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Blog September 2023

From Store to Fridge: Digital Innovation in the Last Mile

Explore how digital innovations are transforming the last mile delivery in e-commerce. From drone deliveries and autonomous vehicles to IoT and AI, are you prepared?

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Henrik Lerke

AMCS Transport Director EMEA

Remember Tom Hanks in ‘Cast Away’? For anyone who missed it, it’s a survival drama featuring Hanks as a FedEx executive plunged into the nightmare of a lifetime - isolated on a deserted island after his delivery plane crashes. 

He comes face-to-face with the grim reality of survival and deals with the hard-hitting fact – timely delivery suddenly means something entirely different and existential. Looking back to the 2020 pandemic, we found ourselves in our own 'Cast Away' situation, stranded at home - not on a deserted island, but due to a global pandemic.

The Amazon Prime Culture

Fast forward to today, an era where patience is often a rare commodity, "quick and free" have become the mantra - especially when it's about our precious online orders. We're all a part of the Amazon Prime culture where two-day shipping seems like an eternity. It's hardly surprising that according to a report by McKinsey, nearly 25% of consumers are happy to pay premiums for same-day or instant delivery and 73% of shoppers would rather abandon their online cart than pay a dreaded delivery fee (I'm guilty of it too).

This demonstrates how customers today are not just looking for deliveries; they demand speed, flexibility, and transparency in their delivery experience. They expect to receive real-time updates on their orders, precise delivery timeframes, and the ability to customise delivery preferences. Seamless returns and easy communication with delivery personnel are now part and parcel of customer's expectations. 

And the key battleground? The final leg of the journey, known as the last mile.

The Trickiest Mile in E-Commerce

The 'last mile', though it sounds short and straightforward, is often the most complex phase of the fulfilment chain. It requires strategic planning and execution with a creative blend of logistics and technology to navigate successfully. From order processing and warehouse management to route planning and delivery execution. 

Delivering on time to a variety of destinations, especially in densely populated urban areas fraught with traffic congestion, is a daunting task. The challenges are different but no less severe in rural areas where inefficient route planning can lead to wastage of time, distance travelled and therefore, increased fuel costs. Not to mention, many online retailers operate on razor-thin profit margins, making cost-efficient online deliveries a difficult proposition.

Did you know, the last mile can make up 53% of total delivery cost, making it the costliest part of the supply chain? Moreover, each failed delivery incurs an additional cost, with an average of U.S. $17.78 per failure. With an alarming 5% of all last mile deliveries failing, it leaves a tight space for profit margins. 

Under this mounting pressure, how do businesses balance their margins and the vital need for speed and accuracy in delivery?

Digital Innovations in Last Mile Delivery

First Drone Delivery 

Remember 7-Eleven's ground-breaking drone delivery back in 2015? It was the first FAA-approved drone delivery, marking the dawn of a new age in retail logistics. Today, giants like Amazon are also exploring this space, bringing us closer to a future where our packages are delivered by drones. However, many sceptics doubt the feasibility of this concept in the near future due to numerous challenges. These include privacy concerns, noise pollution, limited carrying capacity, and the complexities of managing and operating the drones. Additionally, there are legislative issues to consider, such as the regulations around flying drones in densely populated areas.

Autonomous Vehicle Delivery 

The pandemic fuelled the demand for contactless services, Chinese tech giants Alibaba, Meituan, and JD.com deployed over 2 thousand robots for delivery services in 2022. 

Ford, Walmart, and Postmates have also joined forces to design a service that delivers groceries and other goods using autonomous vehicles. The goal? To reduce the costs of last mile delivery. With falling production costs and the need for safer delivery methods, these robots are poised to revolutionise the delivery landscape, despite their current limitations. 

Self-Service Lockers 

And it's not just about drones and autonomous vehicles. Retailers are also leveraging digital technology to offer self-service lockers, allowing customers to pick up their orders at their convenience. Amazon led the way, with other major retailers like Home Depot and Walmart following suit.

From Store to Fridge 

Albert Heijn is pioneering a new way of grocery delivery with the help of Smartlock developer, Nuki. The concept is simple yet innovative. A smart lock allows residents to unlock their doors remotely, and with an accompanying camera, they can see who's at the door. When the delivery person arrives, the resident is notified on their smartphone and can let them in. The groceries are then placed in the cooler, and the delivery person leaves. However, it's worth noting that smart locks come with a hefty price tag, costing up to three hundred euros

This raises an interesting question: Would you be comfortable with a delivery person stocking your fridge in your absence?

IoT and Real-Time Packaging Tracking 

DB Schenker, a European logistics provider, is introducing an ultra-thin tracking label for global shipment tracking. The label, which can be affixed to containers, pallets, or individual cartons, allows for tracking across land, air and ocean transport. This development provides customers with real-time data about location and condition and includes a security measure that sends an alert if the package is tampered with. Additionally, the label features a lithium-free battery, contributing to environmental sustainability.

AI Chat for Improved Customer Service 

AI-powered customer service chatbots are also being used to reduce costs and increase customer satisfaction by notifying the customer, presenting alternative delivery options like rescheduling or rerouting to a nearby pickup point, minimising inconvenience and reducing the burden on customer service teams.

By seamlessly integrating these advanced processes and technologies, this next-generation online home grocery delivery experience exemplifies customer-centricity, raising customer satisfaction and setting new industry benchmarks.

Optimise Your Last Mile with AMCS

Home delivery services face a unique set of challenges, such as route management, cost reduction, and customer satisfaction. With the AMCS Transport Optimisation Suite, we offer a comprehensive solution that is designed to address those challenges head-on. It uses advanced algorithms to optimise routes, cutting down unnecessary travel and ensuring deliveries are made on time, even within strict deadlines. But it goes beyond mere efficiency. Our suite is crafted to improve your customer experience, facilitating better planning, and significant cost savings.

From 'what-if' simulations to optimising your master plans, coordinating with warehouses, and analysing performance, this suite covers strategic, tactical, operational, and post-operational logistics. Our system is designed to adapt to your unique operational needs, providing real-time updates, efficient route planning, and seamless integration with existing IT systems. By reducing planning time, operational costs, and CO2 emissions, we help you achieve a more sustainable and profitable business model. 

Just like Tom Hanks in 'Cast Away', we've all faced our own delivery challenges. But unlike Hanks, we have the power of digital innovations at our disposal. Let's optimize your last mile together, making every delivery count.  

Request a demo today to see how our solution can streamline and enhance your transport planning and execution, enhance efficiency, minimize costs, and refine your delivery service.

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