Delivery times continue to shorten, but the room for acceleration may be nearing its limit

Last-mile delivery speeds continue to accelerate, but under the dual pressures of shifting consumer preferences and shipper cost control, the room for further shortening delivery times is becoming increasingly limited.

According to Project44's "State of Last Mile" report released last month, the average time from customer order to final delivery dropped to 4 days in April this year, down from 5.6 days in April 2022. The company's supply chain visibility platform tracks the movement of more than 1 billion shipments annually.

The report notes: "Looking back at historical delivery time data, 2023 is experiencing the fastest delivery times the last-mile market has seen in years."

Carson Krieg, Project44's head of industry growth and last-mile solutions, told sister publication Supply Chain Dive that the "healthy average" for end-to-end fulfillment is between 4 and 6 days. This raises a key question: how much more can delivery times be compressed?

"I think delivery times will return to some kind of normal range," Krieg said.

What is driving faster delivery?

Krieg believes the reasons for faster delivery are multifaceted.

On the transportation side, parcel carriers have moved past the capacity constraints that limited their service levels early in the pandemic. Shippers are diversifying their carrier portfolios, leveraging the potential speed advantages of emerging delivery providers on specific routes.

"UPS might take two days from Southern California to Northern California, while OnTrac could potentially do next-day," Krieg cited as an example.

On the fulfillment side, companies are moving inventory closer to end consumers, most notably Amazon and its shift to aregional network model. Martin Dresner, professor and chair of logistics, business, and public policy at the University of Maryland, noted that retailers have been trying for years to catch up with the delivery speed advantages brought by Amazon's vast warehousing network. The pandemic further accelerated these efforts, especially the promotion of the "ship-from-store" model.

Other major retailers are also strengthening fulfillment investments and related initiatives. Walmart's store-fulfillment delivery sales havenearly tripledin two years, with monthly sales in this category exceeding $1 billion. Meanwhile, Target announced earlier this year a $100 million investment to leverage its store network to supportnext-day delivery, further deepening its "store-as-hub" strategy.

It's not just giants like Amazon and Walmart that are speeding up.American EagleandNordstromboth reported faster customer delivery times in their most recent earnings calls.

"We are serving customers better through faster delivery, with overall delivery speed up 9% compared to last year," Nordstrom CEO Erik Nordstrom said earlier this month.

Cost control and consumer demand may slow delivery

Multiple factors are likely to limit further acceleration of delivery speeds, or even cause them to slow down.

In recent months, with inflation eroding profit margins, retailers have been cautious about adopting more expensive transportation services. Correspondingly, demand for expedited services such as air freight networks has weakened, with many shippers instead requesting moreeconomical ground transportationoptions.

"We can achieve 3 to 5 day click-to-delivery times," said Laura Ritchey, COO of e-commerce fulfillment provider Radial. "Going faster than that becomes very costly."

Companies that shift to a regional fulfillment model like Amazon can reduce both transit time and transportation costs. But for companies lacking the robust infrastructure and forecasting capabilities that Amazon possesses, this is a high-risk move. Vijay Ramachandran, vice president of marketing enablement and experience at Pitney Bowes, pointed out that if demand shifts, inventory could end up deployed in regions with higher delivery costs or poorer service times.

"The more inventory is dispersed across the country, the more you need flawless demand planning and a clear understanding of where demand will occur geographically," Ramachandran said.

Inaccurate forecasting makes on-time delivery harder, and even if transit times remain relatively fast, it can easily lead to consumer dissatisfaction. According to Pitney Bowes BOXpoll market survey data,62% of consumersconsider an accurate estimated delivery date more important than fast shipping.

But many retailers have not improved on-time rates by relaxing delivery promises. According to Project44 data, the on-time delivery rate in April fell to 80.4% from 83.9% in the same period last year, which the company attributed in its May report to "overly aggressive delivery time commitments by some companies."

Experts say retailers need to find a balance between cost control and meeting consumer expectations to improve their delivery services in the long term.

"We are in the post-pandemic era, but the environment is different from before the pandemic," Ramachandran said. "This change requires us to build a new understanding of what consumers truly want."