This article focuses on critical aspects of last-mile delivery, highlighting advantages for businesses. We discuss key digital solutions essential for addressing last-mile supply chain challenges, such as drones, sidewalk autonomous delivery robots, mobile robotic stores, and the utilisation of smart lockers and mailboxes.
What is last-mile delivery and why is it important?
Last-mile delivery is the final step of the delivery process that involves moving parcels from distribution hubs to a customers’ hands. It is one of the most important aspects of a supply chain from the customer experience perspective, because it is the key touchpoint between businesses and customers. Particularly in the context of e-commerce, there is an increasing demand from customers for next-day or same-day deliveries, which has put businesses under extreme pressure to expedite this process by adding more resources, which ultimately increases their supply chain costs. It is estimated that the last mile accounts for 40-50% of total parcel delivery costs and is one of the most expensive journeys of the supply chain. It is also one of the most significant contributors to total supply chain carbon emissions.
In this context the implementation of digital solutions in the last-mile delivery process can be very beneficial.
Digital solutions enhancing the last-mile of the supply chain
The key digital solutions that can transform the last mile of the supply chains are drones, sidewalk autonomous delivery robots, robotic stores on wheels (also referred to as store-hailing and mobile robotic stores), and smart lockers and smart mailboxes. We discuss each in turn below.
Drones
Drones are being used to deliver food products, convenience items, and medical supplies such as vaccines. Their use can result in faster deliveries, with lower carbon footprint, and lower operational costs. The industry is supported by specialist drone delivery service providers like Wing, Zipline, DroneUp and Flytrex. While some drone delivery vendors are targeting a wide range of verticals, some are focused particularly on healthcare because time-criticality and willingness to pay in the case of healthcare are higher. Although e-commerce giants such as Walmart, Amazon, UPS, DHL, and Alibaba are already using drones for deliveries, their adoption is still at an early stage and only within limited geographical areas. For instance, as of May 2023, Amazon had completed just 100 drone deliveries. One of the reasons for slow growth of this area are strict regulations that relate to the use of drones, many of which can be found in Transforma Insights’ Regulatory Database.
Sidewalk autonomous delivery robots
These small delivery robots are used to make autonomous last-mile deliveries of small packages (such as groceries) using pedestrian areas alongside roads. The benefits of sidewalk autonomous delivery robots include affordability, cost efficiency, and faster service (particularly in congested locations since these robots can avoid road traffic). Although many of these robots are now capable of Level-4 autonomy and so can handle navigation without human intervention, during emergency situations a remote supervisor can take back control. Sidewalk autonomous delivery robots are already being used to deliver groceries and other items in Europe, China, and the U.S. For instance, Starship Technologies has partnered with George Mason University to offer on-demand food delivery using autonomous wheeled robots. Students can order from various eateries and their orders are delivered within 15 minutes. In addition, they can track the robot’s progress via an app and receive an alert upon arrival, so ensuring a seamless ordering experience for the students.
Robotic Stores on wheels
Robotic stores on wheels (also referred to as store-hailing and mobile robotic stores) allow customers to summon retail stores on-board autonomous vehicles to their location through a mobile application. This approach is used by organisations like Unilever and Mars, and the success of this relatively new concept depends significantly on regulatory approvals. On-demand stores to a great extent mitigate the potential for customer dissatisfaction since customers have the freedom to personally choose the products they need.
Smart Lockers and smart mailboxes
Smart storage systems enable delivery agents to drop packages for customers to collect them according to their convenience. This allows customers greater control over their orders, eliminating the need to wait at a defined location (typically home or a place of work) for standard deliveries. While most smart lockers have screens which consumers can use to pick up, return, and ship packages, some are battery-powered and do not have screens.
Courier firms and retailers can use smart lockers to optimise their operations, reducing individual delivery trips and minimising failed deliveries. The adoption of these digital parcel machines is widespread in countries such as Germany, Finland, Denmark, and China. Notably, retailers like K-Group in Finland have also started embracing these lockers, while Decathlon (a sports retailer) is in the process of deploying 1,500 parcel lockers across Europe.
Potentially a huge impact in last-mile delivery costs
Owing to their fuel-efficient nature and the potential to bring labour cost savings, digitally transformative last-mile delivery solutions such as drones, sidewalk robots, and autonomous mobile robotic stores are being increasingly deployed. It is estimated that sidewalk robots and autonomous vehicles can reduce the last-mile delivery cost by 40-50%.
Compared to trucks and delivery vans, sidewalk robots and drones can deliver products more efficiently over short distances and consume less energy and generate less greenhouse gases. For instance, it’s estimated that in California, small drones can be 54% more carbon-efficient than trucks and in cities such as Missouri, they can be 23% more efficient. Also, despite having limitations like limited payload, flight range, and limited number of parcels they can deliver in a day, sidewalk robots and drones are well-suited to quickly delivering packages, which is crucial for customer satisfaction in today’s competitive environment. For instance, the fastest time in which Wing made a delivery was 2 minutes 47 seconds. Apart from decreasing last-mile carbon emissions, smart lockers also decrease handling-related costs of parcels and by reducing the number of failed deliveries and increasing the number of parcels that can be ‘delivered’ in a single stop, further reducing the overall cost of delivering packages.
The digital transformation of last-mile delivery is revolutionising the logistics landscape. Employing technologies like autonomous robotic systems, artificial intelligence, and the Internet of Things, these solutions are tailored to meet the growing demand for prompt and streamlined delivery deliveries.
By Suruchi Dhingra, Research Director and Joydeep Bhattacharyya, Content Editor at Transforma Insights