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Why is the last-mile of delivery so costly and complex?

The location and optimisation of distribution facilities is key to mastering the urban last-mile. Here Matthias Winkenbach, Director of the MIT Megacity Logistics Lab and the MIT CAVE Lab explores the complexities of last-mile delivery.

While the last-mile is the shortest, final leg of the global supply chain, it's also the most complex and most costly part. “The final mile actually accounts to about 40% of the overall supply chain cost, so that tells you how important it is to get that last-mile right,” says Matthias. 

Location is key, so placing facilities as close to customers as possible is ideal. Optimising efficiencies in the warehouse and in delivery also helps reduce the complexity and cost. 

“It's not about applying off-the-shelf solutions, it's about having tailor-made solutions
to the specific urban environments that you care about,” explained Matthias. 
As part of his work at MIT, Matthias and his team examine data to help optimise delivery routes and reduce the complexity for the increasingly dense urban environments. What they were finding was that although routes were planned, drivers would often deviate from the optimal route, and they wanted to work out why. 

A recent MIT experiment in this area analysed GPS data to identify which customers were causing disruption along the route. Matthias explains how this experiment allows you to understand the behaviour of the driver and also extract the local knowledge that the driver has about the urban environment that they operate in, at scale. 

It proves that there is no one-size-fits-all solution for last-mile logistics in any given city. “So, a solution for last-mile logistics in New York City might look very different from the best solution for last-mile logistics in Sao Paulo or Paris” says Matthias. 

“Where you have your distribution facilities, what kind of facilities you have and how you use them, is basically the most strategic question that you have to answer if you want to master the urban last-mile,” concludes Matthias. 

"The shortest part of a global supply chain, that last mile is actually the most complex …. So that's why getting those last one to five kilometres right is the most critical thing to do."