Modern-day customers are sophisticated in their demands. There is an increased need for last mile deliveries as McKinsey reports that about 20-25% of consumers go for same-day shipping over the standard delivery options available, even when they have to pay extra.
With increasing volumes of instant deliveries, the cost of last-mile deliveries also increases. Therefore, all online retailers need to understand these costs and optimize them to ensure they offer excellent customer service while reaching their revenue targets.
The Cost of Last Mile Delivery
The cost of last mile delivery directly impacts the entire cost of an organization’s shipping costs. They include:
Labor Costs
The delivery provider is an essential part of the supply chain. Therefore, they are the most significant expenditures, amounting to about 50-60% of last mile delivery expenses. The truck drivers who deliver the goods from stores right to the customer’s doorstep are the most expensive.
The Bureau of Labor Statistics (US) reports that truck drivers’ average wage is about $15.12 per hour and can range from $9.43 to $29.39. Express deliveries are even more expensive, going to around $25.10 per hour. Increased customer demands mean more deliveries and an increase in labor costs.
Fuel Cost
Fuel accounts for about 10-25% of the entire last mile delivery expenditure. It may seem like a small amount, but it can significantly impact the overall costs. Fuel costs often increase as businesses scale and enter new markets. Increasing delivery spans as you cover large areas leads to extra expenses on fuel. Still, predicting accurate fuel costs using manually generated insights is impossible, leading to downtimes.
Delivery Management Software
Delivery management software is the key to streamlining last mile delivery processes. It can also be costly when the business does not plan and optimize it effectively. There are various features in the software that are complex to develop and may push companies to invest more money to create solutions that suit their needs.
The technology you choose should automate most of your operations to ensure you avoid having to pay extra. The optimized costs will help you get better features and get reliable services that customers can trust. Also, working with a reliable delivery management software provider can help to ensure there are no hidden costs that may cost you the bottom line.
Reasons Why Last Mile Delivery Is So Expensive
Apart from the cost of last mile delivery, some reasons make it an increasingly costly venture. For example, the change in consumer expectations increases the need for businesses to invest in real-time delivery tracking. Such features are expensive when a company has to create them.
Also, some customers demand free shipping where the company will have to take care of the shipping costs and not charge customers. It makes it challenging to manage the budget that your business has.
Businesses must have a reliable tech stack and route optimization tools to eliminate failed deliveries. Also, having the right technology will ensure you optimize your process and streamline the last-mile delivery.
Elite EXTRA offers reliable dispatch software that enables online retailers to make their deliveries smooth. Contact us today to learn more about our solution.
