What is the Last Mile Delivery?

Last mile delivery comprises 53% of overall shipping costs.

In the shipping and delivery business, the Last-Mile Delivery means the final stage of delivery to the destination. Customers usually see tracking status like Out for Delivery or On Vehicle for Delivery. The final delivery destination is often a personal residence. The cost of delivery at the final stage is the most expensive portion of the shipment. It could account for 53 percent of delivery costs overall. [Other costs are Line Haul 37%, Sorting 6%, and Collection 4%.] Depending on the destination, the delivery person needs to go door-to-door to drop off packages. The last stage of shipment means it can be a couple of flights of stairs or a long drive to a rural location. Either way, this segment of the delivery is very costly since it’s both time consuming and energy exhausting activities.

Why is Last Mile Delivery important for the retailers and customers?

For customers, the last-mile delivery is also an experience between the customer and the retailer. This is where online meets humans, it is crucial for the customer's experience. This experience could harm a company's brand image if the package is left out in the rain, gets lost, or arrives damaged, or even gets delayed. The behavior of the delivery person could be included in the customer's purchase experience resulting in complaining about the rating on the purchase.

In the competitive nature of the online market, for retailers, having a high brand image and keeping up with the cost of delivery are the most important things. In some cases, damaged packages or lost deliveries can add a heavy toll to the business's revenue. To maintain high customer satisfaction, there is a growing demand for fully integrated omnichannel retailing with last-mile logistics. The experience and cost of last-mile delivery could be a key differentiator for retailers as customers can easily shop alternative retailers.

For delivery companies, delivery attempts can increase the overall shipping cost if the recipient was not at home, and the delivery requires a signature. Last-mile delivery is becoming more critical than ever due to the surge of online orders. Retail e-commerce sales are expected to reach $600 billion in 2024. In 2019, U.S. online retail sales of physical goods amounted to 365.2 billion dollars. These projected increases span across various product types, including apparel, food, health & beauty, entertainment, electronics, accessories, and more.

Retail e-commerce sales in the U.S. from 2017 to 2024

What are the Challenges of Last Mile Deliveries?

On August 9, 2019, USPS reported a net loss of nearly $2.3 billion in its fiscal 2019 third quarter, an increase of $767 million from the same period in 2018. According to a report by the Government Accountability Office, costs related to USPS's last-mile delivery network have increased to $21.1 billion in fiscal 2018 from $17.7 billion in fiscal 2008.

For years, the giant online retailer, Amazon, has established its own in-house delivery system. Now Amazon can meet USPS' ultra-low shipping rates, a Morningstar consumer-equity analyst, Hottovy said. The retailer's price-per-package hovered around $3.50 in Q2 2019, is just slightly above what Amazon pays the Post Office to move its packages.

The main difference between Amazon and other shipping companies, Postal services or UPS, is they all have unionized workforces, and that means additional costs needed to cover the benefits, such as health insurance or pensions. As a result, Amazon's delivery system is less expensive per unit in part, according to the Industry expert Nicholas Farhi, a partner at OC&C Strategy Consultants. Amazon's delivery network system consists of three different labor sources: Amazon drivers directly employed by the company; Amazon Flex drivers, who are contractors; and Delivery Service Partners (DSPs), which are small businesses nationwide that deliver Amazon packages. None of these workers are unionized.

However, Amazon can never cut off the tie from USPS because, as mentioned earlier, Amazon needs someone to deliver the last mile in rural areas due to the less dense customer areas. But what happens if USPS cannot continue its business, who can make the last-mile delivery in rural areas? If it happens, it will be an ultimate challenge for Amazon.

Are delivery robots the answer to the billions dollars question of last-mile delivery?

Since CES 2019, there have been many automated robots that want to solve many of these last-mile problems.

Here are some of the contenders:

Nuro: An automated and battery-powered delivery vehicle that may be apt for the delivery of hot food and fresh groceries.

Toyota Boxbot: A self-driving electric van designed to manage more complex, expensive deliveries, such as those that require a signature.

Loomo Delivery: a robot looked like an office copier and used as a personal transporter in the office.

Anymal dogs and Continental van: A team of autonomous delivery vans developed by Continental with robotic dogs developed by Anymal, where dogs deliver the goods.

Postmates Serve: Serve is a tiny robot that can carry up to 50 pounds over a 30-mile radius running with four wheels.

SameDay Bot: An autonomous delivery device developed by FedEx and Pizza Hut. It can navigate unpaved surfaces, curbs, and even steps for a door-to-door delivery experience.

Starship Robots: A six-wheels robot with a container capable of carrying up to 20 pounds, aiming for food delivery. The customer can use the app to open the cover.

Robomart: An autonomous van filled with fresh groceries.

TeleRetail: For small and local businesses to compete against Amazon. It can navigate on the sidewalk.

List of Delivery Robot Contenders for the Last-Mile Delivery

Who can solve the last mile delivery issues?

Most of the last-mile robots are wheels-based, which means that navigating unknown terrain must be challenging. Perhaps, developing a bipedal robot that mimics the human ability to navigate could solve the last-mile logistics solution. In 2019, Ford and Agility Robotics announced they are working together to develop a bipedal robot, Digit. It is based on a prototype, ATRIAS, a robot developed by Oregon State University's Dynamic Robotics Laboratory, which models the chicken and other two-legged creatures. Digit is capable of navigating the best route to the front door. It can navigate across many different real-world walking conditions, such as sidewalks, grass, and stairs. It can even react to being bumped without losing its balance and falling over. If it encounters that it cannot be resolved, Digit will ask for help from the vehicle, Ford Transit Connect, like the mothership. The cargo vehicle will request further assistance from the cloud, and the information will be relayed back to Digit to navigate around the obstacles. Since Digit is equipped with cameras and LiDAR, a distance measuring technology, Digit can understand the distance between itself from the objects.

Team up with Transit Connect, the cargo van carries more than one Digit and can deploy them to the delivery tasks. Digit's unique design allows it to fold itself in the back of the self-driving vehicle. The combination of Transit Connect and Digit seems to solve the critical challenges of last-mile delivery, especially facing the complexity of the unstructured landscape of the real world. This bipedal robot with autonomous driving vehicle solution looks promising for solving the last mile delivery logistic issues. This scenario surely resembles a scene from Will Smith's I, Robot. Isn't it?

Another realistic contender besides the two-legged robot, the aerial delivery drones, seems promising as well. In 2019, the autonomous last-mile delivery market was sized at 12 billion U.S. dollars. It is expected to grow to 91.5 billion U.S. dollars by 2030. In the coming years, we shall see who is leading the race of solving the last-mile delivery. Delivery robots or aerial delivery drones? What do you think?