THE LAST MILE CHALLENGE: EVALUATING THE EFFECTS OF CUSTOMER DENSITY AND DELIVERY WINDOW PATTERNS

Consumer direct delivery of packages ordered over the Internet has grown at well over 25 % per year over the past 10 years and now accounts for over $100 billion in sales in the U.S. alone. Retailers have rushed to capitalize on what has commonly been labeled multi‐channel retailing, while logisticians have faced a challenge in devising efficient methods of delivering billions of packages to customer homes. Inefficient deliveries in this “last mile” of the supply chain have led to numerous business collapses as well as a substantial increase in delivery costs. We present a study which examines the effect of two factors (customer density and delivery window length) on the overall efficiency of the delivery route. Data are collected based on empirically derived settings from interviews with several practicing managers. Results provide insight for logistics and marketing managers who must balance customer desires for convenience with business desires for efficiency. The data show that offering a 3 hour delivery window is 30–45% more expensive than offering unattended (9 hour delivery window) delivery. The results provide a tool for managers to address the tradeoffs between various settings for the independent variables (customer density and delivery window length) and the overall route efficiency.