In the media

Last mile is here to stay, so invest in green efficiency

By Edward Morley

Smart Transport

06 February 2023

Our appetite for the convenience of home-delivered goods and services that leap-frogged forward in lockdown shows no signs of abating. As a result, logistics distribution centres are becoming larger at the hub, and more localised for near home distribution.

Last mile delivery - the movement of goods, most likely from a transportation hub to the final delivery destination – was already growing before Covid. Van traffic had doubled in the decade to 2020 with broadly the same per unit mileage. Reports at the time talked of impressive compound market growth – at around 3%. In 2020 alone, e-commerce growth hit 25%.

Then with the arrival of Covid behaviours changed – there was a boom in online shopping. In 2020, parcel revenues for Royal Mail outstripped letters revenues and the wider growth in demand established a new market of independent delivery partners. Providers offering more convenience blossomed, as urban delivery of meals and other goods grew.

This situation hasn’t changed, and last mile delivery growth projections exceed pre-Covid forecasts and are here to stay. In a crowded market where cost and time-to-door are measures of success, 2023 will see continued investment from both existing players and new entrants into last-mile delivery. However, predictions for 2023 cannot just be about further growth in last-mile delivery. That is too simplistic. Indeed, the idea of yet more vans on the road in a decade when we are meant to be decarbonising simply does not add up.

The challenges facing last mile delivery (notwithstanding the insatiable demand) are significant. The first is around congestion. Covid provided empty roads for deliveries, but traffic has returned, and local road networks are often full, both for travelling and parking. Then there is the variation between urban and the rural areas in the viability of increasingly time-driven offers such as next or same day delivery.

A further challenge lies in the scale and growth of the sector. This affects the logistics of both delivery and returns and means that more local infrastructure is being created to manage the end-to-end processes. This is often happening without consolidated or collaborative ways of doing it, meaning that dominant providers will continue to be the key players.

Meeting rising consumer expectations on ease of delivery is difficult. Our unwillingness to accept bundling of goods, longer delivery times or to pay for more sustainable delivery options is incompatible with reducing the impact of the sector.

However, companies wishing to differentiate themselves and reduce costs in a world of rising fossil fuel prices, will start to offer new greener options which may end up being quicker too. We can expect to see a growth in custom last mile delivery vehicles in urban areas. The bike with a box rucksack will evolve to e-cargo bikes and electrified one driver micro-vans (think electric tuk-tuk).

This is already a growing trend for city centres, but the novelty will become the norm. This change is purely a commercially driven one and with home delivery here to stay, 2023 will see this kind of investment to keep market share.

In specific dense urban areas, and potentially new build estates, autonomous delivery will emerge with the delivery robots, six-wheeled autonomous vehicles, expanding their coverage. Successful trials in cities like Milton Keynes, mean delivery into new build estates will emerge as the norm, while more adventurous pavement travelling robots may appear in other towns.

Rural areas will remain a challenge, but rural deliveries will be priced to de-incentivise speed. This will eventually come to wider delivery services. While rural deliveries will go green, conventional vans will still be used to accommodate distance covered, but the need to balance consolidated and full loads will lead to incentives (price differentials) where goods are delayed and bundled together.

A market will start to emerge for a digital solution for collaborative delivery across multiple partners – particularly where multiple retailers link into single delivery operators.

2022’s trend of charging for returning goods will grow but consumers will demand something more in return. They will want something closer to handing back goods on the doorstep. Providers with the slickest digital solution to support this will gain the upper-hand, and those that consolidate and collaborate will have the advantage of a greater number of household contact points.

Next year won’t see delivery bots turn into drones everywhere, but the islands and most rural parts of the UK will continue to trial semi-autonomous drone solutions. This will predominantly be key services like medical prescriptions and testing samples, but increasingly for wider goods as well.

Covid has changed consumer buying behaviour and therefore last mile logistics for the next decade. Yet, as wider economic challenges squeeze margins, and as the push for net zero accelerates, businesses in this sector need to remain nimble enough to respond to change.

Many made tactical choices to meet demand when no alternative existed but now that a new normal has been established, the sector must adapt and evolve. The customer must remain central to the adoption of solutions that reflect available technology but also are sustainable both environmentally and commercially.

Those that go green, who collaborate and work with others to consolidate, and remain customer focussed in their digitally driven service will be best placed to take advantage of continued market growth in last mile delivery and logistics.

Self-driving delivery robot on road.
Pictured: Self-driving delivery robot

Explore more

Contact the team

We look forward to hearing from you.

Get actionable insight straight to your inbox via our monthly newsletter.