This is the second entry in our series on Final Mile (also known as last mile) shipping. To read all entries, please click here:
- What is Final Mile Logistics?
- How to Find the Right Last Mile 3PL Partner
- What To Look For In A Tech-Enabled 3PL For Final Mile
- Final Mile Guide: Managing Costs And Operational Efficiency
Controlling Final Mile Costs
In the first post in this series, exploring the intricacies of final mile shipping (also known as last mile shipping), we defined final mile logistics and provided an overview of the common pitfalls and challenges shippers must navigate to successfully execute final mile shipping. In this article, we will address the key factors which drive final mile costs- and how to effectively reduce them while improving customer service.
According to the Capgemini Research Institute, consumer products companies and retailers “have to catch up with consumer demand for better and faster last-mile delivery services while at the same time mitigating associated profitability risks. Our research shows that close to three-fourths of consumers are willing to reward retailers who get the last-mile experience right with increased spend and loyalty…But, last-mile delivery is the most expensive part of the supply chain.”
Consider these factors that can drive higher final mile costs
- Damages, Claims, and Returns: Shippers that utilize an LTL-only approach to final mile, rather than using LTL linehaul paired with a dedicated final mile carrier, experience higher rates of damage to their products due to a mismatch in the service being requested by the shipper and the capabilities of the LTL carrier. For example, dedicated final mile carriers are equipped, trained, and well-prepared to deliver shipments to destinations that LTL networks struggle to service, including small retail spaces and businesses and residences with limited access. Utilizing a dedicated final mile carrier greatly reduces damages, which in turn reduces claims and the need for costly returns.
- Failed Deliveries: When LTL carriers are used for final mile, rather than a dedicated final mile carrier, the risk of failed deliveries due to incorrect equipment increases. If a delivery requires a driver to return to a dock to pick up additional equipment—like a forklift—it incurs additional mileage. In turn, the shipper sees higher costs.
- Diminished Customer Loyalty: When your customers experience a failed delivery or receive damaged product, there’s more than additional accessorial charges to worry about; your relationship with the customer may be at risk. Therefore, diminished customer loyalty should be considered a “hidden cost” shippers risk incurring when employing an LTL-only approach to final mile.
- Time-Consuming: As illustrated above, shippers that utilize an LTL-only approach to their final mile needs expend significant time, energy, and resources simply handing claims resulting from damaged shipments. Shippers that attempt to arrange for their own LTL linehaul and dedicated final mile carrier can mitigate the risk of damage, but have traded one cost for another: the time required to orchestrate the LTL linehaul and final mile carrier is a significant resource drain, as is managing two sets of paperwork for every load (one for the LTL linehaul carrier and one for the final mile carrier).
Best Practices to Lower Final Mile Costs
- Increase visibility into inventory before loading the truck. Greater inventory visibility ensures drivers know what to expect when picking up or delivering final mile freight.
- Know your customers. Knowing the delivery limitations of your customers’ homes and businesses helps eliminate unpleasant surprises and mitigate accessorial charges.
- Transition from an “LTL only” approach to a multimodal approach which utilizes LTL carriers for the linehaul and dedicated final mile carriers for the delivery. If creating your own LTL/final mile network is not feasible, consider partnering with a 3PL like GlobalTranz to provide this service.
- Reduce the paperwork in managing final mile. This includes using a single BOL and a single invoice for both the LTL linehaul and the final mile carrier, which requires integration through a TMS.
- Leverage technology. When working with a 3PL like GlobalTranz, you gain access to the robust, multimodal GlobalTranz TMS, which includes dedicated final mile capabilities, including integrations with LTL linehaul carriers and final mile providers.
Choose GlobalTranz to Reduce Your Final Mile Costs
Shippers want to lower their shipping costs while maintaining customer service but finding the best way to manage final mile costs can feel like searching for a needle in the haystack. When it comes to final mile, going it alone can be a costly and time-consuming endeavor.
GlobalTranz combines people, processes, technologies and key relationships with LTL and final mile carriers to streamline your final mile freight management, reducing delays, and ensuring competitive rates. Learn more by requesting a consultation with GlobalTranz today.