Fueled by Technology: Shifting Gears to Delivery Performance in Last Mile

As a transportation industry insurance professional, I’ve seen the last mile delivery segment experience drastic growth and change in the last decade, and 2024 is no exception. According to a survey of 300+ global last mile leaders, the last-mile landscape is undergoing a transition from a customer satisfaction-centric approach to a performance-oriented approach.

On-time delivery rates have risen to 62% in 2023, up from 45% in 2022, and the focus on cost per delivery has increased to 78% in 2023, up from 55% in 2022. These increases come as a direct result of a logistics strategy based on improving the efficiency and reliability of deliveries made, with advanced technologies in the driver’s seat.

With this intensive focus on on-time delivery performance, last mile logistics providers are faced with the opportunity to optimize operations and their service level – and to minimize the risk of growing market pressures – including labor problems and rising auto insurance rates.

Improving Delivery Performance While Optimizing Cost Management

Let’s take a look at the challenges to optimizing delivery performance, effective solutions and their benefits:

Challenge – Driver Productivity

The greatest hindrance to delivery speed is driver productivity, caused by inefficient route planning.

Solution – Delivery Management Software Powered by AI – Advanced route optimization algorithms can automatically generate the most efficient routes to drivers, and facilitate seamless rerouting when needed. According to a report by DHL, AI-driven big data analytics can improve delivery efficiency by up to 20%.

Challenge – Driver Safety & Rising Auto Insurance Rates

The leading cause of accidents, in last mile, continues to be driver negligence and distracted driving. The pressure to complete on-time deliveries has led to an increase in unsafe driving behaviors, such as speeding, running red lights, and reckless driving.

Solution – Telematics – Implementing telematics solutions that promote safe driving habits will mitigate risky driving, improving delivery performance and your company’s risk profile, which could lead to better insurance rates. Driver behavior based on telematics data is quickly becoming an important underwriting criterion.

Challenge – Labor and Workforce Management

The last mile delivery industry faces challenges related to labor shortages and workforce management, including IC misclassification and compliance issues. As e-commerce continues to grow, the demand for delivery drivers and logistics personnel increases. Balancing workforce needs with operational efficiency remains a critical issue.

Solution – Workforce Technology – Implementing technology that handles workforce management will mitigate the risk of misclassifying ICs and non-compliance. Attracting and retaining talent in a competitive job market will be easier with technologies that support and train drivers.

Challenge – Demand Forecasting & Capacity Utilization

Inaccuracy in demand forecasting can wreak havoc on resource management and operational expenses.

Solution – Leverage AI To Forecast Demand & Reduce Costs – By leveraging AI and emerging technologies, last mile delivery companies can proactively scale their operations, ensuring timely deliveries, all while reducing operating costs and improving service levels.

Challenge – Failed Deliveries

With every failed delivery comes more expense. An astonishing 5% of all last mile deliveries fail.

Solution – Real-Time Tracking Technology – Real-time tracking and communication provide customers with the ability to make last-minute changes or reschedule deliveries, resulting in a reduction of missed deliveries and a better customer experience.

Challenge – Urban Traffic Congestion

As e-commerce grows, delivery speed in densely populated urban settings is becoming extremely difficult to achieve.

Solution – Delivery Hubs, Drones & Autonomous Vehicles – Micro-fulfillment centers allow for faster and more efficient delivery by storing popular items closer to where customers live. Innovations such as autonomous delivery vehicles and drones have the potential to reduce delivery times and lower costs. However, regulatory hurdles and technological limitations still pose challenges.

Keeping Pace with Technology to Get Ahead of Rising Costs

There’s no question that the last mile/home delivery industry is being driven by fast-emerging technological advancements. Those businesses that can anticipate and integrate the latest technologies will optimize their operations and improve delivery performance, leaving them well-positioned to navigate the increasing market pressures of rising insurance rates and labor costs.

Sources

FarEye, Eye on the Last Mile 2.0

Jesse Lyon, PLUS

Jesse Lyon has twelve years of insurance experience including more than two years in the final mile segment as a commercial lines account manager for BizCHOICE. He is deeply interested in the fields of cyber liability and technology E&O as well as alternative fields such a renewable energy. His research has led to numerous published papers on those topics in the U.S. and the U.K.