Supply Chain Scanner - Week of March 10, 2025

Weekly blog by Emily Atkins

Last mile headaches costing logistics providers

In an environment where speed and trackability are keys to the success of a last-mile delivery business, predictability in routing is critical. Yet a large majority of last-mile providers report that they often have to adjust routes on the fly, creating delays and costs.

In new research, 70 percent of respondents, comprising 2,500 professionals in logistics, retail, manufacturing, and transportation jobs, said they frequently have to change routings, and 39 percent said they do this multiple times each day. Drivers are most commonly forced to change routes due to congestion and construction, but inaccessible addresses and lack of parking also contribute to the problem.

When you’re on a strict schedule to get a certain number of deliveries completed during a shift, having to reroute can cause cascading delivery failures. Logistics providers are also up against vehicle capacity constraints and labour shortages that add to the pressure.

Missed delivery windows can mean the loss of a sale for the retailer and loss of reputation for the carrier. Routing changes mean longer times on the road, adding up to increased risk, increased fuel costs, poor working conditions for drivers, and potentially even more lost time for electric vehicle drivers if unscheduled battery top-ups are needed. In a market where drivers are already hard to find, adding stress to their jobs is not a good retention strategy.

In the survey, 40 percent reported that between six and 20 percent of deliveries arrive late as a result of route planning challenges. As well, 22 percent cite poor routing as a major cause of increased fuel costs.

Logistics costs have been steadily increasing, jumping by 19 percent in the past year, according to Kearney’s annual state of logistics report, and last-mile delivery is a big culprit in the escalation. And with these costs eating up between 40 and 50 percent of supply chain budgets, service providers have a big incentive to find ways to keep them under control.
Companies are increasingly turning to technology as one line of defence.

With artificial intelligence becoming smarter and more capable, new routing software can significantly assist in reducing costs due to congestion and other somewhat predictable hurdles. AI-based routing can take account of patterns in traffic congestion, weather conditions and truck capacities to make smart routing decisions that save time and money.

Logistics providers are also turning to automated dispatch and scheduling, which take human errors out of the equation as well as increasing the volume that can be managed. Automated notifications allow customers to be prepared for deliveries, and real-time updates can mitigate potential reputational risk when drivers do end up being delayed.

Last-mile service providers are also applying fleet management techniques to manage costs. Updating fleets to electric, for example, is one strategy that can work under specific conditions, such as when routes are well-defined and consistent. Other companies may opt to use less conventional delivery vehicles such as cargo bikes or autonomous units that can maneuver around dense urban areas where regular trucks are too large.

On the staffing side, using gig-work drivers can fill gaps when the regular labour force is not sufficient, such as during peak seasons. Likewise, sub-contracting deliveries to third parties can also help take up the slack.
Finally, there’s always the option of increasing your prices. However, the current market does not really support that option, as declining parcel volumes shift the market towards the shipper. Still, in certain circumstances, a contract revision might be the answer.

What has your organization done to master the last-mile challenge? If you are a retailer, have you worked collaboratively with a 3PL to address these challenges? As a service provider, have you adopted more sophisticated routing software to keep costs down?

Please share your experience on LinkedIn. What has worked for you?

Join the conversation on Canada’s Logistics Community forum!

Emily Atkins
President
Emily Atkins Group

 

Emily Atkins is president of Emily Atkins Group and was editor of Inside Logistics from 2002 to 2024. She has lived and worked around the world as a journalist and writer for hire, with experience in several sectors besides supply chain, including automotive, insurance and waste management. Based in Southern Ontario, when she’s not researching or writing a story she can be found on her bike, in a kayak, singing in the band or at the wheel of her race car. LinkedIn: https://www.linkedin.com/in/emilyatkinsgroup/