Updated February 2026
Last mile delivery eats up more of your shipping budget than any other segment of the supply chain—often 53% of total shipping costs. For many businesses, it's the single largest controllable expense standing between them and healthier margins.
The frustrating part? Most of that cost comes from inefficiencies that are entirely fixable. This guide breaks down ten practical tactics to reduce your last mile delivery costs, from route optimization and failed delivery prevention to smarter packaging and data-driven decision making.
Why last mile delivery costs keep rising
Lowering last mile delivery costs comes down to a few core strategies: optimizing routes with smart technology, using real-time tracking to reduce failed deliveries, right-sizing your packaging, and analyzing data to find inefficiencies. The businesses seeing the biggest savings combine AI-powered route planning with proactive customer communication and flexible delivery options that allow for better route consolidation.
So why do costs keep climbing despite these known solutions? E-commerce growth has fundamentally shifted what customers expect. Same-day and next-day shipping used to be premium options. Now they're the baseline for many shoppers, which forces businesses to make more frequent, smaller deliveries instead of efficient bulk shipments.
Labor shortages add another layer of pressure. Driver wages have climbed as companies compete for a workforce facing an estimated deficit of 60,000 drivers in 2024, and fuel prices remain unpredictable. Meanwhile, urban congestion means drivers spend more time in traffic and less time completing deliveries. All of these factors compound to push last mile costs higher year after year.
If you're new to the term, "last mile delivery" refers to the final leg of a package's journey—from a local distribution center to the customer's door. It's called the "last mile" even when the actual distance is several miles or just a few blocks.
What drives the cost of last mile delivery
Before diving into cost-cutting tactics, it helps to understand where your money actually goes. Last mile delivery typically accounts for the largest portion of total shipping expenses, often representing 40% or more of supply chain costs. Breaking down these expenses reveals distinct categories, each with its own optimization opportunities.
Fuel and vehicle expenses
Every mile your delivery vehicles travel costs money in fuel, tire wear, and eventual repairs. Route inefficiency—where drivers backtrack or take longer paths than necessary—directly inflates these expenses. When a driver covers 50 miles to complete deliveries that could have been done in 35 miles with better planning, that extra 15 miles adds up quickly across hundreds of daily routes.
Labor and driver wages
Driver compensation represents the largest single expense in most last mile operations. Beyond hourly wages, there's also training, benefits, and the hidden cost of turnover. When experienced drivers leave, you're constantly investing in onboarding new ones—and new drivers typically complete fewer deliveries per hour while they learn routes and procedures.
Failed delivery attempts
When a customer isn't home or a package can't be delivered on the first try, you pay twice: once for the initial attempt and again for re-delivery. Research shows that up to 20% of e-commerce packages aren't delivered on the first attempt. Failed deliveries also generate customer service calls and can damage your reputation. A single failed attempt can add 50% or more to that delivery's total cost.
Urban congestion and access challenges
City deliveries present unique obstacles. Limited parking, restricted delivery windows for certain buildings, and traffic that turns a five-minute drive into thirty minutes all eat into efficiency. Apartment complexes and office buildings often require drivers to navigate security protocols, adding time to each stop that doesn't exist with suburban home deliveries.
Customer expectations for fast shipping
Speed demands reduce your ability to consolidate deliveries efficiently. When customers expect next-day delivery, you have less flexibility to batch orders by geography or wait for optimal route density. This trade-off between speed and efficiency sits at the heart of many last mile cost challenges.
10 proven tactics to reduce your last mile delivery costs
The following tactics help businesses reduce last mile delivery costs through smarter technology, streamlined processes, and better customer engagement. You don't need to implement all ten at once—even adopting two or three can produce meaningful savings.
1. Optimize routes with intelligent dispatch technology
Route optimization software calculates the most efficient path for drivers by factoring in traffic patterns, delivery windows, stop density, and vehicle capacity. The best systems update routes in real-time as conditions change throughout the day.
Manual route planning simply can't match what algorithms achieve. A dispatcher might create a reasonable route, but optimization software evaluates thousands of possible combinations in seconds. The result is fewer miles driven, less fuel consumed, and more deliveries completed per shift. Platforms like Koorier One provide real-time dispatch capabilities that handle this complexity automatically.
2. Reduce failed deliveries through real-time customer communication
Proactive communication dramatically lowers failed delivery rates. When customers receive accurate delivery windows and real-time updates, they're far more likely to be available when the driver arrives.
Effective communication typically includes:
- Automated notifications: SMS or email alerts sent when a driver is approaching
- Delivery window confirmations: Messages that let customers confirm availability
- Real-time tracking links: Tools showing exactly where the delivery vehicle is
Koorier's Kapp platform gives consignees this kind of visibility, allowing them to manage their delivery experience rather than simply waiting and hoping.
3. Partner with a technology-driven delivery network
Outsourcing to carriers with robust visibility platforms often costs less than managing an in-house fleet, especially for businesses without the volume to justify dedicated vehicles and drivers. Technology-driven partners provide optimization tools and tracking capabilities that would otherwise require significant capital investment.
The key is choosing partners who offer transparency. You want real-time visibility into where packages are and when they'll arrive—not just a tracking number that updates once daily.
4. Give customers self-service delivery management tools
When recipients can reschedule deliveries, redirect packages to alternate addresses, or choose pickup locations, failed delivery rates drop significantly. Self-service tools also reduce customer service call volume, which saves labor costs on your end.
This approach shifts control to the customer in a way that benefits everyone. The customer gets flexibility, and you get higher first-attempt success rates without additional effort from your team.
