What are the forces driving the evolution?
There are three main factors driving the evolution in the last mile logistics space:
1. Urbanization: As more and more people move into cities, which is increasing the consumer density, the resultant constraints in capacity and infrastructure further complicate the overall shipment process and constantly change the way orders get fulfilled and delivered to end consumers.
2. Consumer Behavior: As more people are getting used to on-demand consumption, where they get instant gratification by receiving their orders within hours, it’s forcing shippers to re-evaluate their last mile supply chain logistics and fulfillment policies.
3. E-commerce: The COVID-19 pandemic forced a lot of traditional brick and mortar shoppers to buy products online, which has changed the perception of the e-commerce experience for many. This is likely driving more traffic to e-commerce channels, which is causing many shippers to invest in auxiliary facilities and last mile deliveries to service new customer needs.
What are the key challenges?
Effective optimization of cost, service, and assets are the inherent challenges within last mile logistics. We know that urbanization brings uncertainty in supply and demand with traffic congestion, random disruptions such as road closures, diversions, accidents, and many other unplanned variables. These, along with constrained capacity and infrastructure (such as parking regulations, more frequent stops etc.), make modeling network design and routing for the last mile extremely complex. This is further complicated with the lead times running into hours, making it less flexible and cost efficient to service the customer within a short delivery time window.