Last Mile Delivery Market Overview

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A fast-growing market that is crying out for solutions due to the post-covid e-commerce boom

The number of last-mile deliveries is expected to grow by 78% worldwide by 2030 (World Economic Forum, 2020). This growth poses serious challenges to the last-mile sector regarding logistics operations within dense urban areas, improving the sector’s sustainability, and establishing cooperation between logistics stakeholders.

This growth poses severe hurdles to the last-mile sector for several reasons. For instance, last-mile logistics takes the stage in dense urban areas where logistics space is scarce and local authorities increasingly intensify policy measures. Furthermore, the sector comprises a complex web of actors with varying and changing interests and interdependencies. And as competition increases, so does the need for logistics players to equip themselves with the latest technologies to gain competitive advantage and adhere to possible new policy measures (McKinsey, 2021).

Finally, the logistics growth forecasts, and looming pressures on logistics stakeholders and urban environments, have increased awareness and efforts to ensure that this growth evolves in a more sustainable way. Key challenge for this sustainability transition is to simultaneously reduce environmental impact, foster urban liveability and maintain the profitability of operations.

Overview of the Last Mile Delivery Industry

By 2027, the global last-mile delivery market is expected to grow to more than $ 200 billion from $ 108 billion in 2020. The growth of the last-mile delivery market is led by the increased number in online orders.

Last-mile delivery, also referred to as Last-mile Logistics, is the portion of a journey where items are moved from a transportation hub or warehouse to the ultimate delivery location. Last-mile delivery aims to deliver goods to clients as rapidly as feasible while keeping costs to a minimum. More than half of the shipping expenses are incurred during the last-mile delivery. It is mostly used in the food, eCommerce, retail and pharmaceutical industries. The last-mile delivery market growth is expanding as a result of factors such as the rise of the eCommerce industry, an increase in trade activities brought on by globalization, technical developments in delivery vehicles, and an increase in demand for quick package delivery.

The B2C category of the market grabbed the highest revenue share, and it is anticipated to continue to hold that position in the future.

With the continuous upgrading of technology, deeper integration of intelligent software, industrial scenarios and broader industrial application, in recent years, we have witnessed the booming development of the sector.

In the future, last-mile delivery will focus more on user experience, cost reduction and efficiency improvement through technological transformation across different scenarios.

Improved methods and application of technologies are essential:

The high pace of technology development in logistics is rapidly transforming last-mile delivery. Innovations can apply to many aspects of the last mile, ranging from hub locations and infrastructure to vehicle technology, platforms, logistics operations and business models. They can contribute to the sustainability of last-mile logistics in different ways. First, innovations can help lower emissions of current operations, from vehicles used for last-mile deliveries to the organization of last-mile deliveries (e.g. delivery-to-door or via unattended technology). Alternatively, new logistics players can enter the market, introducing new business models that fundamentally change how goods are handled.

In last-mile transport, one of the main challenges is the decarbonization of the last-mile vehicle fleet. New engine solutions are pushed by European regulations and the establishment of low-emission zones or environmental zones in cities by local authorities. In response, innovative vehicles take the streets, such as electric vehicles, hybrids, and fuel-cell electric vehicles. These vehicles reduce last-mile logistics‘ environmental impact. Innovations also concern non-motorized transport modes, such as (e-)cargo bikes and delivery on foot, potentially with a „follow-me helper“. Cargo bikes‘ relative low costs, emission and health benefits and flexibility are essential advantages over other delivery forms in dense and congested urban areas.

Delivery automation is another technological innovation that may shape the future of last-mile logistics. Growing labour costs and decreasing relative costs of technology drive the transition to automation in logistics. From a technological standpoint, the last-mile services of the future could be widely carried out by unmanned vehicles, robots, and unmanned aerial vehicles. In the meantime, such developments raise new issues around traffic safety, infrastructure and legal domains.

