Things You Should Know about Last Mile Delivery
Author: Ben Wunderman -- CEO & Co-Founder, Packsmith
E-commerce has quickly become a ubiquitous part of our lives, offering radical convenience and accessibility to consumers across the United States and around the world. However, the rapid growth of online shopping has also led to rapidly increasing environmental impacts, especially in the most inefficient stage of the e-commerce value chain: last mile delivery.
The “last mile” refers to the final leg of the e-commerce delivery process from a fulfillment or distribution location to the customer's doorstep. While e-commerce actually produces 36% fewer carbon emissions on average than in-store options. Even after factoring in higher returns and packaging, the logistical inefficiencies of e-commerce today mean that— at growing scale— the last mile of e-commerce is a major contributor to climate change. By 2030, the World Economic Forum estimates that there will be at least 36% more e-commerce delivery vehicles on the road and an additional 6 million tonnes of CO2 in the atmosphere due to e-commerce alone.
In this blog post, we will explore the three most effective strategies that sustainably-minded e-commerce brands can adopt to minimize the direct climate impact of their business, reduce costs, bring down shipping times, and establish long-term sustainability for last mile delivery.
Distributing Inventory & Localizing Fulfillment
According to the World Economic Forum, last mile delivery accounts for around 53% of an e-commerce brand’s total shipping cost and around 41% of a brand’s overall supply chain cost. This massive cost is driven by one main factor: a brand’s inventory is usually held hundreds or thousands of miles away from the consumer. When a consumer orders a product, that order is typically fulfilled and then shipped over a long distance— driving up shipping costs, ensuring long delivery times (the average e-commerce order in the United States reaches the buyer in 6-10 days), and limiting deeper market penetration.
The most impactful way for e-commerce brands to reduce the climate impact of last mile delivery is by bringing inventory and order fulfillment closer to end customers. According to Accenture research, localized fulfillment could lower last-mile emissions between 17% and 26% by 2025. MIT Real Estate Lab research also estimates that distributed fulfillment can reduce transportation-related emissions by up to 50% overall and by approximately 10% per package.
Consolidating Shipments & Optimizing Delivery Routes
Consolidating shipments and optimizing delivery routes using algorithmic routing technology is another highly effective strategy for reducing last mile delivery emissions and improving efficiency at the same time. Transportation is e-commerce’s largest source of carbon emissions, and consolidating deliveries on “circular” routes can reduce those emissions by almost 90% according to MIT Real Estate Lab research. By combining multiple orders that are going to the same area into a single delivery vehicle using AI-driven routing technologies, e-commerce brands can dramatically reduce the number of vehicles on the road and the number of miles driven.
A full standard van can replace more than 100 individual car-based deliveries and this approach not only decreases overall fuel consumption (including charging electric vehicles), but it also reduces shipping unit costs by at least 30% and congestion in our suburbs and on our streets by around 30%. If electric vans or other zero-emission delivery vehicles (cargo bikes, electric scooters, etc) are used to deliver consolidated goods on optimized routes, then last mile emissions can be reduced by an additional 27% on average.
Distributing inventory correctly and running localized fulfillment and shipping operations can be difficult— most logistics providers in the e-commerce industry only have a few large warehousing and fulfillment locations across the country, with limited ability to use sales data to optimize the geographic allocation of inventory. This severely limits the ability of brands to effectively distribute inventory and fulfillment without doing it themselves.
Similarly, optimizing delivery routes can be hard for brands to influence if they aren’t handling shipping or last mile delivery directly. As almost 100% of e-commerce shipping volume flows through the large national carriers, sustainability-minded brands have had little choice or influence when it comes to the optimization and sustainability of last mile delivery itself. However, as between 50-65% of abandoned e-commerce carts are attributable to shipping speed or cost, very few brands can afford to ignore this issue.
Luckily, a revolutionary breed of sustainability-focused logistics providers (transparently, we at Packsmith are one of them) have emerged to provide growing e-commerce brands with effective local fulfillment and delivery through a distributed network of inventory pools that are optimized based on the geographical distribution of real orders and real customers.
Most importantly, the working capital of most e-commerce brands is tied up in product inventory. Truly distributed logistics providers work to optimize a brand’s existing inventory for accelerated growth and deeper market penetration— reducing the capital and inventory pressure that brands face on a daily basis while
Choosing “Order Optimized” Sustainable Packaging
Packaging waste is a significant concern in the e-commerce industry, and packaging is currently the largest source of carbon emissions from e-commerce (even if the opportunity to reduce emissions is greater when it comes to last mile delivery itself). As emissions from e-commerce packaging are approximately six times higher than in-store shopping and brands usually have full control over their packaging (including the packaging used for shipping), brands have a unique opportunity to positively shift the impact of their packaging as well as share that sustainability story with their customers with every purchase.
Firstly, implementing packaging optimization strategies— such as right-sizing packages and eliminating “shipped air”— can significantly reduce the amount of material used in each shipment and the overall impact of each delivery. By using frustration free packaging options made from sustainable materials that match the size and weight of products, e-commerce brands can minimize wasted space and reduce the overall outgoing volume of packages. This is particularly important for single-item shipments (usually at least 60% or more of an e-commerce brand’s total sales for a given period, often as high as 80%) and product bundles, as reducing the number of packaging combinations needed is critical for fulfillment efficiency, packaging cost reduction, and meaningful sustainability.
Secondly, e-commerce brands should prioritize the use of sustainable packaging materials in all of their packaging choices. Biodegradable, compostable, and recycled materials can easily replace plastics and other non-sustainable materials without sacrificing the brand’s unboxing experience or reducing package durability during last mile delivery.
Reducing the usage of cardboard boxes can be key here: using a long-lasting paper bag or compostable mailer instead of a box can reduce average last mile delivery emissions by more than 36% for the typical e-commerce brand. More importantly, this strategy quickly reduces a brand’s core packaging costs and can dramatically increase logistical efficiency for any growing e-commerce brand.
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