss in more detail in this article, the range of options you can use includes traditional shippers, third-party delivery companies, and in-house drivers. Every business will have to find the right balance that works for your needs.

What is the last-mile problem?

The phrase “last-mile problem” describes the difficulty of providing last-mile delivery that meets the standards of customers. They have come to expect shipping that’s fast and affordable—and even better if it’s free. That expectation affects both their decision during the purchasing process and how they feel about the brand once the order is delivered.

More than half of all abandoned carts—56%, according to 2022 research from X Delivery—are left because of shipping concerns. In the same study, the top 2 factors consumers said they consider when deciding to shop on a brand’s website are cost of delivery and speed of delivery. Offering delivery options that will persuade a customer to purchase matters, but you also need to meet their expectations with the delivery itself. If you don’t, a 2022 Descartes survey found, 23% of consumers won’t order from you again. And it’s not just lost sales at stake; 21% of customers said they’ve lost trust in a brand due to a delivery failure.

Every brand that offers delivery has to consider how best to handle the last-mile problem.

Why is last-mile delivery challenging?

The delivery industry is huge and well established, so what makes last-mile deliveries such a particular problem? In comparison to other types of shipping, last-mile delivery presents some unique challenges.

It’s expensive

Last-mile delivery is inefficient, which makes it more expensive. Getting a large truck full of goods to one location, like a retail store, is comparatively much easier than getting each item in that truck to a different home.

Making a large number of small deliveries incurs costs on many levels. There’s the labor cost for the time the driver spends making all those deliveries. There’s the cost of gas—used not only in getting to each home but also while the vehicle idles at red lights or in rush-hour traffic. Plus, there’s the general wear and tear on the vehicle and the maintenance needed to keep it running smoothly. Last-mile delivery also involves taking fewer direct routes and making more frequent stops than one large delivery to one place, causing all the costs to be higher.

Fast delivery is often expected, or even required

Adding to all the other challenges, customers frequently want their items fast. For some types of products, that can mean within a couple of days. But for other types, like groceries, customers might want their orders within the same day. And in the case of meals, customers will likely look for delivery options that can get to them as soon as possible. This rising consumer demand for immediate gratification has put pressure on retailers to have a same-day delivery offering—even for products that don’t need to go out immediately.

It’s unpredictable

You can’t control traffic. You can’t control the weather. And while a company can invest in regular vehicle maintenance to reduce problems, you can’t avoid every possible issue. Every driver gets a flat tire now and then. But because last-mile delivery requires more driving within congested cities, as well as taking rural routes where roads are less maintained, it means dealing with even more of the unpredictable factors common to the delivery process.

Route planning is complicated

When a driver is facing a long list of stops at homes in different residential neighborhoods, figuring out the most efficient route is critical to keeping costs down and getting deliveries out faster. But route planning isn’t simple—especially not when you need to take into account real-time conditions like road closures or construction delays. And customer expectations for fast delivery can often require batching orders going to the same area of town, which adds another layer of logistics to contend with. Effective route planning requires analyzing these complex and changing factors all at once.

Delivery failure is common

Managing deliveries to warehouses and businesses tends to be fairly straightforward. You can usually expect someone to be there during business hours, and in many cases it’s someone’s job to know when a delivery is coming and be there to receive it. Plus, finding the right address isn’t likely to be all that complicated.

When delivering to a consumer’s home, though, you face more complications that can lead to delivery failure. The address could be listed wrong or be located in a new development that the GPS doesn’t recognize. If a delivery requires someone to sign for it, you face the risk of making multiple attempts when no one’s home, especially if the customer doesn’t know when to expect it. It’s also common for delivery drivers to end up at the wrong address—drivers can be easily confused by similar addresses in the same neighborhood. All of these are common issues that can not only affect the customer experience but also increase a company’s delivery costs.

4 types of solutions to the last-mile problem

Last-mile delivery is difficult, but you have a few options for handling it. You don’t have to choose only one of these; many businesses will benefit from using a combination of options to address different types of delivery needs.

