2022

The Future of
Last-Mile Delivery:
How technology is tackling the
complexity and cost of fulfillment
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 Table of Contents

What’s at stake? 6

Autonomous delivery systems 9

En-route manufacturing 12

Robotic stores on wheels 14

Delivery lockers & storage systems 17

Digital twins 20

Looking ahead 23

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 We dive into the evolution of last-
mile delivery and what solutions will
look like in 2030, from autonomous
delivery systems to digital twins.

The global e-commerce logistics market is slated to surpass $3T in

value by 2028, according to Acumen Research and Consulting. As
delivery costs rise, inflation worsens, and a global recession looms,
companies helping to reduce the cost of fulfillment and delivery are
gaining traction.

The future of last-mile delivery will be built on key technologies

such as:

• Autonomous delivery systems, which leverage a combination

of self-driving cars, sidewalk robots, and drones to minimize
last-mile inefficiencies

• En-route manufacturing, which brings fulfillment closer to the

end customer, enabling faster delivery at a lower cost

• Robotic stores on wheels to bring the shopping experience to

the consumer’s doorstep, driving delivery volume with added
convenience

• Delivery lockers and storage systems that improve the

economics of last-mile delivery and facilitate reverse logistics

• Digital twins to optimize the flow of resources across the

supply chain, generating efficiencies in the delivery journey

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 Below, we dive into these technologies: how they work, who has
an edge, and how they’re shaping the future of last-mile delivery.

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 What’s at stake?

WHY IT MATTERS
The pandemic gave way to an unprecedented surge in online
shopping and e-commerce across retail categories, in addition
to a variety of new fulfillment methods to cater to consumer
preferences and needs. Even though stores have reopened and life
has largely returned to normal, consumers continue to shop online
more than they did before the pandemic.

This shift in consumer behavior — coupled with demands for

faster, cheaper delivery options — has placed substantial pressure
on retailer bottom lines. The last mile comprises more than 40%
of total supply chain costs, according to the Capgemini Research
Institute. Nancy Korayim, founder and CEO of last-mile delivery
startup MetroSpeedy, also pointed out that it accounts for over 50%
of total shipping costs.

With e-commerce retailers like Amazon, Walmart, and Alibaba

continuing to raise the bar for fast delivery, and upstarts delivering
food and convenience items within 15 minutes of an order being
placed, competition has become fierce — especially for smaller
retailers and brands that lack the fulfillment capabilities of the
larger players.

Speed is becoming a crucial competitive advantage in the

e-commerce space. More than 68% of online shoppers surveyed by
Bizrate Insights cited shorter delivery windows as the determining
factor for placing an online order. To improve speed at an
affordable rate, retailers and brands are increasingly looking to
improve delivery economics.

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 WHY NOW
Mastering last-mile delivery is more important than ever. As
inflation reaches new levels, fuel costs rise, and the labor shortage
worsens, delivery is becoming more expensive, and retailers are
doing everything in their power to avoid passing these costs onto
consumers. Compounding these issues are rising sustainability
concerns, especially in the logistics sector, which are driving
retailers to focus on reducing emissions while delivering more
items faster.

Tackling the complexities associated with delivering in urban

centers is also becoming more important, as demand for quick
commerce is rising in cities that are getting more congested.

Tech-enabled solutions across artificial intelligence (AI), robotics,

and data science are increasingly making it possible to improve
shipping speeds, lower costs, and more effectively manage
emissions throughout the delivery journey, especially at the last
mile. New fulfillment methods and technologies are also gaining
traction as they more effectively cater to the delivery economy.

WHO NEEDS TO PAY ATTENTION

E-commerce giants such as Amazon, Walmart, and Alibaba have
launched and scaled their own logistics networks, which give them
more control over the delivery journey and allow them to ship at
unprecedented speeds. These companies also have the resources
to experiment with more nascent delivery technologies (e.g.,
autonomous delivery and delivery drones) to drive down costs.

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 In response, more specialized retailers are looking to build out their
own logistics capabilities. American Eagle, for instance, recently
acquired logistics startups AirTerra and Quiet Logistics, and it has
since started building out its own logistics business. The company
is already partnering with other brands such as Steve Madden, Saks
Off Fifth, and Fanatics to capitalize on economies of scale and
better compete with Amazon and Walmart. Gap has also followed
suit, launching its own fulfillment services platform, GPS Platform
Services, that covers short-term storage, business-to-business
(B2B) and direct-to-consumer (DTC) fulfillment, returns processing,
and post-purchase solutions.

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 Autonomous delivery systems
minimize last-mile inefficiencies

Fully automating the last mile of delivery is a challenging

task. Several companies are exploring ways to allow multiple
autonomous vehicles to work together to address the limitations
associated with ground-based and aerial delivery.

EXECUTIVES HAVE INCREASINGLY PAID ATTENTION TO AUTONOMOUS DELIVERY SYSTEMS

IN RECENT YEARS, AS ILLUSTRATED BY THE RISE IN EARNINGS CALL MENTIONS OF THE
TOPIC. SOURCE: CB INSIGHTS

WHAT ARE AUTONOMOUS DELIVERY SYSTEMS?

Autonomous delivery systems rely on a combination of
autonomous vehicles (e.g., sidewalk robots, delivery drones, and
autonomous delivery vans) to automate the last mile of delivery.

Integrating different autonomous vehicles into one system helps

address the limitations associated with each individual vehicle. For
example, autonomous delivery vans can’t bring a package up to a
consumer’s door — but they could be paired with a sidewalk robot
or a drone capable of doing so.

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 FIRST MOVERS
Amazon and Walmart have been actively filing patents for
autonomous delivery systems that rely on multiple vehicle types to
fulfill an order.

