Last-mile delivery : challenges, costs and optimization strategies

Last-mile delivery is one of the most critical stages of the supply chain.

As e-commerce continues to grow and customer expectations increase, businesses face mounting pressure to deliver faster, more accurately, and at a lower cost. Yet despite its importance, the last mile remains one of the most expensive and complex parts of the logistics process.

Industry studies estimate that last-mile delivery can account for 20% to 30% of total supply chain costs, making it a key area for operational improvement and cost optimization.

In this guide, we'll explain what last-mile delivery is, why it matters, the challenges companies face, and how technology can help optimize last-mile operations.

What is last-mile delivery?

Last-mile delivery refers to the final step of the logistics process, where goods are transported from a distribution center, fulfillment center, or local hub to the end customer.

This stage directly impacts customer satisfaction because it represents the final interaction between the customer and the delivery experience.

The supply chain typically consists of several stages:

• production;
• warehousing;
• order fulfillment;
• transportation;
• final delivery.

The last mile is the final and often most visible step in this process.

As part of broader freight transport operations, last-mile delivery plays a key role in ensuring goods reach customers efficiently.

Why is last-mile delivery important?

Last-mile delivery plays a critical role in both operational performance and customer experience.

Consumers increasingly expect:

• fast deliveries;
• accurate delivery windows;
• real-time shipment tracking;
• flexible delivery options.

A company's ability to meet these expectations directly influences customer satisfaction, loyalty, and brand perception.

At the same time, businesses must balance service quality with profitability.

Effective last-mile strategies contribute directly to overall supply chain optimization.

Key stakeholders in last-mile delivery

Several actors contribute to successful last-mile operations.

These include:

• parcel carriers;
• courier companies;
• third-party logistics providers (3PLs);
• delivery platforms;
• transportation technology providers.

Each stakeholder plays a role in ensuring efficient and reliable delivery execution.

How does last-mile delivery work?

Last-mile operations typically involve several steps.

Order processing

Once an order is received, it is prepared and assigned to a transportation provider.

Route planning

Delivery routes are optimized based on factors such as:

• delivery locations;
• traffic conditions;
• vehicle capacity;
• service requirements.

Efficient logistics scheduling is essential to maximize route performance and delivery efficiency.

Vehicle loading

Orders are consolidated and loaded onto delivery vehicles.

Delivery execution

Drivers complete deliveries according to planned routes and customer requirements.

Proof of delivery

Delivery confirmation is recorded through digital proof-of-delivery systems.

Modern Transportation Management Systems (TMS) help coordinate these activities efficiently.

Why is optimizing last-mile delivery essential?

As transportation costs continue to increase, companies must continuously improve delivery efficiency.

An optimized last-mile strategy helps organizations:

• reduce transportation costs;
• improve customer satisfaction;
• increase operational efficiency;
• reduce environmental impact;
• strengthen competitiveness.

Companies that fail to optimize this stage risk losing market share to more agile competitors.

Main challenges of last-mile delivery

High operational costs

Last-mile delivery involves significant expenses, including:

• driver wages;
• vehicle maintenance;
• fuel costs;
• route inefficiencies;
• failed deliveries.

Because shipments are delivered individually rather than in consolidated loads, costs per delivery remain relatively high.

Organizations looking to reduce logistics expenses should closely monitor transportation spend management initiatives.

Urban congestion

Deliveries in densely populated urban areas often face:

• traffic congestion;
• parking restrictions;
• access limitations;
• delivery time constraints.

These challenges increase delivery times and operating costs.

Customer expectations

Consumers now expect:

• same-day delivery;
• next-day delivery;
• precise delivery windows;
• real-time tracking.

Meeting these expectations requires advanced technology and operational agility.

Sustainability requirements

Reducing emissions has become a priority for logistics organizations.

Many companies are actively seeking ways to lower the environmental impact of their delivery operations.

Sustainability and the last mile

Environmental concerns are driving major changes in last-mile logistics.

To reduce carbon emissions, companies increasingly invest in:

• electric vehicles;
• cargo bikes;
• route optimization technologies;
• urban micro-fulfillment centers.

These initiatives help reduce environmental impact while improving operational efficiency.

Emerging trends in last-mile delivery

Real-time visibility

Customers expect full transparency throughout the delivery process.

Real-time shipment tracking has become a standard requirement.

Crowdsourced delivery

Many organizations now leverage independent delivery networks to increase flexibility and reduce delivery costs.

This model helps businesses scale capacity during periods of peak demand.

Urban logistics innovation

Companies are rethinking how deliveries are performed in urban environments.

Innovations include:

• micro-distribution centers;
• parcel lockers;
• pickup points;
• alternative transportation modes.

These solutions improve efficiency while reducing congestion.

Why are last-mile delivery costs so high?

Several factors contribute to the high cost of last-mile operations.

Fragmented deliveries

Unlike long-haul transportation, last-mile deliveries involve multiple individual stops.

This reduces transportation efficiency and increases delivery costs.

Labor intensity

Human resources represent a significant share of delivery expenses.

Driver recruitment and retention continue to challenge logistics organizations.

Technology investments

Companies must invest in:

• route optimization software;
• delivery management platforms;
• tracking systems;
• customer communication tools.

While these investments improve efficiency, they also contribute to operating costs.

How a TMS helps optimize last-mile delivery

A Transportation Management System provides the visibility and automation required to improve last-mile performance.

Route optimization

The TMS automatically identifies the most efficient delivery routes.

This reduces:

• mileage;
• fuel consumption;
• delivery times.

Real-time shipment visibility

Logistics teams can monitor deliveries and react quickly to disruptions.

Carrier management

Companies can manage multiple carriers through a single platform and select the most suitable delivery provider.

Performance monitoring

Key performance indicators help organizations measure and improve delivery efficiency.

Monitoring relevant supply chain KPIs enables continuous improvement.

Advanced transportation management system features further enhance visibility, automation, and operational control.

Last-mile delivery software solutions

Several technology providers specialize in last-mile optimization, including:

• Bringg;
• AntsRoute;
• Hub One;
• Everest.

These platforms typically focus on delivery execution, route planning, and operational visibility.

Many businesses rely on dedicated TMS software to centralize transportation management and carrier collaboration.

Why use Shiptify for transportation management?

Shiptify helps companies improve transportation performance through a centralized and collaborative platform.

Centralized transportation visibility

Monitor all shipments from a single interface regardless of carrier or transportation mode.

Automated workflows

Reduce manual work through automation of transportation processes.

Better carrier collaboration

Connect logistics teams, carriers, suppliers, and customers through a shared platform.

Cost optimization

Improve transportation planning and identify opportunities to reduce delivery costs.

As a comprehensive freight management system, Shiptify helps organizations streamline transportation operations and improve efficiency.

Conclusion

Last-mile delivery remains one of the most challenging and expensive stages of the supply chain.

Rising customer expectations, increasing transportation costs, and sustainability requirements are pushing companies to rethink their delivery strategies.

By leveraging technologies such as Transportation Management Systems, organizations can improve visibility, optimize routes, reduce costs, and deliver a better customer experience.

With Shiptify, logistics teams gain the tools needed to manage transportation operations more efficiently and build a more resilient supply chain.

Optimize your last-mile delivery operations with Shiptify

Discover how Shiptify helps logistics teams improve transportation visibility, optimize delivery performance, and reduce logistics costs through a single collaborative platform.