The Last Mile Problem
This global dispersion of delivery addresses has created an
industry problem known as “the last mile.” While parcel delivery firms can ship
goods between major hubs efficiently and with an economy of scale, moving goods
from the distribution center to the customer’s home is a far bigger problem. McKinsey estimated
in 2016 that the cost of parcel delivery globally is around €70 billion ($60.7 billion),
with last mile deliveries accounting for a staggering 50 percent or more of the
costs that arise due to the lack of efficiency in business-to-consumer (B2C)
In remote locations, a delivery truck may have to travel a
long way between drop-offs. While cities provide the opportunity for clustering
nearby deliveries together, congestion means that a truck may spend the
majority of its time in traffic.
The problem becomes even more apparent in the developing
world, where in many countries the infrastructure for last mile deliveries just
does not exist. The
Wall Street Journal
has previously reported
that some companies are even partnering with one another to develop the
infrastructure needed for deliveries. This is in response to demand from a burgeoning middle class in countries like India and
China. All over the world, consumers are looking to have their goods delivered
as quickly and as cheaply as possible.
The last mile problem offers massive opportunities to create
efficiencies, and many companies are putting an enormous investment into
technological solutions. Amazon has already trialed home deliveries using drones and says it is only a
matter of time before drones will be leveraged as regularly as delivery trucks
on the road.
Self-driving autonomous vehicles are a further area of
development. Fortune reported in March that a spokesperson
from Renault-Nissan stated that commercial delivery vehicles would be at the
forefront of the self-driving vehicle revolution. DHL even
self-delivering parcels, autonomous packages that steer themselves, may feature
in the future of last mile deliveries.
in Parcel Deliveries
Distributed ledger technology could now add significant
value to parcel delivery and particularly to the last mile problem. One of the
challenges faced by the industry is fragmentation. Logistics and shipping
consist of a vast mix of global players such as Maersk, DHL or UPS, together
with smaller, more localized delivery firms and even sole operators conducting
deliveries by bicycle.
It is, therefore, a further challenge for industry players
to interact efficiently in a way that helps to solve the last mile problem.
Whereas a global player can move goods between its hubs and distribution
centers relatively easily, it may need to outsource the last mile delivery to a
smaller firm. PAKET is one blockchain startup that
is working on the potential for distributed ledger technology to disrupt the
parcel delivery sector.
One of the most valuable functions of blockchain technology
is its peer-to-peer connectivity, allowing the exchange of value for which it
is so highly touted. If the parcel itself represents the value and the
different delivery and shipping companies are the peers, then it is easy to see
how a blockchain parcel delivery network can bring efficiencies to the sector.
PAKET, for instance, is developing a protocol that will allow one party to
contract delivery services to multiple others based on the exchange of its
native BUL token.
The protocol deploys smart contracts to ensure security for
the sender and the couriers involved. Delivery fees are held in escrow until
the package is delivered. It is also possible for the sender to require a
collateral payment staked by the courier, which acts as compensation in case
the parcel disappears. Both the fee and collateral are freely negotiated
between the parties.
PAKET foresees that, ultimately, anyone could become
involved in solving the last mile delivery problem. For example, regular
commuters could pick up parcels in their city of work and ferry them back to
their hometown, hence making a side income from their daily journey to work.
This connectivity and flexibility will help overcome the infrastructure problem
seen in developing countries.
Blockchain technology could also reduce the incidence of
lost or stolen parcels. Digital asset tracking is being implemented in supply
chains (by Walmart, for example) to track the
movement of products more effectively. By adding digital tags to parcels,
shipping companies could know precisely in which container, on which specific
ship, flight or train, a package is traveling.
The parcel delivery industry has already demonstrated its
ability to keep up with significant changes to demand brought about by
e-commerce. However, the sector is now on the cusp of a technological
revolution, with blockchains and autonomous vehicles ushering in a new era for
the benefit of consumers.