5. Offer flexible delivery windows to improve efficiency
Wider delivery windows allow for better route consolidation. When every customer demands a one-hour window, drivers make fewer stops per route. When customers accept four-hour or all-day windows, you can sequence stops for maximum efficiency.
Consider offering small incentives for customers who choose flexible windows. A modest discount or loyalty points can encourage behavior that saves you significant money per delivery.
6. Consolidate orders to maximize vehicle capacity
Batching orders by geography or timing improves vehicle utilization. Instead of sending a half-empty van to a neighborhood today and another half-empty van tomorrow, you wait until you have enough orders to fill the vehicle efficiently.
This approach works particularly well for non-urgent deliveries. Customers choosing standard shipping often don't mind waiting an extra day, especially if it means lower prices or free shipping thresholds.
7. Set minimum order values for free shipping
Minimum order values (MOVs) help offset delivery expenses while encouraging larger purchases. The challenge is finding the right threshold—set it too high and customers abandon carts, set it too low and you're subsidizing deliveries that cost more than they're worth.
Analyzing your average order value alongside your delivery costs helps identify the sweet spot. Many businesses find that a well-calibrated MOV improves profitability without deterring customers.
8. Use data analytics to spot cost inefficiencies
Tracking delivery metrics reveals optimization opportunities that aren't visible otherwise. You might discover that certain zones consistently have higher costs, specific time slots produce more failed deliveries, or particular product categories require disproportionate handling time.
Key metrics worth monitoring include:
- Cost per delivery: Broken down by zone and time of day
- First-attempt success rates: Tracked by carrier or driver
- Average time per stop: Compared across different delivery types
- Vehicle utilization rates: Measuring how full vehicles are on each route
9. Position fulfillment centers closer to customers
Distributed inventory reduces delivery distance and transit time. If your products ship from a single warehouse across the country, last mile costs will inevitably run higher than competitors with regional fulfillment centers.
This tactic requires significant investment and isn't feasible for every business. However, third-party logistics providers (3PLs) offer access to distributed fulfillment networks without the capital expense of building your own facilities.
10. Leverage platforms for recurring supply delivery
Subscription and scheduled delivery models improve route predictability. When you know certain customers receive deliveries every Tuesday, you can plan routes days in advance and ensure optimal stop density.
Recurring deliveries also reduce per-order processing costs. The predictability benefits both operational efficiency and revenue forecasting, making it easier to plan capacity and staffing.
How to measure your last mile cost savings
Tracking the right metrics helps you understand whether your cost-reduction efforts are actually working. Without measurement, you're essentially guessing.
Cost per delivery
Calculate this by dividing your total last mile expenses—labor, fuel, vehicle costs, failed delivery costs—by the number of successful deliveries completed. Tracking this metric weekly or monthly helps you spot trends and measure the impact of any changes you make.
First-attempt delivery success rate
This metric directly correlates with cost efficiency. Every percentage point improvement in first-attempt success translates to fewer re-delivery expenses. Most well-optimized operations aim for 95% or higher.
Average delivery time
Faster isn't always better if it comes at excessive cost. However, unusually long delivery times often indicate route inefficiencies or operational bottlenecks worth investigating.
Customer satisfaction score
Delivery experience significantly influences whether customers return. A low-cost delivery that frustrates customers may cost more in the long run through lost repeat business.
How businesses reduce last mile delivery costs with smarter technology
Technology-driven solutions enable sustainable cost reduction without sacrificing service quality. The businesses seeing the greatest savings combine real-time visibility, intelligent dispatch, and customer communication tools into integrated platforms rather than juggling disconnected systems.
Control centers that let shippers schedule, manage, and track deliveries from a single dashboard eliminate the inefficiency of switching between multiple tools. When consignees can manage their own delivery experience through real-time updates and self-service options, failed delivery rates drop and customer satisfaction rises.
The most effective platforms scale from small business needs to enterprise requirements, integrating with existing tech stacks rather than requiring complete system overhauls. Configurable workflows mean you can adapt the technology to your specific operations.
Ready to lower your last mile delivery costs? Request a shipping quote from Koorier today.
Author & Authority
By Giovanna Freitas
Marketing specialist at Koorier
About Koorier
Koorier is a Canadian logistics technology company specializing in regional last-mile delivery networks and real-time delivery visibility for retailers and enterprises.
FAQs about last mile delivery costs
What percentage of total shipping cost is last mile delivery?
Last mile delivery typically represents the largest portion of total shipping expenses—often 40% or more of supply chain costs. The high percentage reflects the complexity and labor intensity of individual stop deliveries compared to bulk transportation between facilities.
Which approach is most likely to reduce last mile delivery costs?
Route optimization combined with reducing failed deliveries typically yields the greatest savings for most businesses. These two tactics address the largest controllable cost drivers: fuel and labor efficiency, plus the expense of re-delivery attempts.
How can small businesses afford last mile optimization technology?
Partnering with technology-driven delivery networks gives small businesses access to sophisticated optimization tools without large capital investments. These partnerships provide enterprise-level capabilities through shared infrastructure and software platforms.
What is the difference between last mile cost and middle mile cost?
Middle mile refers to transportation between warehouses, distribution centers, or fulfillment hubs—the bulk movement of goods before they're sorted for individual delivery. Last mile covers the final delivery from a local facility to the end customer's location.
How do product returns affect last mile delivery costs?
Returns add pickup, transportation, and processing expenses to overall delivery costs. Reverse logistics often costs more per item than outbound delivery because pickups are less predictable and harder to consolidate into efficient routes.
-Picsart-AiImageEnhancer.png)
