Home delivery markets are not new. The practice is ancient. But these services were paid for. Free is not cheap. The economics of transportation show that between 25 percent to 75 percent of the transportation costs occur for direct to consumer logistics. With so much money entering into last mile, new regional carriers are expanding, and iconic newer disrupters, funded by investors, have entered the market, offering on-demand approaches.

In 2015, retailers will struggle to find profit or at least be cost neutral. Retailers and service providers need to apply some strategic thinking here. Tacking on some service and posting standards rates won’t be enough any longer.

Home delivery requires scheduling a delivery that contributes to the firms. And it is also about service, not easy in this always on 24/7 and mobile world. Many category retailers, de facto, have to provide services due to the nature of their products—the need for assembly and installation, for example. Specialty retailers know that an extended service relationship under their brand creates loyalty and long-term relationships. But customer service can have a negative effect if not done well. Winning at home delivery takes skill and smart technology.

The technology for last mile can be seen in home-grown solutions in ecommerce, idea-generating software from disrupter service providers, and logistics technology providers who support these sectors.

So what will it take?

• Continuous Route Optimization—specific to the last mile challenge. In the service world, unlike longer haul logistics, new requests keep popping up, so systems have to be responsive and avoid the old-style cutoff points. In 2015, traditional TMS route optimizers will scramble to revise their offerings to meet this challenge.

• Dynamic Incentivized Scheduling—the ability to develop economic models and dynamic schedules to provide attractive choices to the customer and profitability to shipper. This is the gold standard in technology that only a few providers offer.

• Mobile and Telematics for Last Mile—GPS and AVL for precise locating and directing of vehicles. These technologies are blended into the solution to provide driver instructions, monitor delivery status, and link to execution for real-time routing changes.

• Electronic Confirmation and Proof of Delivery—Not just mobile signatures. The system confirms appointments while en route to the customer; validates presence (they came and you were not home); electronic proof of delivery; and follow-up on customer satisfaction on the process.

2015 will see more TMS+ providers try to understand the features and needs for last mile, as more end-users seek better solutions. More acquisitions will emerge with omnichannel pressures mounting.

The Outlook

ChainLink estimates the current sales for a “suite” in last mile to be ~$100m. This year will see significant new sales as TMS+ providers scramble to provide an offering. Most offerings will be modular and retailers will have to integrate and customize to support their own processes. Existing technology leaders, who do have more complete solutions, will gain the upper hand, offering SaaS and mobile applications along with their expertise and advice to customers.