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Last Mile Delivery: Challenges, Optimization, & Solutions within Dynamics 365

Last mile delivery is the final step in getting goods from a warehouse or distribution center to the customer’s doorstep. It’s the most visible part of the supply chain, directly impacting customer satisfaction. It’s also the most complex and costly, with challenges like traffic, high fuel expenses, and tight delivery windows.  

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Monty Montgomery

Introduction

To tackle these issues, businesses rely on last mile delivery software – or transportation management systems (TMS) – to leverage dynamic route planning, load optimization, auto-dispatching, and real-time reporting. By aligning these processes, shippers are drastically cutting their transportation costs and boosting end customer satisfaction. 

Find out why the last mile is so critical, key challenges that shippers face, and how Avantiico is enhancing Microsoft Dynamics TMS (within D365 SCM) with dynamic route planning, load planning, automated freight reconciliation, and other powerful features.

See Our Microsoft TMS Guide

What Is Last Mile Delivery?

Last mile delivery, or final mile delivery, is the final step in the delivery process, where goods are transported from a distribution center or warehouse to the end customer.  

It’s often the most critical and visible part of the supply chain, because it directly impacts customer satisfaction. If your driver runs into delays on the final mile, customers could be left upset about late deliveries or even cancelled deliveries in worst case scenarios. 

Whether it’s a package arriving at your doorstep or groceries being delivered to your fridge, the last mile is what makes the delivery experience complete. This is why optimizing that final mile is so critical. 

First Mile vs. Last Mile Delivery

First mile and last mile delivery are two distinct stages in the supply chain, each with its own challenges and focus. The first mile refers to the initial movement of goods from the manufacturer or supplier to a distribution center or warehouse. It’s about consolidating products and preparing them for the next stage of the journey. 

On the other hand, last mile delivery is all about getting those products to the end customer. While the first mile focuses on efficiency in bulk transportation, the last mile prioritizes speed, accuracy, and customer satisfaction. Both stages are crucial, but the last mile is often more complex due to factors like traffic, delivery windows, and the need for personalized service. 

Last Mile Delivery Challenges

Last mile delivery is critical for customer satisfaction, but it comes with its own set of challenges. These obstacles can impact efficiency, cost, and the overall customer experience. Here are some of the most common last mile delivery challenges: 

  • High Costs: The last mile is often the most expensive part of the delivery process due to fuel, labor, and vehicle maintenance expenses. 

  • Traffic and Delays: Urban areas with heavy traffic can lead to delays, making it harder to meet tight delivery windows. 

  • Failed Deliveries: Missed deliveries due to customers not being home or incorrect addresses can increase costs and frustrate both businesses and customers. 

  • Customer Expectations: Rising demand for same-day or next-day delivery puts pressure on businesses to deliver faster while maintaining accuracy. 

  • Route Optimization: Planning the most efficient routes can be complex, especially when dealing with multiple stops and unpredictable factors like weather or road closures. 

  • Sustainability Concerns: The environmental impact of last mile delivery, particularly in urban areas, is a growing concern for businesses and consumers alike. 

  • Technology Integration: Implementing and managing last mile delivery software and tools can be challenging, especially for smaller businesses with limited resources. 

These challenges highlight why the last mile is often referred to as the “final frontier” of logistics, as addressing them calls for automated solutions and careful planning. 

The Last Mile Delivery Problem: Complexity & Cost

The last mile is often the most expensive and complicated part of the delivery process. Unlike bulk transportation, last mile delivery involves moving smaller quantities of goods to multiple locations, often in urban areas with heavy traffic. . 

This increases fuel costs, labor expenses, and vehicle wear and tear. Additionally, customers now expect faster deliveries, sometimes within hours, adding pressure to an already complex process. Balancing speed, cost, and efficiency is a constant challenge for businesses

Last Mile Delivery Trends & Statistics

  • Last Mile Delivery Costs: The last mile accounts for 53% of total shipping costs, making it the most expensive part of the supply chain. 

  • Failed Deliveries: Failed deliveries cost businesses an average of $17.20 per package, including redelivery attempts and customer service expenses. 

  • Customer Expectations: Over 60% of consumers expect same- or next-day shipping, putting immense pressure on last mile logistics. 

  • Traffic & Delays: Urban traffic congestion can significantly hike up last mile delivery costs, particularly in more populated areas, due to additional stops and turns. 

Optimizing the Last Mile: 5 Key Steps

The last mile delivery process involves five key steps to ensure products reach customers hassle-free and on-time. Here’s a breakdown of the five main stages: 

last-mile-delivery-optimization

1. Order Processing

Once an order is placed, it’s confirmed, packed, and prepared for dispatch. This step ensures the right product is ready for delivery. 

2. Route Planning

Delivery routes are optimized to save time and fuel. This step involves using tools like last mile delivery software to map out the most efficient paths. 

3. Dispatching

The order is assigned to a driver or delivery partner, who is given all the necessary details to complete the delivery. 

4. Real-Time Tracking

Customers and businesses can track the delivery in real time, providing transparency and updates on the package’s location. 

