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Last mile strategy: Enabling speed and flexibility upstream

Leveraging last mile delivery logistics solutions

Increasingly, the post-purchase experience matters as much as the first leg of the buying journey. So what considerations are needed when formulating an effective last mile strategy? And how should retailers reorganise their operations to enable successful last mile delivery? See how supply chain transformations can be the ticket to success.

The current landscape

Consumer behaviour has changed dramatically over the past decade. Consumers are increasingly leveraging multiple channels to purchase goods and services. A recent study of consumer behaviour found that only 7 per cent were online-only shoppers and 20 per cent were store-only shoppers. The vast majority—73 per cent—were omnichannel customers, using multiple channels during their shopping journey.

In the current consumer landscape, the post-purchase experience matters as much as the first leg of the buying journey. Focussing on the post-purchase experience—the journey of the purchased item from channel to consumer—represents the next frontier for retailers. Previously, retailers often handed off the customer experience to a third party, like UPS or FedEx, which focussed on delivery. But as consumer expectations continue to evolve, retailers are realising the potential benefit of investing more heavily in this area.

In a span of five years, the value of same-day delivery sales has grown significantly, starting from practically zero in 2013 to more than $4 billion in 2018. Today, more than 50 per cent of consumers are willing to pay for this service. Same-day delivery is something shoppers expect.

A packaged item’s journey from production to the consumer has traditionally been broken down into three stages:

  • The first mile takes the item in bulk from a production facility to a warehouse.
  • The middle mile sees those items move from that warehouse to distribution centres.
  • In the last mile, volume shipments are broken down into hundreds or thousands of individual deliveries, each with its own route, location and timing.

Last mile strategies

Amazon has set the standard for last mile strategy, putting severe downward pressure on fulfillment service levels at much lower costs. It’s now offering free one-day delivery on more than 10 million items.

In response, other retailers are experimenting with their own last mile innovations. Walmart is testing Spark Delivery, a crowdsourced model where independent drivers pick up orders from Walmart shops and warehouses and deliver them to customers. Other companies have revamped their operations to ship to customers more effectively. A leading retailer, for example, is using its shops to ship more than 80 per cent of online orders, reducing the time to ship to customers.

Retailers are feeling increased pressure to improve their last mile delivery logistics solutions and invest in solutions that bring down the time to deliver to a customer. Still, only 65 per cent of retailers offer same-day delivery or are preparing to offer it in the next year.

Achieving faster and more flexible delivery to customers means rethinking workforce strategies around hiring and training, rewards, and scheduling to accommodate fluid work. Organisational design improvements can enable new ways of working and boost decision-making efficacy.

The road to fulfillment

What are the key changes needed across the end-to-end supply chain that enable effective last mile fulfillment? Additionally, how should retailers reorganise their operations to enable successful last mile delivery?

To date, most companies and retailers have focussed their efforts on optimising last mile transport—and for good reason. Last mile delivery logistics is the least efficient stage in the supply chain, making up 28 per cent of the total delivery cost.1 However, retailers tend to develop tunnel vision in designing efficient last mile strategy, largely concentrating on improving transport operations to enhance last mile delivery and entering partnerships with delivery service providers for faster service. But the emphasis placed on delivery service providers can limit the true extent to which effective last mile strategy can be facilitated and enabled.

Moving towards an effective last mile strategy requires end-to-end supply‑chain transformation. The transformation should examine supply chain’s people, processes and technology to help create an environment that's flexible, data-driven and customer-focussed.

Minding the gaps in the value chain

Companies should develop a last mile strategy that identifies the existing gaps in their end-to-end supply chain and positions them against the end goals. Operational improvements at each node of the value chain (such as manufacturing and distribution centres) can allow companies to design a holistic last mile solution that will reduce delivery lead times and enable more flexible last mile fulfilment options for customers. Considering both people-related changes and broader operational decisions is critical. The nodes in which those changes occur will have unique impacts on workforce, rewards and ways of working among teams. Retailers and consumer product companies can utilise the following considerations for each node of the supply chain:

To help meet the challenges of the last mile, manufacturers should rethink the following: packaging products, flexible plant layouts, and handling and shipping processes.

Historically, manufacturers have designed packaging to be shelf-ready rather than last mile-ready. Instead, stock needs to be flexibly packaged so that it can be adjusted to customers seamlessly from any channel. Last mile considerations should also drive how products are packed (whether as singles or as packs) and physically prepped (polybag, ticketing). Manufacturers will need to design packaging concurrent with product development, identifying the overlap between shelf-ready packaging and last mile-ready packaging. Packaging should also include customisable shipment and carton labelling for rapid execution of orders in downstream nodes such as warehouses and stores.

