Importance of Last Mile delivery


Independently of Covid-19, today’s consumers are increasing the online purchases for their daily shopping to food delivery needs. These groceries, meals or products must be delivered at the customer’s doorstep. The “Fast forwarding last-mile delivery”-report from McKinsey predicts that “70-80% of last-mile deliveries will be autonomous by 2025”. In particular supermarkets or restaurants face the challenge of timely (aspired to be below 15 minutes) delivery at low costs. With growing importance also the challenge of getting to CO2 neutrality. Quick and efficient fulfillment of an order is therefore not just a ‘nice to have’; it is becoming a requirement for many retailers to stay competitive in their markets. This opens opportunities for new technologies in supply chain to increase the number of deliveries, shorten the delivery times and delight customers — all while trying to cut costs of the expensive “Last Mile”.

Last mile delivery

Last mile delivery

The challenge

The Last Mile, the final step of the logistics of delivering goods to the customer, is the most expensive (nearly 1/4th of total delivery cost) and most time-consuming. Of the entire supply chain, the Last Mile has the biggest impact on the customer satisfaction. This process involves coordination between (real-time) customer demand and the supplier’s logistical processes. Nowadays customers are getting increasingly higher expectations of quick delivery and actively involved themselves. 90% of the shoppers actively track the delivery status of their package and want (sometimes: need) the delivery to fit their schedule seamlessly. The services need to provide insights into the delivery process and deal effectively with customer inquiries when exactly a package will be delivered.

Below we list three drivers for Last Mile delivery:

  • Pandemics

  • Congestion and pollution due to increased urbanization

  • Lowering costs

1. Impact of pandemics

The growth in Last Mile delivery had been consistent and strong for several years, driving steady innovation. Then came the pandemic. The steady expansion rocketed to a sudden explosion in demand. The delivery business still struggles in processing the exploded demand by adding capacity, extending hours, even branching out into more products to be delivered fast enough.

Businesses that did not have their own delivery capabilities had to lean heavily on third-party services as a channel to deliver to customers. The system saw a momentum unlike any seen before. The initial pandemic response, with businesses scrambling for quick fixes to meet surging demand, has mostly run its course. But the Last Mile will never go back to its pre-pandemic state. Its impacted by the shift in customer priorities such as, from convenience toward safety. Subtler changes in customer behavior, motivation and habits also collectively have a significant impact. The raise of social safety distances and contact indeed provides a great opportunity for smaller autonomous vehicles to drive the streets and deliver to homes.

Autonomous delivery robots

Autonomous delivery robots

2. Congestions and pollution in city centers

While the innovative companies bring about very efficient products of various sizes that are strictly eco-friendly, many city municipalities combat truck traffic meticulously without hindering businesses and residents receive the goods timely fashion. Larger goods trucks pose a danger to pedestrians and cyclists, increase traffic congestion and are responsible for up to half of traffic emissions within cities.

In older city centers with narrow streets or car-free zones Last Mile delivery is not only a challenge to do a timely delivery. Vans, cars and trucks making deliveries also contribute to more traffic congestion and CO2 and NOx emissions in these sensitive areas.

Freight hubs system in Europe lead an eco-friendlier way by - instead of passing through city centers - having long-distance trucks deposit into smaller, decentral distribution centers in (the edges) of the city. This increases the importance and workload of Last Mile deliveries. However, it is a progressive innovation towards a brighter future.

3. Costs

Comparison of costs per delivery: driver vs. robot

Comparison of costs per delivery: driver vs. robot

There is a significant amount of cost savings that can be derived with the progress towards autonomous delivery scheme. Calculations of current courier costs show that on an average, a single restaurant delivery costs about 5.75 euros this includes the driver’s salary, offers and incentives and the insurance of delivery. Whereas a robot-based delivery would result in a cost of 3.12 euros per delivery. The demand to expose drivers less to pollution and enable a replacement of their jobs through remote operation and ML training jobs is driving the need towards specialized operation jobs while enabling to maintain the tight margins of delivery companies.

The importance of Autonomy

Self-driving delivery robot companies like Neolix, Nuro and Starship etc. Have significantly gained in traction during the pandemic. These types of companies have scaled up manufacturing and are rolling out autonomous technology for last mile delivery on the streets helping to maintain the profitability of delivery companies.

The current delivery robot sizes vary as companies experiment to find their sweet spot, product-market fit and consumer acceptance. There are smaller robots that navigate the pavement and carry about 5 kgs payload. There are medium sized moving vending machines. There are larger ones – the size of a small van - fitted for delivery of groceries or parcels. While it’s not certain today, which exact type(s) will reach the best acceptance by both municipalities and end-customers, we can state that the last mile delivery robots will rely on vehicle autonomy and remote operation technology.

More than the hardware, mastering the AV-stack - AV stands for Autonomous Vehicle - is the key for effectively delivering the benefits of autonomous logistics. The advantage of the AV-stack is that it delivers substantial value in terms of cost reduction and reliability. A company with concrete vision to get to autonomous moving robots in the streets, will deliver most of the value in costs and reliability. While quite some start-ups strive towards develop this software, stable progress can be only be measured by collecting data and testing the AV-stack in real-life (street) situations.

EU governments have been fast to cope with the rapidly raising demands by targeting a pro- autonomous delivery company legal framework for mid of 2021. As legislation in the automotive industry is targeting L4 in 2022, the autonomous robotic will be the first to hit the road in EU - as already happened in China and USA.

Teraki as key provider of the robotics AV-stack

At Teraki, our priority is to process all types of sensor data and from this distill deterministic conclusions directly at the edge. This keeps the material costs (in terms of processing and sensors used) low, while reducing the total data needed to be processed for route planning and critical decision making. Consequently, this lowers latency and improves battery performance – leading to longer operational deployments. Thirdly, this enables better mapping (for a robot to orient itself in its environment) and better Remote Control (for a human at a distance to temporarily take over the control of the robot). The Teraki software technology enables up to 150x times more cost-efficient model-training while preserving perception accuracies up to 20-30% better than standard technology stacks. As such it is key for the scalable operation of a larger fleet of robot delivery schemes.

As such Teraki has been supporting the more scalable roll-out of delivery robot deployments in the US and Asia. Currently it is looking to support first local supermarket and delivery service brands in the EU with their own delivery robot applications.

… and soon to be seen in action

As prelude of the forecast that “70-80% of last-mile deliveries will be autonomous by 2025”, one can see the first delivery robots in action in the streets. So far mostly in Asia. However, driven by the above three challenges: 1) social distancing, 2) crowded and polluted city centers and 3) cost competitiveness, many companies start or plan to start first deployments in limited areas.

Teraki will be providing its vehicle autonomy solutions in delivery robots that will operate in Berlin in the coming months. For more news on this exciting development, stay tuned.

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