5. Final Delivery

The product is delivered to the customer’s doorstep, completing the last mile. This step often includes proof of delivery, such as a signature or photo confirmation. 

Last Mile Delivery Solutions

Capabilities like dynamic route planning, auto-dispatching, live reporting, and automated freight reconciliation can directly feed into your last mile logistics. Here’s how: 

Dynamic Route Planning

Dynamic route planning uses real-time data to create the most efficient delivery routes. Unlike static routes, which are fixed, dynamic planning adjusts for factors like traffic, weather, and delivery priorities. 

This not only saves time and fuel but also ensures faster deliveries. Tools like last mile delivery software often include this feature, making it easier for businesses to adapt to changing conditions. 

Dynamic Load Planning

Load planning ensures trucks are loaded efficiently, minimizing costs and maximizing delivery speed — critical for last mile logistics. 

By optimizing truck loading based on factors like pallet size, height restrictions, and delivery stop sequencing, it reduces handling time and ensures timely deliveries. Effective load planning ultimately streamlines the final mile process, improving efficiency and customer satisfaction. 

Auto-Dispatching

Auto-dispatching automates the process of assigning deliveries to drivers or delivery partners. By analyzing factors like location, availability, and delivery windows, the system assigns the right driver to the right job. 

This reduces manual effort, minimizes errors, and speeds up the dispatching process. It’s a key feature of many last mile delivery solutions. 

Real-Time Reporting

Real-time reporting provides businesses with up-to-date insights into their delivery operations. From tracking driver locations to monitoring delivery statuses, this feature helps businesses stay informed and make data-driven decisions. It also improves transparency for customers, who can track their orders in real time. 

Automated Freight Reconciliation

Freight reconciliation ensures accurate billing by matching freight estimates with carrier invoices, a critical step for final mile delivery, as discrepancies can lead to delays, customer dissatisfaction, and financial losses.  

Automated solutions can streamline this process by quickly matching shipments, resolving billing disputes, and providing real-time financial reporting. This boosts cash flow, reduces errors, and strongly supports customer satisfaction.  

Last Mile Delivery with Dynamics 365 SCM

Microsoft Dynamics 365 Supply Chain Management (SCM) offers robust tools for managing logistics, but when it comes to last mile delivery, businesses often need more advanced capabilities.  

While the native Transportation Management System (TMS) in Dynamics 365 provides foundational features like route planning and load optimization, it lacks dynamic routing and real-time adaptability — key components for efficient last mile delivery.  

This is where enhancements like Avantiico’s add-ons come into play, bridging the gap and enabling businesses to optimize their final mile operations. 

Enhance Your Microsoft TMS with Avantiico

Further optimize your final mile with our Microsoft Dynamics TMS - including dynamic routing, load planning, automated freight reconciliation, and more.
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What Is Microsoft TMS?

Microsoft TMS (Transportation Management System) is a feature within Dynamics 365 SCM designed to help businesses plan, execute, and optimize the movement of goods.  

It includes tools for route planning, carrier management, load optimization, and real-time shipment tracking. For example, you can use it to plan efficient routes, compare carrier rates, and ensure full truckloads.  

However, while Microsoft TMS provides a solid foundation, it doesn’t include advanced features like dynamic route planning or real-time adjustments, which are key for last mile delivery optimization. 

Can Microsoft Dynamics TMS Help with Final Mile Optimization?

While Microsoft Dynamics TMS offers basic route planning and load optimization, it has limitations when it comes to final mile delivery. The system does offer static route planning and freight management, but lacks the real-time adaptability needed to handle last mile challenges like traffic delays, last-minute order changes, or dynamic customer schedules.  

To fully optimize last mile delivery, businesses often need additional tools — such as Avantiico’s Microsoft Dynamics TMS add-on — which add dynamic routing, real-time adjustments, and advanced load planning capabilities to the standard features. 

Optimize Further with Avantiico’s Microsoft TMS Add-Ons

Avantiico’s add-on to Microsoft Dynamics 365 TMS take last mile delivery optimization to the next level. By integrating advanced features like dynamic route planning, automated load optimization, and freight reconciliation, this powerful integration helps you do more with less — no rip and replace required. 

If you’re currently using Dynamics 365 SCM and the Warehouse Management/TMS tool within it, contact us to gain access to these time and cost-saving features: 

Dynamic Route Planning: Unlike standard Microsoft TMS, which only supports static route planning, Avantiico’s solution uses real-time data to adjust routes based on customer order and delivery priorities. Dispatchers can add or remove stops on-the-fly, and delivery appointments are automatically scheduled, ensuring faster and more efficient deliveries. 

Automated Freight Reconciliation: While Microsoft TMS offers basic freight reconciliation, Avantiico’s solution fully automates the process by linking customer-specific rates and carrier invoice accessorial charges to the Transportation Management Hub. This reduces manual effort, improves accuracy, and simplifies dispute resolution. 