The organization of urban freight flows is also changing. Last-mile logistics players are experimenting with (new) methods in organizing urban freight flows to increase sustainability and efficiency. New delivery models, such as collection and delivery points, are challenging last-mile logistics‘ business-as-usual and are increasingly crucial for parcel delivery companies. For instance, business-to-consumer delivery through parcel lockers is increasingly considered a viable alternative to home delivery. Delivery companies place parcels in unmanned reception boxes that the customer can open with a reference code or an application on their phone. Cities are also increasingly experimenting with last-mile delivery through urban consolidation centres or hubs. Here, packages from all (national and local) carriers are centralized, and last-mile delivery is bundled and executed with sustainable modes. Such hubs or urban consolidation centres can help to make traditional door-to-door delivery, organized by individual couriers, express and parcel services, more sustainable.

Finally, the future of last-mile logistics is also shaped by new entrants in the market, which might introduce new business models and radically change modes of operations. Examples of new entrants in last-mile logistics range from innovative start-ups to big tech companies, community and public initiatives. Here, a central question is the extent to which new entrants will impact the operations of established players, gain market share, or lead to further mergers and acquisitions.

Overview of the Transport Management Systems to address these challenges

The global Transport Management System (TMS) market size is expected to grow from $ 13 billion in 2023 to 33 billion by 2028 at a CAGR of 19%. Intelligent TMS solutions can dynamically optimize routes, predict disruptions, recommend carrier selection, and automate administrative tasks, thereby increasing operational efficiency and driving the market’s growth.

Cloud-based SAAS solutions will drive the TMS market. Modern businesses around the world are primarily dependent on technology. The majority of SMEs in Europe and in the USA are using cloud-based transport management systems because they may benefit from leading technologies without the cost of developing them. For example, the cloud-based transport management system’s storage flexibility provides scalability, which is crucial for SMEs and will aid them in coping with unanticipated growth or customer demand. As another example, the cloud-based transport management system provides cost savings and an alluring pay-as-you-go model, such as real-time payment over the cloud, allowing SMEs to position themselves as effective and competitive among other firms. The rise of big data across industry verticals has helped companies analyze data sets to make better strategic decisions.

The Europe transportation management systems market size was valued at $ 3 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 12.1% from 2023 to 2030.

The growth of the market is owing to increased return on investment (ROI) and the advent of digital transformation in the transportation sector. Therefore, the introduction of digital from linked warehouses to new mileage delivery services increases TMS’s value and presence in the market, reshaping the industry into a dynamic setting for fostering social change. Most cloud-based transportation management solutions are offered for rent as software (SaaS). This indicates that rather than paying for the technology outright, customers subscribe to it on a monthly or yearly basis. Users are constantly using the most recent software version because this is more cost-effective. The development of technologies such as IoT and cloud-based services also provides prospects for the market’s overall growth.

The rise of e-commerce and the significant return on investment provided using transportation management systems (TMS) are projected to be the primary drivers of industry expansion. The improved commerce between developed and emerging economies, which has resulted in higher imports and exports, impacts demand for this market segment. Innovative and efficient transportation management solutions are required because the raw materials must come from various locations worldwide. The market for the logistics sector is also aided by emerging economies‘ rising demand for luxury automobiles. Most high-end vehicles are produced in Europe before being transferred to other nations. Automotive sectors now employ TMS because of the necessity to track these shipments and ensure they arrive on time. Additionally, the global supply of auto parts modifies the industry’s need for TMS.

In Europe, supply chain visibility, TMS, commodity trading, transaction and risk management (CTRM) software, and demand planning are essential to better manage transportation and continue the supply chain. Demand planning and TMS experienced the most significant traffic spikes in the country, possibly indicating that customers are most concerned about demand variations and the ability to track shipments, choose the best routes, and keep operating fleets in war zones. The key trend impacting the growth of the traffic management systems market is an increase in the number of strategic alliances.

Conclusion:

In summary, while the general market has seen growth and progress in recent years, few consistent and clear solutions address all the hurdles in the supply chain. All the more, there is a demand for solutions from a single source that map as many aspects as possible and offer customers a platform with which corporate logistics can be mapped transparently, data can be collected efficiently and used in a structured manner and, despite the breadth of possibilities, can still guarantee the corresponding intuitiveness, customization level and user-friendliness.