For logistics giants like UPS, DHL, and FedEx, among others, the last mile - the final leg of a package’s journey from a distribution center to the customer’s doorstep - has become the toughest and most expensive link in the supply chain.
While these companies dominate global logistics with robust infrastructure, extensive reach, and decades of operational experience, last-mile delivery continues to expose vulnerabilities that threaten efficiency, profitability, and customer satisfaction.
Rising costs of delivery
The last mile is notoriously expensive, accounting for up to 50% of total shipping costs in many cases. Unlike the middle stages of cargo movement where bulk shipments move predictably between hubs, last-mile deliveries involve fragmented routes, lower drop densities, and higher labor intensity.
Here, the big players loose the economic advantage of scale when faced with varying costs of fuel, vehicle maintenance and workforce wages.
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Meanwhile, the booming e-commerce fulfilment market is adding its own pressures, as customers become accustomed to fast, free and often precisely scheduled, deliveries.
Balancing speed with cost efficiency is a constant struggle in the last-mile game. It requires agility and quick adaptation in the decision making process, something the logistics giants are not known for - at least not yet.
Urban congestion and regulation
In dense urban centers, traffic congestion, restricted delivery zones, and limited parking make efficient routing nearly impossible. Cities like New York, London, and Mumbai impose strict regulations on delivery vehicles to ease congestion, but these restrictions slow down operations and drive costs higher.
DHL has tested cargo bikes and UPS has experimented with urban lockers, but scaling these solutions across diverse markets still remains a challenge.
Consumer Expectations of Speed and Flexibility
e-Commerce has reset the bar for customer expectations. Shoppers now demand same-day or next-day delivery, real-time tracking, and flexible time windows.
Labor Pressures and Workforce Management
Last-mile delivery depends heavily on human labor - drivers, couriers, and subcontractors. Global 3PLs today, are faced with growing labor shortages, high turnover, and mounting union pressures in key markets.
The gig-economy model adopted by smaller players like Amazon Flex or local couriers offers more flexibility but raises concerns about reliability and brand consistency. Scaling a workforce that is both cost-effective and dependable remains a major operational challenge.
Sustainability Pressures
Many customers and regulators today are demanding greener logistics. With transportation responsible for a significant share of emissions, companies are under pressure to electrify fleets, cut emissions, and adopt cleaner energy. The challenge lies in achieving sustainability goals while keeping delivery affordable and competitive.
Automation to the Rescue?
Automated sorting and routing systems
Modern parcel hubs are increasing relying on automated conveyor systems, scanners, and AI-driven routing engines to decide the fastest, cheapest way to get a package to the customer.
These systems slash manual errors and optimize vehicle loading so drivers take the most efficient routes.
UPS’s ORION (On-Road Integrated Optimization and Navigation) uses advanced algorithms and real-time data to cut unnecessary miles from drivers’ routes. UPS reports it saves them around 100 million miles and 10 million gallons of fuel per year, directly lowering last-mile costs.
Autonomous vehicles and drones
Autonomous delivery tech, whether self-driving vans or drones, can operate for longer hours and access places conventional trucks can’t.
FedEx’s Roxo SameDay Bot, an autonomous delivery device, has recentluy been tested to handle short-range deliveries directly to customers’ homes or businesses in Dubai.
Similarly, DHL has piloted its Parcelcopter drone in remote areas of Germany, proving that automation can bridge the “last 50 feet” problem in areas that are costly or difficult for human couriers.
Conclusion
For UPS, DHL, and FedEx, the last mile is both an Achilles’ heel and a massive growth opportunity.
The global 3PL that can most effectively solve the puzzle of high costs, urban congestion, rising expectations, labor strains, and sustainability demands will set the standard for the future of freight forwarding.
Innovation, whether through automation, partnerships, or reimagined delivery models, will be a deciding factor in whether these giants can continue to dominate the logistics landscape or lose ground to more agile rivals.
Read More: Elite & Co. Wins Innovation in Last-Mile Delivery 2025 Award