Furthermore, manufacturers will need to be able to fulfill directly from the plant to the customer, bypassing the distribution centre or store network. Doing so will entail developing the capabilities to create customised, personalised, or value-added services from the plant to ship directly to the consumer. This approach will mean creating flexible layouts and handling processes. Manufacturers will have to develop end-to-end visibility into the supply chain to identify demand triggers early, adjust to customer trends quickly and ensure products are always available for shipment.

This operational flexibility could have numerous implications for the workforce. For example, workers may be expected to navigate between various types of packaging or shipping processes based on customer demand. Identifying what processes allow for the flexible deployment of workers and which require more advanced safety protocols or certifications is important in building flexibility into operations.

The ability to redeploy workers quickly will require some to be cross-trained. Additionally, there may be benefit to the manufacturer maintaining a workforce continuum that allows for both predictability of full-time workers and the flexibility of short-term workers (gig workers). Moreover, managers will need to know not only how to identify demand triggers, but also how to flex their workforce to meet the demand accordingly.

Moving stock from shops and decentralising from massive distribution centres into mini-hubs or dark stores will help speed up fulfilment, enabling the backroom of stores to double as last mile fulfilment centres. An effective shift to this model will require adjusting store layouts to ensure efficient shipping-ready backrooms.

Technology will also play a huge role in the transition of stores, such as using product locators enabled by RFID and integrating with cloud-based, distributed order management systems to assist stores in fulfilling customer ship orders efficiently. A single view of an item and corresponding inventory, agnostic of the channel, along with integrated point of sale and manifested ship orders in the order management system, can allow the organisation to fulfil from the best possible location, whether it is a store or a distribution centre.

Finally, retailers should develop strategic alliances with other retailers to expand the reach of their networks and utilise unused capacity for shipments or customer pickups.

Similar to the other nodes, changes to store operations may affect the workforce. Like in a distribution centre, a store’s workforce should be comfortable with fluid circumstances. For example, store doors may be used for both incoming and outgoing shipments and could require cross-training to ensure that workers can flex between front-of-store and backroom operations.

Additionally, workforce scheduling may need to change to allow for more frequent shipments and potentially 24/7 operations. Changes in processes and the use of technology will also affect rewards and performance pay. Finally, store manager skills may need to expand to not only include an ability to understand data and deploy workers across operations quickly, but also to navigate new alliances among stores and strategically utilise capacity.

Distribution centres will increasingly require systems and processes that enable real-time stock and order-flow decision making to reduce pick times and eliminate process waste. Handling processes will need upgrading to execute batch and small-package handling versus pallet handling. The layouts of distribution centre facilities should be adjusted to fully leverage holistic process flows until points of divergence occur. Data flows will serve an important role at distribution points to ensure the most efficient process.

The system and process changes in the distribution centres could also have workforce implications. For example, the ability to respond to real-time inventory changes requires a workforce that’s comfortable navigating fluid circumstances and is cross-trained to shift as needed within the distribution centre. Additionally, managers will need to understand how data affects operations and the workforce to quickly redeploy workers.

Organisationally, team structures may also need to change to enable speed and flexibility. This could mean flattening the organisation, distributing decision rights closer to the work and developing “utility players” who can effectively move from one area to another based on real-time needs. Changes in processes and batch sizes will likely affect individual productivity measures and may require reviewing rewards and performance pay.

Finally, the trade-off between cost and service/speed could affect how workers are scheduled. Service-level agreements, customer promises and the like may require a change to shift schedules and reconsideration of the workforce continuum (full-time to contingent mix) to meet demand.

The benefits of a holistic last mile strategy

A holistic approach to developing a last mile strategy can offer organisations numerous benefits, as it can help:

  • Provide increased visibility and flexibility to the organisation to deliver customer products from multiple nodes within the supply chain, as well as the ability to tailor shipments to customer requirements
  • Reduce the order-to-delivery time and improve reliability, enhancing customer experience and increasing overall competitiveness
  • Build trust with current customers and gains new customers through an enhanced delivery experience.
  • Decrease the total cost of last mile delivery logistics through efficient processes and reduced waste through the network

Before making the shift, retailers and companies should recognise the barriers that stand in the way of succeeding in this integrated and holistic approach. For example, lack of reliable and actionable data and insights makes decision-making a challenge. Also, limited system infrastructure and capabilities can cause poor cross-functional visibility, rendering reporting a challenge for a holistic approach. One of the most stubborn obstacles is cultural. Organisational siloes, accountability and controls can make end-to-end thinking and approaches in traditional organisations a cultural barrier.


1 Barry Hochfelder, “What retailers can do to make the last mile more efficient,” Supply Chain Dive, May 22, 2017,

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