Hiring in-house delivery drivers

For businesses that field a high number of delivery orders and want total control over the delivery process, hiring in-house drivers gives you that control. Hiring more employees is a big expense, though—as is covering the cost of vehicle maintenance, gas, and repairs. But this way allows you to select your drivers, control their routes, and determine what hours they’ll work.

Using traditional shippers

For last-mile delivery orders that aren’t especially time-sensitive, using traditional shippers for delivery can make sense. This is a relatively affordable option. And you benefit from investments the shippers have already made in hiring drivers, maintaining large fleets of vehicles, and developing technological systems and processes to keep everything running.

This option doesn’t work as well for more time-sensitive deliveries. For businesses that need to get items to customers as soon as possible (like restaurants) or within the same day (like grocery stores or retailers), you’ll want to consider faster ways. And with traditional shippers, you lose some control over the last-mile delivery experience; once you hand off the package, they take over. If you want a delivery to clearly come from your brand (or seem to), you also lose some of that with this choice.

Working with third-party delivery platforms

Third-party delivery platforms specifically help businesses with the last-mile problem. They connect your business with drivers and provide the technology required to manage and route deliveries. All you have to take care of is preparing and packaging customer orders. When you need fast deliveries—the same day or even within the hour—they’re a useful solution.

Partnering with third-party delivery companies is an easy way for a business to start offering delivery, since they’ve developed a network of drivers and the logistics infrastructure. For businesses that already offer delivery, third-party platforms are a smart way to extend the delivery options you provide now. Your in-house drivers will only be available within set hours, can only handle so many deliveries within that time, and probably need to stick pretty close to the store for the sake of efficiency. Third-party providers allow you to offer delivery to customers who live farther out or want orders brought outside of your typical hours. A third-party platform can also supplement your drivers on especially busy days. All of that allows you to take more orders and make more money in the process.

Using last-mile delivery software

Alongside the other last-mile delivery solutions you consider, choosing the right delivery management software can make handling last-mile deliveries easier and more efficient. A few common features that help are:

  • Route planning: Last-mile delivery software often uses machine learning to perform a sophisticated analysis of the available route options and recommend the best one. Technology can tap into real-time data on traffic, road conditions, and weather forecasts and analyze all the information nearly instantaneously. Route optimization saves businesses money by making deliveries more efficient, while also getting orders to customers faster.

  • Delivery scheduling: Many delivery failures occur because the customer isn’t home to receive the order. Delivery scheduling gives the customer the power to schedule a delivery to show up at the time that works best for them. For businesses, being able to see orders that are scheduled hours or even days in advance can help you manage your delivery processes more efficiently. Fewer delivery failures means fewer headaches for everyone involved.

  • Real-time tracking: When customers can track the status of their order on a map, they’ll know precisely when to expect it. That cuts down not only on calls to the business asking for status updates but also on potential delivery failures. In addition, real-time tracking technology keeps the business informed of where the drivers are at any given time. That allows the business to stay on top of the status of each order, so you always know what’s going on.

  • ETA calculations: A common feature offered alongside real-time tracking, ETA (estimated time of arrival) calculations give everyone involved valuable information they can plan around. With the help of machine learning and real-time data, technology can provide impressively accurate ETA calculations.

  • Electronic proof of delivery: You want to know that the deliveries you send out are getting to their intended destinations. Electronic proof of delivery provides the customer with proof that their item reached their doorstep, and offers the business evidence that they carried out their part of the delivery agreement. Electronic proof of delivery can take a couple of forms. For high-value items or orders that include alcohol, it could mean getting a signature upon delivery. Another option is to have drivers take a picture of the order once it’s left on the customer’s doorstep, providing both the customer and the business evidence that it reached its destination.

  • Delivery analytics: Most types of last-mile delivery software automatically generate data about the deliveries a business makes, offering valuable insights you can use to grow your business. You can learn information like how long deliveries take on average, which areas of town are the hardest to reach efficiently, and any correlation between delivery details and customer reviews. All of that can help you make smarter business decisions moving forward.

