How Can Route Optimization Reduce Costs And Improve Last-mile Delivery In Southeast Asia

Hidayat is en-route to deliver the parcel to the customer he has been assigned. The address says: “Selular shop, Mall Kelapa Gading 3, Jakarta Utara”. Hidayat rechecks the address, looking for a street name or a house number. Nothing. Hidayat is confused. His delivery is going to be late.

There are a lot of Hidayats facing similar issues every day in the Southeast Asia region. Fuzzy addresses, complex geographical terrain, and poor infrastructure are just a few of the issues that delivery resources face on a daily basis.

What Is Last Mile Optimization? 

Last Mile Optimization refers to the process of refining the final leg of the delivery journey, where products are transported from a warehouse or distribution center to a customer’s doorstep. It is often the most challenging and expensive stage in the logistics process, accounting for up to 53% of the total delivery cost. However, it is also one of the most critical phases, directly impacting customer satisfaction, delivery speed, and overall service efficiency.

As the final touchpoint with customers, the last mile has a significant influence on their perception of the brand and their decision to engage in future transactions. Therefore, optimizing this phase is not just about cutting costs it’s about delivering a seamless, on-time, and satisfying experience that encourages customer loyalty.

Key Strategies for Optimization

1. Route Planning:  Leveraging advanced software to plan the most cost-effective delivery routes, considering factors like traffic, delivery time slots, and vehicle capacity.
2. Fleet Management: Efficiently managing fleet capacity and utilizing resources to minimize idle time and maximize delivery efficiency.
3. Customer-Centric Planning: Tailoring deliveries to customer preferences, locations, and time constraints to ensure a personalized experience.
4. Real-Time Tracking:Providing customers with accurate delivery updates, improving transparency and trust in the service.

Benefits of Last Mile Optimization

• Cost Savings: Reduces fuel, labor, and operational costs through optimized routes and fleet utilization.
• Efficiency: Streamlines processes, shortening delivery times and increasing productivity.
• Customer Satisfaction: Enhances the delivery experience with timely, reliable, and transparent service.
• Scalability: Enables businesses to grow without significant increases in cost or operational complexity.

Last-mile Delivery Challenges in Southeast Asia

SE Asia has become an attractive region for industries, especially the e-commerce segment in recent times. The rising labor costs of China, along with the move away from an export-based economy, has made SE Asia into an upcoming manufacturing hub. The rapidly growing markets along with increasing internet penetration add to the attraction of the region.

According to a recent study by Google and Temasek, the internet economy in the SE Asia region is on track to exceed $240 billion by 2025.

The growing internet space has provided an unprecedented scope of growth for the e-commerce segment. However, it has also attracted competition like never before, with companies from all over the world vying to capture the expanding market.

The increase in competition also means that the customer has more choices and companies need to focus on meeting customer demands to capture their imagination. The image below describes this better:

As conveyed by the image, the old requirements of providing efficient and transparent deliveries, no longer cuts it for e-commerce firms. With single day deliveries and ETAs becoming common; last-mile delivery experience and pricing points are all set to become the new differentiating factors.

As companies continue to try and balance a better delivery experience while cutting down logistics costs, AI-based Route Optimization (RO),  a solution for two of the most challenging computer science problems: the Traveling Salesman Problem (TSP) and the Vehicle Routing Problem (VRP), can be the key to unlock SE Asia’s logistics issues.

How Does Route Optimization Boost Last-Mile Delivery?

Even though there a few RO solution providers in the market, most of them don’t consider on-ground restrictions and lack the knowledge of the regional elements. RO solutions that follow global standards in terms of performance while incorporating local constraints, can help SE Asia companies in creating a differentiating factor for their customers.

Route optimization can help in improving the last-mile deliveries and cutting down logistics costs in the following ways:

• Geocoding and accurate address detection IP to automate sorting processes (primary & secondary).
• Optimal fleet mix and route plan for the vehicles respecting business as well as local constraints such as traffic, possible route restrictions etc.
• Intelligent clubbing of orders based on properties such as preferred delivery time slots, priority orders, location preference, and order specifications (weight, size, content etc.).
• Control tower application to manage operational exceptions and predictive alerts on delays, vehicle breakdowns, idle time, live tracking, etc to improve both customer experience and efficiency of delivery executives.
• Reducing turnaround time for the customer by optimizing first-mile operations, locations of warehouses/distributer centers, reducing sorting times at fulfillment centers and last mile distribution centers.
• Predicting time windows of delivery for customers thereby increasing first attempt rates and higher customer experience.
• Electronic proof of delivery (EPOD) for reducing friction with customers and digitization of the processes.
• Fitting more deliveries in a day by minimizing driving hours with more efficient routes.

How Locus Enhances Last-Mile Delivery with Route Planning?

Locus’ Route Planning and Optimization Software, provides AI-based automated route planning that considers multiple real-life constraints and distribution models. With Locus’ proprietary Geocoding and Vehicle allocation engine, route optimization software provides transparency, efficiency, and consistency in your supply chain along with reducing logistics costs.

Locus has been working with some of the biggest brands in SE Asia to solve their complex logistics decision-making problems. To know more, get in touch with us.

Oh! And don’t worry about Hidayat, he has completed his delivery on time. After all, he now uses Locus.