Everybody knows that your supply chain’s Last Mile can be seriously expensive, but besides that, have you ever really given it much thought?
As it turns out, Illinois Institute of Technology professor Gurram Gopal and software engineer Alvaro de Miguel put their heads together to make sense out of those dollars, and where you’re best to put your Last Mile money in a recent issue of Supply Chain Management Review.
The Insights Your Supply Chain Demands
Dr. Gopal and de Miguel’s work on Last Mile supply chains may prove to be extremely valuable to companies both large and small.
Here are just a few of the things they found true:
- Limited delivery windows are mixed bags. Though these time windows greatly improve First Time Hit Rate, or the number of times a package is delivered on the first attempt, it really depends on where your package is headed whether time windows are an asset.Offering two-hour delivery windows within the city of Chicago is cheaper than base reference costs for the entire state, but they’re far more costly for the entire state. Because four hour windows cost more than 20 percent extra versus no delivery window commitment, you’ll see the best return using delivery windows within urban areas, where premium increases are minimal.
- Eco-friendly deliveries are best for long distance last miles. Plenty of companies are looking to go green for the last mile, especially when it comes to city driving.When vehicles that run on LPG, electricity or are some type of hybrid are involved, it turns out that eco-friendly deliveries just don’t make a lot of impact on last mile costs in urban areas. They did, however, have an impact when deliveries were all across the state of Illinois. For the city center of Chicago, cargo bicycles delivered a savings of up to 40 percent, even when time windows were offered.
- Wider adoption of security boxes and collection points can save you money. If a city or company were to promote the installation of secure boxes for every home that gets regular deliveries, it wouldn’t take long for the costs to be completely covered by Last Mile supply chain savings. With no time windows to consider, delivery costs could drop by around 25 percent. When collection points are the only delivery point, rather than individual homes, Last Mile costs could drop by as much as 50 percent.
Knowing more about your supply chain, how it functions and the differences in Last Mile costs between urban and more rural areas can help you save big money fast. Right now, many merchants are trying to find better ways to decrease their last mile costs, and data scientists are helping by modeling these questions to find the best solutions for everyone.