Emerging technologies that help with last-mile delivery

Delivery software is the main kind of technology that businesses use to manage last-mile deliveries. But some companies are experimenting with or starting to use emerging technologies, including these:

Delivery drones

This is a buzzy new technology that a few companies have begun to experiment with. The tech isn’t quite ready for wide adoption, but some companies have reportedly started using it for retail deliveries. Drones are an attractive option for short-distance deliveries, since they allow you to get around (or rather, above) traffic issues in cities. They also alleviate the need for drivers, which saves money on labor costs.

Autonomous delivery trucks

In recent years, tech companies have made huge investments in developing self-driving technology, with autonomous delivery trucks as one of the use cases they’re aiming for. While a spate of news articles have excitedly announced the use of autonomous delivery trucks on the road in limited areas, this is another technology that’s not quite ready for wide adoption. But it could be in the coming years.

Smart lockers

They may not be as high-tech or futuristic-sounding as drones and self-driving cars, but smart lockers are a readily available option that businesses can incorporate into their last-mile strategies now. Instead of taking every delivery to a customer’s front door, retail companies can invest in installing smart lockers in a few key spots around the city that are easy for customers to reach. This alternative doesn’t work for every type of delivery—freshly prepared tacos won’t fare well sitting in a locker for long. But for items with less immediacy, it can alleviate a common last-mile problem. When more orders can go into smart lockers rather than to a person’s front door, it translates into fewer stops for drivers.

White-label delivery

Another option businesses can consider is partnering with a third-party delivery platform that offers white-label delivery. With white-label delivery, customers place orders directly on a business’s website or app. After the business receives the order, they can send fulfillment requests to a third party. This capability allows businesses to offer on-demand delivery from their own sales channels without needing to build out the delivery infrastructure themselves. When considering which third-party delivery companies to work with, check if they offer the technology required for white-label delivery.

How can Uber help with last-mile delivery?

Uber Eats offers multiple services that can help you expand your options for last-mile delivery.

If your goal is to increase brand loyalty among customers who already know you, you can use Uber Direct (a white-label delivery solution) to offer on-demand delivery from your own website or app. Through a simple integration process, you can:

  • Allow customers to select express, same-day, or scheduled delivery at checkout
  • Tap into a network of drivers who will handle the logistics of last-mile delivery
  • Send real-time tracking information to customers, customized to match your branding
  • Expect a commission-free cost structure with no hidden charges

If your goal is to improve discoverability and reach among new customers, you can list your business on the Uber Eats app (our third-party marketplace) to open an additional sales channel for your business. By listing your business on the Uber Eats marketplace, you can:

  • Reach new potential customers who are browsing the app with a high intent of ordering
  • Choose how you’d like to fulfill the order—by connecting with drivers in the Uber network, using your own delivery staff, or offering order pickup
  • Stay in control of your costs by selecting a pricing plan that aligns with your goals

In the case of both Uber Direct and the Uber Eats marketplace, your business can tap into a network of drivers as well as tools to manage, track, and route your orders to customers efficiently. All of this is designed to take many of the most time-consuming aspects of last-mile delivery logistics off your plate.

Frequently asked questions

If you’ve still got questions about last-mile delivery, we’ve got a few more answers for you.

  • The most common example of last-mile delivery is any delivery that goes directly to a customer’s home. Whether it originates at a warehouse, a retail location, or a restaurant, getting it from there to someone’s front porch is a complicated prospect for the business—but one that many businesses are willing to tackle for the sake of customer satisfaction.

  • Last-mile delivery is expensive because of how costly and time-consuming transportation is in general. The costs of delivery include the labor costs of the drivers, the gas they use to get from one place to the next, and the costs of the vehicles themselves. Last-mile delivery involves a lot of driving in cities, which means dealing with traffic, stoplights, and construction, adding to the cost. And getting deliveries to customers in rural areas can mean driving long distances on roads that aren’t well maintained, both increasing the time drivers spend on deliveries and putting more wear and tear on vehicles. All of that adds up.

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