Last-Mile Delivery Market Overview, Industry Growth Analysis & Forecast: 2024
Logistics management is a way to streamline business operations in a particular way of using advanved technological solutions. Last mile delivery market is expected to grow by USD 44.88 billion in the next 5 years, which is having a CAGR of over 14% during the forecast period.
Last Mile Delivery Market in North America 2020-2024
- Delivery Market will be accelerating at a CAGR of over 14%
- The annual growth rate for 2020 is estimated at 12.70%
- 79% of the growth will come from US
- One of the key drivers for this market will be the growth of e-retailing.
People are rapidly moving from brick and mortar stores towards online platforms for most of their purchases in North America, which has led to the growth of e-retailing at a fast pace across North America and the rest of the world. E-retailing has changed the way of communication between customers and retailers by introducing an easy way of making purchases at home.
Benefits of E-Retailing:
- Saves time
- Low operational costs
- Wider geographical reach for retailers
- Wide range of products availability
The Future of Logistics Industry
Similar to other industries, delivery and logistics is currently facing huge change; that is open to both risk and opportunity. In the scenario of new technology, new market entrants, new customer expectations, and new business models, there are different ways to meet challenges. In this paper, we need to focus on key areas of logistics management companies need to focus on now and highlight possible future of the industry.
Customer expectations are increasing. Both individuals and businesses expect to get goods faster – in the case of consumers – at low or no delivery cost. It can be possible by using the maximum and intelligent use of technology for data analytics and automation. This promises lower costs and improved efficiency. Developing the right strategy is crucial. There is increasing competition and people are starting their logistics & supply chain management operations in which sharing is a big story now. The whole sector is redefining collaboration. IoT is coming with increased standardization in logistics management operations.
Logistics Market Place in Next Five to Ten Years:
We explore future scenarios based combination of the four factors, weighted according to how important specific trends become:
- Defining the Physical Internet:
The term physical internet or PI is based on the idea that physical objects can be more efficiently moved around if they become more standardized and share common channels that require modularisation and standard interfaces and protocols.
Moreover, transport modes will need to be better synchronized and IT applications and networks will also need to operate together. To make the most of these, more efficient transport models need to be developed.
- Sharing the PI(e):
The dominant theme in this scenario is the growth of collaborative working, which enables the current market leaders to retain their dominance. This involves greater use of IoT solutions.
- Start-up, shakeup:
Start-ups put a bigger impact on the economy by collaborating with the incumbents to complement their service offers. They are not just managing their own strategic logistics but transforming that expertise into a profitable business model.
- Scale matters:
In this scenario, the current market leaders compete for a dominant market position through the acquisition of smaller entrepreneurial start-ups.
This study will help you know the trends and developments that can affect your business and help to develop a strategy for continued profitability through this time of disruption.
Distinct Business Models in the Logistics Industry:
What is logistics management and how it is manageable in the new digital era? In the era of technological disruption, logistics management companies are transforming their businesses to digitization and customer expectation is evolving. New technologies offer great efficiency and more collaborative operating models. Adoption of these technologies by startups and the industry’s own customers and suppliers are also shaking up the sector.
The competition is high towards adopting the latest ways of doing business that define the industry’s future. With an estimated US $ 4.6 trillion revenues at stake, companies need to adapt to changing markets proactively.
There are a number of distinct business models in the industry and companies may choose them according to their business preferences, which can overlap or individual companies may operate under more than one model. In this paper, we are elaborating different business models based on logistics service providers (LSP), carriers, and courier parcel companies.
Profitability and margins differ with business models. Sometimes, last-mile delivery services remain the most profitable group hitting the double-digit margins.
Customers in the logistics industry comprise both B2B and B2C segments. We will discuss B2B in this report.
Changing Customer Expectations:
Technological advancements have changed customer expectations and they expect to get shipments faster and with more transparency at a lower price.
B2B: Struggling for efficiency and transparency:
Technology is disrupting every aspect of how logistics management companies operate. Suitable digital solution will be a prerequisite for success. The winners will be those who understand the ways to exploit a whole range of new technologies, from data analytics to automation and platform solutions.
Cloud technology is helpful in providing efficient solutions which enable businesses to use new business models that are flexible and scalable.
Digital is still a challenge for transportation and logistics companies:
Almost 90%of the industry experts give importance to data and analytics in the transportation and logistics industry. The sector has never had access to more data. There are vast opportunities to improve performance and serve customers better. Adding machine learning and artificial intelligence to data analytics can deliver truly dynamic routing.
Lack of Digital Culture Stats:
Lack of digital culture and training is the biggest challenge that transportation and logistics companies are facing.
- 50% lack of digital culture and training.
- Lack of a clear digital operations vision and support/ leadership from top management: 33%
- Business partners are unable to collaborate around digital solutions: 22%
- Unclear economic benefit of digital investments: 21%
Automation could Reshape the Workforce:
Labour is a fundamental part of any logistics operating model. There is always been a trade-off between service levels and costs. But, automation is the right way which can manage this situation and actually breaks down this equation, allowing firms to offer better services and save costs. Some of the industry’s most labor-intensive processes are on the way to being fully or partially automated in delivery and logistics operations.