Dynamic Load Planning: Microsoft TMS does offer basic load planning, but Avantiico’s solution takes it a step further with rules-based logic to optimize truck loading based on pallet size, height restrictions, and delivery stop sequencing. It also provides a visualization tool to plan loads. This eliminates the need for dock staging and can split loads across multiple trucks if necessary. 

Other Extended Functionalities

Real-Time Reporting: Provides up-to-date insights into delivery statuses, route efficiency, and load optimization, enabling better decision-making. This enhancement goes beyond standard TMS reporting by offering deeper visibility and responsiveness to dynamic supply chain changes. 

Sales Commodity Pricing: Standard Microsoft TMS requires a price to complete a sales order line, which can delay order fulfillment when commodity prices are not yet published. Avantiico’s enhancement allows orders to be entered without prices, supporting customer-specific rounding rules, buyer add-ons, and planned cuts to keep the process moving. 

Customer-Based Substitution: Microsoft TMS only supports product substitutions, so it doesn’t natively support customer-specific substitution rules. Avantiico’s solution bridges this gap by defining flexible, customer-specific rules for substitutions, ensuring compliance with customer preferences even during product shortages. It also maintains price consistency for substituted products. 

Distributors and logistics professionals are constantly at war with final mile costs – but with a powerful TMS that offers the tools above, you can simplify last mile delivery and boost customer satisfaction in the process.  

Ready to Reduce Your Final Mile Costs? Contact Us Today

Contact us today if you’re already using D365 SCM and need extended delivery functionalities such as dynamic route planning, load planning, automated freight reconciliation, and more. 

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FAQ 

What does last mile delivery mean?

Last mile delivery refers to the final step in the delivery process, where goods are transported from a distribution center or warehouse to the end customer. It’s the most visible part of the supply chain because it directly impacts the customer’s experience. Whether it’s a package arriving at your doorstep or groceries being delivered to your home, the last mile is what completes the delivery process. 

What is the “last mile problem”?

The “last mile problem” refers to the challenges businesses face during the final stage of delivery. These challenges include high costs, traffic delays, failed deliveries, and rising customer expectations for faster shipping. Unlike bulk transportation, last mile delivery involves moving smaller quantities to multiple locations, often in urban areas, making it the most complex and expensive part of the supply chain. 

Why is last mile delivery so costly?

Last mile delivery is expensive because it involves multiple small deliveries to individual customers, often in areas with heavy traffic. This increases fuel costs, labor expenses, and vehicle wear and tear. Nowadays, customers also expect faster deliveries, sometimes within hours, which adds pressure and further drives up costs. These factors make the last mile the most costly part of the delivery process, accounting for over half of total shipping expenses. 

How can businesses improve last mile delivery efficiency?

Businesses can improve last mile delivery efficiency by using technology like dynamic route planning, auto-dispatching, and real-time tracking. Dynamic route planning adjusts delivery routes in real time based on traffic, weather, and other factors, saving time and fuel. Auto-dispatching assigns deliveries to drivers automatically, reducing errors and speeding up the process. Real-time tracking keeps both businesses and customers informed about delivery progress, improving transparency and satisfaction. 

What’s the difference between first mile and last mile delivery?

[H3] What’s the difference between first mile and last mile delivery? 
First mile delivery involves moving goods from the manufacturer or supplier to a distribution center or warehouse. It focuses on consolidating products and preparing them for the next stage of the journey. Last mile delivery, on the other hand, is about getting those products to the end customer. While the first mile prioritizes bulk transportation efficiency, the last mile emphasizes speed, accuracy, and customer satisfaction, making it more complex and costly. 

How do failed deliveries impact businesses?

Failed deliveries, such as when a customer isn’t home or the address is incorrect, can significantly impact businesses. They lead to additional costs for redelivery attempts and customer service efforts, averaging around $17.20 per package. Failed deliveries also frustrate customers and can harm a business’s reputation, making it crucial to address issues like accurate address verification and flexible delivery options. 

Does Microsoft Dynamics TMS have the necessary tools to optimize last mile delivery?

Microsoft Dynamics TMS provides foundational tools for route planning, load optimization, and shipment tracking, which are useful for broader logistics management. However, it lacks advanced features like dynamic routing and real-time adaptability, which are critical for optimizing last mile delivery. While it handles static routes and bulk transportation well, businesses often need additional solutions, such as Avantiico’s enhancements, to address the unique challenges of last mile logistics, like traffic delays and tight delivery windows. 

How Is Avantiico Extending the Capabilities of Microsoft TMS?

Avantiico enhances Microsoft Dynamics TMS by adding advanced features like dynamic route planning, real-time adaptability, and automated load optimization. These tools help businesses respond to last mile challenges, such as changing customer order and delivery priorities, more effectively. By integrating these capabilities, Avantiico bridges the gap in Microsoft TMS, allowing you to streamline last mile operations, reduce costs, and improve delivery times while maintaining high customer satisfaction. 

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This combination also allows businesses to handle unexpected disruptions, like product shortages or route changes, with ease, ensuring timely deliveries and improved customer satisfaction. By streamlining operations and reducing costs, dynamic routing and load planning work together to create a smarter, more agile supply chain. 

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