Tag: last mile

OM in the News: AI and The Last Mile

The final mile—the last leg of the delivery process where goods are transported from a distribution center or store to their ultimate destination—is one of the most critical and cost-sensitive components of the modern supply chain. A package could end up at the wrong address, shipments could be late due to traffic, or a thunderstorm could damage a parcel left out in the rain.

Now AI and machine learning are playing a greater role in predictive analytics, helping companies anticipate delivery issues before they occur and proactively adjust.  AI can design more efficient delivery routes, improve accuracy and the customer experience, and predict errors before they might happen, writes Material Handling & Logistics  (July 22, 2025).

A new McKinsey report found that in the last decade, about $80 billion in venture capital went to logistics startups, with on-demand last-mile delivery platforms getting the greatest share of those funds.

Last-mile routes typically involve multiple stops and individual small packages — rather than one truck delivering pallets to a single warehouse — making this supply chain segment difficult to manage efficiently and expensive for the businesses involved. Last-mile delivery makes up an estimated 41% of all logistics costs in the supply chain.

AI can be  used to plan routes based on factors such as traffic, delivery windows, estimated time per stop, and driver capacity, reports Business Insider (July 15, 2025). More efficient routes can lower fuel costs, improve density, and enable more deliveries in a day, increasing revenue for providers.  Amazon just announced Wellspring, which uses AI to analyze satellite images, apartment building layouts, street imagery, consumer instructions, and photos from past deliveries. It can recommend which parking spot or apartment building entrance a driver should use to drop off a shipment.

AI can also forecast the likelihood of issues for specific routes or deliveries. Then it can make decisions based on the patterns, like moving packages to different facilities or increasing rates on a certain route, so drivers will be incentivized to pick them up earlier in the day. UPS created AI-based DeliveryDefense to analyze historic factors such as loss frequency and delivery attempts. The AI then spots areas that could be targets for porch pirates in the future.

Companies that can balance cost efficiency with delivery accuracy will be best positioned to thrive in today’s environment of volatility and heightened customer expectations.

Classroom discussion questions:

  1. How can AI be used in last-mile delivery?
  2. What are the complicating factors in last-mile deliveries?

OM in the News: Walmart Wants to Put Groceries Into Your Fridge

The new grocery-delivery service will initially be offered in Kansas City. Pittsburgh, and Vero Beach, Fla.

Walmart is opening a new front in home-delivery services: carting milk, eggs and other groceries and leaving them in the fridge. This fall, Walmart in 3 cities will start delivering online grocery orders directly to refrigerators in shoppers’ homes and garages. The workers will wear body cameras clipped to their chests, allowing customers to watch live streams of deliveries being made while they aren’t home. Workers will enter residences equipped with smartlocks, internet-connect devices that can be controlled remotely to unlock a door.

The service, Walmart InHome, marks the latest attempt by retailers to adjust to changing shopping habits and solve the last-mile delivery problem, especially for groceries, reports The Wall Street Journal (June 7, 2019). Walmart workers will need to be with the company for at least a year to make deliveries. Walmart also added short biographical profiles of its delivery workers to the pilot service’s consumer app, which helped humanize them. “Customers didn’t know who was coming into their homes, so we changed it,” the firm stated.

The retailer is working to grab market share in online grocery shopping to maintain its place as the country’s largest grocer. Walmart this year plans to offer online grocery pickup from over 3,000 store parking lots and 1,600 stores that offer grocery delivery, mostly by joining with crowdsourced delivery firms.

Amazon offers a similar in-home delivery service for Prime members in 50 cities, called Key by Amazon. But drivers don’t deliver fresh groceries, and they leave items just inside a door, garage or the trunk of a car, not a refrigerator.

Classroom discussion questions:

  1. Who is the target customer for this service?
  2. What operational difficulties might be encountered?

OM in the News: FedEx Goes the “Last Mile” on Sundays

FedEx just announced it would start offering Sunday deliveries to most U.S. homes, the latest sign that online shopping habits are pressuring companies to revamp their operations to fulfill orders as they are placed. With people ordering everything from saunas to sandwiches online and expecting to have them quickly appear at the door, retailers and carriers are racing to adapt to service the last mile, writes The Wall Street Journal (May 31, 2019).

