August 30, 2017
Column | outbound

It may be last, but it's not really a mile at all ... yet

Right now, e-commerce's "last mile" is somewhere between six and nine miles, according to a new study. One expert believes it will continue to shrink.

By Mitch Mac Donald

Perhaps it's a minor point, but in businesses like logistics, it's the small details that sometimes matter most.

Consider the currently-in-vogue term "the last mile." It refers, of course, to the final leg of a product's journey through the supply chain—meaning delivery to the customer—rather than a literal distance. As for why it's getting so much attention, it's all about the need for speed in the new world of order fulfillment. Suppliers' ability to meet customer demands for rapid delivery of orders is highly dependent on that last mile of the supply chain. Nowadays, it's not too much to say that the last mile is where sales are lost or won.

While this is true in many industry verticals, nowhere is the pressure more acute than in retail—and e-commerce, in particular. The time when customers were satisfied to have online orders delivered in two to three days is past. The consumers of 2017 expect next-day delivery. It's probably not much of a stretch to say the consumers of 2018 and beyond will expect same-day service, particularly in urban areas.

That's where so-called "last-mile distribution centers" come in. Sometimes called "last touch" centers, these DCs are generally the final point of distribution for goods before they arrive on customers' doorsteps, according to a report released this summer by real estate and logistics services giant CBRE. And they're fast becoming a thing in metro areas: "Last-mile distribution facilities for e-commerce are popping up in close proximity to the population centers of major U.S. cities, creating a foundation for rapid-delivery service that didn't exist on this scale as recently as a few years ago," the report says.

As for what the researchers mean by "close proximity," we're talking under 10 miles. To be precise, CBRE's analysis of the locations of newer last-mile distribution facilities (those opened within the past two years) in the 15 largest U.S. population centers showed that they are positioned, on average, between six and nine miles from the center of the population areas they serve.

Among other findings, CBRE's study revealed a correlation between population concentration and the length of the "last mile." "Denser cities tend to have shorter average distances, such as the six-mile average in San Francisco and the 6.3-mile average in Philadelphia," the researchers wrote in their report. "Meanwhile, cities that are more spread out have longer averages, such as 7.5 miles in Houston, 8.5 miles in Phoenix, and nine miles in Southern California's Inland Empire."

The report left no doubt as to what's driving the trend. "The close proximity of the last-mile facilities to huge populations of customers facilitates online shoppers' growing expectations of nearly instantaneous delivery of their orders," it noted. "Earlier this decade, goods ordered online often were delivered to customers from much larger facilities much farther away, sometimes in other states."

Also notable is the speed with which this scenario has played out. "These close-in fulfillment centers have proliferated within the past two years, underscoring the need for retailers to have large batches of inventory within 10 miles of most of their customers so they can fulfill orders as rapidly as possible," said David Egan, CBRE's global head of industrial and logistics research, in a press release. "This is an entirely new link in most supply chains that delivers on the promise of fast, super-high-performance delivery."

Indications are, the trend has yet to run its course. "Development of last-mile strategies still is in the early stages, so the average distances in many metros [are] likely to shrink a bit more in the coming years," Egan said in the release. If his prediction pans out, "the last mile" may not be a figurative expression much longer.

About the Author

Mitch Mac Donald
Group Editorial Director
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.

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