Despite handling over 21.7 billion parcels in 2023, the US last-mile delivery sector remains outdated in terms of the customer experience it offers. Major carriers like FedEx, UPS, USPS, and Amazon dominate the market, controlling 97% of deliveries, but even they struggle to meet the evolving expectations of their customers. While the overall volume of deliveries continues to rise, many consumers feel dissatisfied with the service they receive, citing issues such as vague delivery windows, limited tracking information, and a lack of flexibility in adjusting delivery options.
A recent survey conducted by Triangle Management Services, commissioned by Bettermile, highlights this gap between consumer expectations and reality. According to the study, 89% of consumers place high importance on parcel visibility to better plan their daily schedules. Yet, only 19% of deliveries offer a time window of two hours or less on the day of delivery. Furthermore, 47% of consumers are either never or rarely given the option to make same-day changes to their delivery.
The breakthrough of food-delivery and ride-hailing services has increased the demand for transparency and customer centricity for regular last-mile delivery. Yet many providers still fall short of these expectations. At the same time, the explosion of e-commerce, driven by consumer convenience and accelerated by the global pandemic, has placed last-mile delivery companies under increasing pressure to balance operational efficiency with customer satisfaction.
In other markets, the use of customer-oriented and efficiency-enhancing technologies is more widespread. In Europe, major carriers such as DHL and GLS have widely adopted advanced tracking. Consumers can track their deliveries live on a map and delivery windows narrow down to 15 minutes in some cases as the vehicle arrives. In China, e-commerce sites offer highly sophisticated parcel tracking systems, including complete visibility of the driver’s location in relation to the delivery destination and dynamic estimated times of arrival (ETAs). In emerging markets such as Brazil, we see massive adoption of advanced tracking technologies, driven by companies like Loggi, who also offer an Uber-like delivery experience.
The Changing Consumer Expectations
In an era where services like DoorDash, Uber Eats, and Lyft have raised the bar for real-time tracking and customer communication, consumers expect the same level of visibility and control when it comes to receiving their packages. These apps allow users to track their rides or food deliveries in real time, receive dynamic updates, and adjust their plans accordingly. It is no surprise that consumers now expect similar experiences when waiting for a package. However, the reality is quite different. Traditional package delivery systems still rely on scan-based updates at fixed checkpoints, such as "out for delivery" or "delivered." This results in vague delivery windows, forcing consumers to stay home all day for important deliveries. Additionally, without dynamic ETAs or real-time tracking, there is an increased risk of porch piracy – one of the most prevalent problems that affects nearly half of all Americans, according to a study by Security.org.
How AI Is Revolutionizing Last-Mile Delivery
Artificial intelligence is proving to be a game-changer in addressing many of these challenges. By leveraging AI-powered solutions such as predictive analytics, dynamic route optimization, and real-time communication between drivers and recipients, last-mile delivery companies can create a more efficient and customer-friendly delivery process. Here’s how AI can help solve some of the most pressing problems in last-mile delivery:
1. Predictive Analytics and Dynamic ETAs
AI-driven predictive analytics can dramatically improve the accuracy of delivery time estimates. By analyzing historical delivery data and real-time conditions (such as traffic, weather, and the number of stops a driver needs to make), machine learning models can calculate precise delivery windows, often narrowing them down to an hour or less. This technology provides dynamic ETAs that adjust as a delivery progresses, much like ride-hailing apps do.
2. Route Optimization
AI-powered route optimization tools can help delivery companies reduce delivery times, fuel costs, and operational inefficiencies. Traditional route planning methods often result in suboptimal delivery paths, with drivers making unnecessary detours or facing unexpected delays. AI, however, can analyze vast amounts of data to generate optimal routes that account for real-time variables like traffic conditions, road closures, and customer availability.
By optimizing routes in real time, delivery drivers can avoid congested areas, make more stops in less time, and adjust their paths dynamically as conditions change. This not only increases operational efficiency but also improves the chances of successful first-attempt deliveries, further reducing costs and improving customer satisfaction.
3. Real-Time Communication and Customer Control
AI can also enhance communication between delivery drivers and recipients, providing customers with real-time updates on their package's location, changes to delivery times, and options for making last-minute adjustments. Whether it’s rerouting a delivery to a neighbor's house, rescheduling, or choosing a specific drop-off point: giving customers more control over their delivery improves the overall experience.
4. Addressing Porch Piracy with AI
The rise of AI-powered delivery tracking and real-time communication can also help combat porch piracy. With dynamic ETAs and precise tracking, customers are less likely to leave packages unattended for long periods, reducing the risk of theft. Additionally, AI can predict high-risk areas for package theft, allowing carriers to take preventive measures such as requiring a signature upon delivery or offering secure drop-off locations. Solutions where packages are delivered to a central, secure location, or real-time delivery alerts that notify customers when a package is about to arrive, also mitigate the risk of theft.
Competitive Advantage Through AI
While Amazon already incorporates AI into its logistics operations, regional and local carriers stand to gain significantly by adopting these technologies. In a market dominated by a few large players, smaller companies can differentiate themselves by offering a customer-centric delivery experience powered by AI. Providing more precise delivery windows, flexible rescheduling options, and real-time tracking can help these carriers secure contracts with e-commerce businesses eager to meet customer expectations for a smooth and transparent delivery experience.
Consumers have shown a willingness to pay a premium for enhanced delivery services. Research indicates that nearly 74% of shoppers would choose a retailer based on the delivery options available, such as more precise time windows. By investing in AI-powered solutions, carriers can improve their operational efficiency, reduce costs, and ultimately provide a better service to their customers — an advantage that could help them compete with industry giants.
A Future Powered by AI
AI innovations are already transforming last-mile delivery, offering solutions to some of the industry's most pressing challenges. Predictive analytics, real-time tracking, and dynamic route optimization enable delivery companies to provide more accurate ETAs, enhance customer communication, and reduce operational inefficiencies. As consumer expectations continue to rise, companies that invest in AI will be better positioned to meet these demands, improve customer satisfaction, and gain a competitive edge in the crowded last-mile delivery market.
Simon Seeger is founder and managing director of Bettermile. With Bettermile, he has set himself the task of digitizing the last mile in parcel logistics and making it better for everyone involved. With its applications, Bettermile increases efficiency on the last mile and creates an extraordinary delivery experience for recipients. Bettermile does not see itself as a mere tech provider, but rather as a company that supports its customers in the digital transformation with intuitive technology, consultation, and the integration of software solutions.
This article originally appeared in the November/December, 2024 issue of PARCEL.