And Amazon, whose sprawl of warehouses has upped the ante, is promising 1-day delivery on many items later this year. “Online shopping is 7 days a week,” says FedEx’s CEO. “So there is increasing demand from online shoppers and e-commerce shippers for 7-day service.”

With the change, FedEx plans to deliver many of the packages it currently drops at local post offices. The shift will seek to lower costs by building density along FedEx Ground routes, while also shifting 2 million packages daily out of the U.S.P.S’s network.

FedEx and UPS have invested heavily in recent years to manage the volume of e-commerce packages moving through their sorting facilities. Until recently, the companies have taken steps to outsource last-mile delivery to the Post Office, worried that home deliveries would be less profitable than shipments between businesses. But as the volumes climb—to 50 million domestic packages a day—the companies are adjusting their operations to boost market share and handle weekend deliveries. They are also experimenting with more immediate delivery options, including drones and robots (both the subjects of recent blogs).

At the same time, FedEx’s traditional business of rushing deliveries by jet across the globe has slowed. Amazon, Walmart, and others have expanded their warehouse networks, adding locations near more U.S. cities where they can store goods and ship them shorter distances.

Classroom discussion questions:

  1. What major market shifts caused FedEx to add this Sunday service?
  2. What new OM issues will FedEx face now?

OM in the News: Your Food is Almost Here

A DoorDash delivery person in New York City.

“Consumers expect to order books, toys, shoes and anything else they want online and have it show up at their doors quickly and inexpensively,” writes The Wall Street Journal (March 9-10, 2019). Now restaurants and grocers are rushing to satisfy the exact same demand. They’re having a hard time. A hungry customer might order a $9.99 Cuban sandwich from Panera which can arrive at her door in about 30 minutes. The problem for Panera is that each delivery costs $5 after accounting for labor, gas and packaging. Yet to avoid turning away customers, it continues to charge a flat delivery fee of $3 per order.

Food delivery is proving to be a thorny, expensive and crucial puzzle for restaurants and grocers. Billions of dollars have been spent in a quest to build services that reliably move fresh food from one place to another, yet many in the business wonder if they will ever get the economics right. Most delivery orders remain unprofitable. It costs supermarkets an average of $10 an order to deliver food, but grocers only recoup around $8 from customers because charging more risks turning off shoppers. And 85% of consumers aren’t willing to pay more than $5 for restaurant delivery. Walmart now offers grocery delivery through a half-dozen third parties, but e-commerce losses are expected to increase this year.

Online grocery sales are expected to grow to $86 billion in 2022 from $17 billion in 2017, while sales of online restaurant delivery will grow to $62 billion from $25 billion in that same span.

Unlike easy-to-ship household items, groceries must be packaged carefully and sent in refrigerated trucks. That makes the last mile of the delivery process—from the warehouse to the consumer’s door—a costly, often perilous journey. Restaurant meals must likewise be packed in special containers and delivered within a short window. Restaurants can’t ignore delivery since 1/3 of restaurant meals are now consumed at home! Yet few chains can afford to do delivery themselves, due to the cost of developing order-taking technology and of employing drivers.

Classroom discussion questions:

  1. What OM issues do grocery stores face is setting up online delivery systems?
  2. What percent of your students are using online restaurant delivery? Their comments?

OM in the News: Trucking the Last Mile for Home Furniture

J.B. Hunt Transport Services is snapping up another home-delivery firm as trucking companies compete to bring furniture, appliances and other bulky goods to consumers’ doorsteps, reports The Wall Street Journal (Jan. 9, 2019). The deal to buy Cory 1st Choice Home Delivery for $100 million deepens Hunt’s reach in a sector that has grown as shoppers get more comfortable shopping online for sofas, exercise equipment and other big objects that are too large for conventional parcel networks.

Hunt will gain 14 additional warehouses and access to a delivery network of more than 1,000 independent contractors, carriers and company drivers. As a result, the Arkansas carrier’s final-mile division will grow to 100 locations and more than 3.1 million square feet of warehouse and facilities space.  “We have high expectations that there will be a lot of demand for that heavy goods delivery,” says Hunt’s CEO. “That’s the two guys in a truck, appliances, furniture, things that the parcel guys don’t want to handle.”