Automated solutions in delivery and logistics are already being implemented and their level of sophistication is increasing. Advancement in data processing now enables tasks to be automated like in delivery and logistics, all people connected to this industry can be streamlined at one platform that fulfills their requirements.
New Entrants to the Industry:
Platform technology has given rise to new business models, mostly adopted by startups who enter the logistics industry. New sharing business models have a great influence on the delivery and logistics sector just like new technology.
Start-ups drive new business models:
Most of the new entrants to the logistics sector are start-ups, and they are looking for new technology to enter the industry. \
Many new entrants in delivery and logistics offer agile pricing. In recent years, most of these companies are entering into last-mile delivery using an on-demand app. Some of these companies are using technology to tap into the sharing economy according to the market demands and sharing capacity.
Uber, currently the largest ride-sharing platform for passenger transit has introduced Uber-Cargo van service in Hong Kong and Uber RUSH is offering express services by targeting online retailers.
Lots of traditional logistics companies are entering into on-demand logistics solutions because they have a clear advantage to streamline their business.
Startups are not the only new entrants:
Well established businesses from other industries also have great potential to shake up the industry’s competition. Technology players or technology-automotive collaborations may enter the industry that includes machine-to-machine parcel-station loading for last-mile delivery.
Ride-sharing platforms may also emerge from autonomous vehicle development or independently. In Asia, Alibaba is trying to improve delivery services for its sellers by setting up Cainiao, a department store, an investment firm and a company with port logistics operations. The main advantage for network members is to access a logistics data platform, which helps them to achieve efficiencies by leveraging their capacity and capabilities on large scale.
The company is trying out new ideas too that allow customers to request a pick-up of a package from delivery personnel in the area.
Collaboration is already happening, especially in last-mile delivery but it is not consistent.
Higher levels of efficiency can be achieved through consistent standards.
Building on last-mile Partnerships:
Many market players are operating collaboratively. Companies like FedEx and DHL have been partnering with national postal companies and small local players for many years. However, with the advent of new technology, collaboration can become much more dynamic.
Collaboration and Standardisation would increase Efficiency:
The standard assumption is that a larger number of competitors is beneficial for customers. But, in some logistics sectors, there are substantial benefits in having more consolidation. According to the estimate, a 10% to 30% increase in efficiency in the EU logistics sector would result in 100-300 billion in cost savings for the European industry. IoT can help to address this challenge by increasing co-operation between enterprises and across transport modes by means of greater standardization.
Companies would need to be willing to collaborate far more extensively than they do today for more efficiency and cost reduction.
Most of the distribution centers in the US are standalone operations owned by different companies. Imagine, if they are connected, can lead to greater savings and maximum efficiency.
There are many ways for logistics companies to use assets more efficiently by collaborating. For example, by sharing fleets and networks, and establishing agreements between different service providers to deliver the best in a cost-effective and efficient way.
Many companies in the delivery and logistics sector are also turning to joint ventures to achieve collaboration. Large players are looking to expand their international operations and service in this way.
Also Read: Why On-demand Economy is highly Sustainable?
The basis for competitive advantage in the logistics industry is changing fundamentally. New technologies are introducing that will change the industry’s cost model. There may be new approaches to pricing that need to be fully taken into account.
Customer expectations are increasing rapidly. Above, we have discussed whether a logistics company can meet the growing expectations of customers, remain profitable and generate growth. The answer is yes, but the need is to choose the right way to achieve the goals.
It will be crucial to develop a clear strategy focusing on the market where there is surety to win. Companies with collaboration can achieve their desired targets.
Logistics companies need to focus on digital solutions, cost efficiency, productivity, and innovation in order to meet the changing expectations. Logistics companies also need to bring costs down by freeing up extra resources and invest more to support the company’s key capabilities and value propositions. So, cutting costs to grow stronger is a part of the strategy.
Finally, with more disruption ahead, companies need to anticipate how their capabilities will need to evolve. The best way is to create demand and to achieve this goal, it needs to establish strong relationships with key customers, keep an eye on the target market and actively shape the future.
The key is to use the strategy of unconventional leadership that drives success by aligning distinctive capabilities and applying them consistently.
In this paper, we have taken a broad perspective. It gives hints on some ways the industry might develop but you will want to consider the detailed implications for your specific business and operating model. We reflect further on how these scenarios may play out differently around the world and across the value chain and supplement this broad overview with deep-dive perspectives in specific areas.
With the help of on-demand delivery and logistics solution, you have the opportunity to streamline the business as it connects service providers and customers and bridges the gap between them. On-demand ecosystem connects all relevant scenarios to fulfill the needs of all customers associated with delivery and logistics in any way.
We provide on-demand delivery software to cater to the needs of all associated with the delivery and logistics industry. Contact us today to get a reliable solution for your on-demand delivery business.