8 Proven Ways to Reduce Last-Mile Delivery Cost

Reduce Last Mile Delivery Costs

Last-mile delivery, along with returns, is one of the final steps in the supply chain, accounting for approximately 53% of total supply chain costs. This is because many factors make up the last-mile delivery costs, like fuel, labour, reverse logistics, return and replacement, environment, maintenance, and storage.

Consumer gratification and a surge in e-commerce have increased the demand for efficacious last-mile delivery services. Services like same-day delivery, free shipping, and failed deliveries are also why last-mile delivery costs have heightened in the past couple of years. To accommodate this rising demand, devising a proper delivery system is necessary to make the process as economically efficient as possible.

1. Route Optimisation

Pre-planning the prime delivery routes will cut fuel costs and increase labour productivity. Route optimisation will forecast any congestion, road blockages, or even weather conditions in the particular area at the time of delivery. Route optimisation can also be mindful of the consumer’s time window and pick the appropriate route for that time frame. 

With today’s GPS tracking systems, route planning can be wholly automated and fully effective, contributing to cost reduction in the industry. Mapping the optimum routes will also help vehicle efficiency, which is cost-effective in the long run.

2. Multiple Delivery Options

Giving consumers the option to choose their delivery preferences will enhance the customer experience and reduce delivery expenses. Providing different delivery options will let the company plan deliveries around the time frame and reduce costs on any features that consumers do not want. Multiple delivery options allow last-mile delivery companies to levy the appropriate delivery charges. For example, if consumers do not opt for same-day delivery, they can choose a later date and a convenient time slot to receive their orders. Multiple delivery options not only help to reduce costs by eliminating unnecessary processes, but they also help to reduce the number of returns and failed deliveries.

3. Enable Real-time Tracking

Real-time tracking is essential in building consumer trust, and helps in reducing last-mile delivery costs. Real-time monitoring lets consumers track their packages live and gives them information like when their orders were shipped, the estimated time of arrival (ETA), whether their package has been sent to the nearest warehouse, or if their delivery agent is on the way. Real-time updates reduce the chances of failed deliveries, reduce miles travelled, and improve productivity, thereby reducing the cost of last-mile delivery.

Last-mile delivery companies can also analyse this real-time data to identify any anomalies in the delivery system. This analysis can be used to take adequate measures to rectify these anomalies, enhancing efficiency and cutting down on any costs that ineffectual contingencies can incur in the last-mile delivery industry.

4. Implement Auto-Dispatching

Assigning dispatch tasks manually can be tedious and time-consuming. By automating dispatch, deliveries will be better organised and assigned, allowing for more deliveries and less travel time. Auto-dispatch technology will automatically allot drops to delivery agents. By automating dispatch, labour costs go down, and productivity increases because more deliveries can be made in an organised way.

Auto-dispatching technology coupled with route optimisation helps reduce fuel and labour costs, is environmentally sustainable, and helps manage resources adequately.

5. Delivery Verification

Verifying deliveries will allow companies to have view the location and time of the completed delivery as well as confirm if the package has been delivered to the right consumer. Proof of delivery(POD) accurately depicts when each task is completed. Drivers can also collect barcodes, QR codes, and pictures for proof and signatures to safely collect essential data, which can later be analysed to enhance last-mile services. The benefits of delivery verification are:

  • Provide for better consumer experience as companies can have better visibility into the consumer’s orders allowing them to know if the order has been delivered promptly or not.
  • POD reduces the chances for returns and replacements, reducing the cost of refunds.
  • Electronic proofing reduces the cost of paperwork and any other manual tasks required after the delivery.

6. Reverse Logistics

Last-mile companies often do not focus on finessing their return service. However, a smooth return service adds to consumer satisfaction. This is where reverse logistics come into play. The objective of last-mile services is to increase customer satisfaction; a simple return procedure accomplishes this. An efficient reverse logistics system can exponentially reduce last-mile delivery costs caused by returns and replacements. Reverse logistics provides companies with benefits such as increased sustainability and reduced inventory holding costs.

7. Decentralised Warehousing

Reducing the distance between a warehouse and the end customer is a good way to reduce last-mile delivery costs. Having a warehouse in the middle of an urban location with many potential consumers makes it easier to get to the customer and meet the short delivery window. This can also be achieved by having smaller warehouses called “forward stocking locations” (FSL) closer to the end user in a more localised area. FSLs reduce shipping costs and manage inventory distribution. 

8. Enhance Load Distribution

Often, last-mile delivery companies underutilise the vehicle load capacity to meet shorter delivery windows. The goal of load optimisation is to get the most out of the transport vehicle’s capacity so that shipping and transportation costs can be reduced. Improving load distribution can reduce the number of vehicles and human resources, thereby mitigating costs in transport and maintenance while enhancing efficiency and precision.


Reducing costs in the last-mile industry does not equate to compromising on good service. The logistics industry is working towards bridging the gap between consumer satisfaction and making profits. Especially with the availability of modern-day technology and tools that can automate most manual processes, it is safe to say that the last-mile industry will become more lucrative and cost-effective in no time. 

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