6 ways to reduce last-mile delivery costs

1. Take a strategic approach

A good first step is to ensure that supply chain leaders fully understand their supply chain network and all associated details.

Supply chain leaders should use supply chain management technology to better understand their network, the types of vehicles best suited for delivery in each area and optimal locations for fulfillment centers, said Milena Janjevic, a research scientist at the MIT Center for Transportation & Logistics.

Many large companies are already carrying out this type of analysis, she said.

2. Incorporate alternative delivery locations

One step that can help companies reduce their last-mile delivery costs is outsourcing.

Companies that enable customers to pick up their purchases in-store or at pickup locations will likely cut down on their last-mile delivery costs, said Alison Ponder, managing director at FTI Consulting, a business consulting firm and global management advisory located in Washington, D.C.

Framing the pickup location as a positive for customers can help. Companies can promote alternative pickup locations as more secure because packages are kept safe for customers who aren't around at delivery time, Briggs said.

3. Eliminate unnecessary packaging

Instituting rules about the amount of packaging to use for each item can help companies cut costs.

"We all get the big shipping boxes that, when you open them up, hold something very small," Ponder said. "It costs a lot to ship that bigger box."

Reducing packaging will reduce costs for packaging material and potentially reduce transportation costs because items are less heavy. "Anything you can do to reduce the size and weight of the package lowers costs," she said.

4. Crowdsource last-mile delivery

Crowdsourcing last-mile delivery can potentially help companies reduce costs as well. This involves employing gig workers to complete the final part of the delivery of a product.

Crowdsourcing last-mile delivery can come with a lower price tag than a company using its own fleet or conventional delivery services, Ponder said.

However, supply chain leaders deciding whether to use gig workers for last-mile delivery should be aware of some of the drawbacks, including less control over the people making the deliveries because they are third-party workers. For example, full-time employees can undergo training about how to speak with customers, while gig workers would not have received that training.

5. Follow collaborative delivery models

Teaming up with another organization can potentially reduce last-mile delivery costs.

Companies can use technology to bundle their routes with another organization so that packages being delivered to the same area are delivered in one trip, Briggs said. For example, competing retailers might decide to combine their deliveries to reduce costs for both organizations.

Sharing delivery assets can help drive down the cost per unit being delivered, he said.

6. Reshape delivery time expectations

Companies can potentially convince customers to wait longer to receive their products by sharing information about the improved sustainability of longer delivery. Longer delivery times will help companies save money, as it costs more to deliver a product to a customer more quickly.

Some companies are already enticing customers to pick slightly slower delivery times by promoting the sustainability of a slower shipping option, Ponder said.

Supply chain leaders can also look into further improving the sustainability of their organization's delivery model by using electric vehicles.

Using electric vehicles might also be less expensive than using conventional delivery vehicles, said Nick McKeehan, managing director at Protiviti, a business consulting firm located in Menlo Park, Calif.

Mary K. Pratt is an award-winning freelance journalist with a focus on covering enterprise IT and cybersecurity management.