Last year, UPS raised its fees for the largest items it delivers to $650 to discourage shippers from sending oversize items such as refrigerators through its parcel system. FedEx also has added surcharges for oversize shipments. The big-and-bulky delivery business also poses challenges for trucking fleets, whose main revenue typically comes from hauling goods to commercial loading docks. Furniture and appliance delivery often involves special services, such as assembly inside shoppers’ homes.

The growth of e-commerce has raised customer expectations. Delivery windows are shrinking, and shoppers want to be able to track the arrival of a new washing machine the same way they might other online orders. Last year, XPO Logistics, the largest provider of last-mile delivery for bulky goods in North America, rolled out services allowing consumers to track their shipments through Google Search or smart speakers such as Amazon’s Alexa.

Classroom discussion questions:

  1. How does this differ from Amazon’s “last mile”?
  2. What are the OM issues that Hunt faces?

OM in the News: Amazon Drives Deeper Into Package Delivery

“Amazon is pushing further onto the turf of its shipping partners UPS and FedEx, enabling small businesses to carry its overflowing supply of packages in the all- important last-delivery leg to the consumer’s door,” writes The Wall Street Journal (June 28, 2018). The online retail giant is inviting entrepreneurs to form small delivery companies employing up to 100 drivers and leasing 20-40 Amazon-emblazoned vans, an initiative that should help it rapidly build out its own delivery network across the country. It has also contracted with many small delivery companies to drop off its packages in major metro areas, many in unmarked white vans.

It is yet another major push by Amazon to gain more control over its own deliveries in a continued quest to build a vast freight and parcel shipping network. Amazon says it has to build out its own services simply to handle the surging number of online orders that UPS, FedEx and the U.S. Postal Service can’t. More than $4 of every $10 spent online in the U.S. is on Amazon, and the number of its deliveries topped more than a billion last year.

Still, Amazon has taken broad steps in recent years to poach some of the most desirable deliveries from its partners and could be on a collision course to one day compete directly with the shipping giants. Amazon expects that hundreds of entrepreneurs could sign up to help the company deliver packages the “last mile,” which is typically the most expensive piece of an online order’s journey.

The number of packages Amazon needs to ship in the U.S. has more than doubled over the past five years to roughly 1.2 billion packages last year. Projected growth is too much for existing delivery companies to handle. Amazon has advanced deeply into logistics over that same period, building out more than 70 delivery stations, buying more than 7,500 truck trailers, leasing 35 aircraft to fly its wares around the country and expanding into ocean freight. Amazon spent $21.72 billion on shipping world-wide last year, or about 12% of overall revenue.

Classroom discussion questions:

  1. How does Amazon handle the “last mile?”
  2. What are the advantages and disadvantages of Amazon’s logistics strategy?

OM in the News: The “Last Mile” and USPS

As consumers demand ever-quicker and convenient package delivery, the US Postal Service wants to boost its business this holiday season by offering what few e-commerce retailers can provide: cheap next-day service with packages delivered Sundays to your home. Retail giant Walmart says it is considering the Sunday option, which could reshape weekend shopping trips to the mall.

The program, available in 20 major US cities, allows consumers to place online orders with participating retailers before a cutoff time Saturday. Postal carriers pick up merchandise from local stores for delivery the following day, similar to the Sunday package deliveries it now handles almost exclusively for Amazon in much of the US.

“The next-day weekend service is part of the Postal Service’s aggressive push into the parcel business at a time when its more lucrative first-class mail is declining in the digital age,” writes the Boston Globe (Nov. 4, 2017). With Amazon continuing to raise the bar of ‘‘free shipping’’ conveniences, from 1- or 2-day package arrivals to keyless in-home delivery via couriers, the financially beleaguered post office is billing itself as the trusted, low-cost carrier already serving every US household.

Bolstered by e-commerce growth and its Sunday operations, the Postal Service will reach new highs this year in holiday package delivery, with nearly 850 million parcels delivered from Thanksgiving to New Year’s. That 13% increase from 2016 would exceed the single-digit growth for UPS and FedEx, putting the post office on track to capture 45.6% market share in peak holiday deliveries. The post office’s growth is due in large part to its established network in the ‘‘last mile,’’ the final and usually most expensive stretch of a package’s journey to a customer’s door. UPS and FedEx already subcontract a chunk of their last-mile deliveries to the post office.

Classroom discussion questions:

  1. Why is the “last mile” an important OM issue?
  2. What are the strengths and weaknesses of the USPS model to Sunday deliveries?