Amazon’s concept involves sending out autonomous delivery vans

that can deploy and control drones to drop off individual orders.
Walmart’s patent couples sidewalk robots with delivery drones that
can handle potential obstacles on the ground, such as parked cars
or construction.

A DECISION TREE INCLUDED IN A WALMART PATENT APPLICATION REVEALS THE LOGIC

THAT COULD GUIDE ACTIONS TAKEN BY ITS GROUND VEHICLE (AGV)-DRONE (UAV)
DELIVERY DUO. SOURCE: WALMART PATENT

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 Walmart has been notably active with third-party vendors,
partnering with autonomous driving developers such as Cruise
(passenger vehicles), Nuro (purpose-built vehicles), and Gatik
(autonomous middle-mile).

IMPLICATIONS
• Once autonomous delivery reaches commercialization,
sidewalk robots and drone delivery solutions should reduce
the amount of human labor involved in the delivery process.
Human involvement would likely be limited to teleoperation,
which would allow one person to monitor and control multiple
vehicles at once.

• Purpose-built autonomous ground vehicles and drone delivery

solutions tend to be fully electric and can therefore serve as
more sustainable transportation options than traditional gas-
powered delivery vans and trucks.

• Integrating drones into the delivery system would speed up

delivery times at a more affordable rate than ground-based
alternatives.

• Regulatory challenges persist. For both ground delivery and

drones, the complex regulatory environment is making it
challenging to launch and scale services. Companies that
can win regulatory approval will likely have a competitive
advantage over peers.

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 En-route manufacturing brings
fulfillment closer to the end customer

The concept of en-route manufacturing pushes autonomous

delivery one step further by bringing production inside the vehicle.

WHAT IS EN-ROUTE MANUFACTURING?

En-route manufacturing solutions allow goods to be produced on
the way to the destination, which could enable faster fulfillment as
well as more customization.

The technology would involve dispersed, unmanned mobile

fulfillment centers or delivery vehicles that can 3D print or
manufacture items en route. Some cases could involve transferring
items between delivery vehicles at different stages of the supply
chain (e.g., larger trucks for long-haul routes, smaller delivery
robots for the last mile).

AN ILLUSTRATION INCLUDED IN AN AMAZON PATENT APPLICATION SHOWS HOW ITEMS

CAN BE TRANSFERRED BETWEEN DIFFERENT AUTONOMOUS DELIVERY VEHICLES. SOURCE:
AMAZON PATENT

Given the nascency of autonomous delivery and portable 3D

printing, this technology remains highly experimental.

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 FIRST MOVERS
Amazon’s patent activity suggests the company is working on
a variety of en-route manufacturing solutions. It has outlined
visions for both airborne fulfillment centers (AFCs) and mobile
fulfillment centers.

One patent involves delivery robots that manufacture or produce

items using stock materials as well as other materials that can be
retrieved from multiple locations along the route. Once the item is
made, last-mile robots could open doors to homes with wireless
codes to deliver the goods.

IMPLICATIONS
• Though en-route manufacturing remains incredibly early-
stage (largely limited to patents and R&D), the solution could
help retailers bring fulfillment closer to the end consumer by
producing goods while in transit.

• En-route manufacturing solutions enable on-the-go

customization, which could speed up the creation of
personalized items across softline and general merchandise
categories.

• Roadblocks to widespread adoption will likely be the high

cost of designing custom vehicles that are capable of
manufacturing products in transit in addition to the loss of
economies of scale when distributing production away from
a central facility.

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 Robotic stores on wheels bring the
shopping experience to the consumer’s
doorstep

Companies are also exploring ways to bring the shopping

experience straight to the consumer’s door with mobile stores and
convenience shops.

WHAT ARE ROBOTIC STORES ON WHEELS?

Robotic stores on wheels allow consumers to hail a delivery vehicle
to their door and choose their items directly from the vehicle. This
practice has come to be known as store-hailing.

When the vehicle arrives, customers can open the door using a
mobile app and choose their items. These mobile robotic stores
are fully automated, featuring a checkout-free shopping system
leveraging radio-frequency identification (RFID) or computer
vision software.

FIRST MOVERS
Robomart has pioneered this approach, developing a shoppable
vehicle that will eventually operate autonomously. The company
partners with retailers to offer branded markets on wheels.

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 A CONSUMER SELECTS FOOD ITEMS FROM A ROBOMART DELIVERY VEHICLE. SOURCE:
ROBOMART

Most recently, Robomart partnered with Unilever to roll out an

autonomous ice cream delivery truck. The truck provides treats
from Unilever’s “The Ice Cream Shop” virtual storefront, which
allows customers to access Unilever ice cream products using
delivery apps like DoorDash and Uber Eats.

IMPLICATIONS
• Because the vehicle contains all the items in the shop, it
doesn’t have to travel back and forth between consumer
homes and a restaurant or store to deliver goods, enabling
higher delivery volumes. Robomart in particular cites that it
can help retailers increase deliveries by up to 500%.

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 • Store-hailing improves the customer experience by bringing
the shopping experience to the consumer’s door, reducing the
friction involved with building a cart and checking out online.

• Similar to autonomous delivery, robotic stores on wheels face

a complex regulatory environment, which will likely make the
tech challenging to scale.

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 Delivery lockers & storage systems
improve the economics of last-mile
delivery

To keep costs low while meeting consumer expectations for faster

delivery, delivery lockers and storage systems — and alternative
delivery solutions more broadly — will likely emerge as more viable
solutions in denser cities.

WHAT ARE DELIVERY LOCKERS & STORAGE SYSTEMS?

Delivery lockers and storage systems allow retailers and brands to
deliver a consolidated set of orders at a commercial location rather
than individual orders to each customer’s home, reducing the
complexities and costs associated with home delivery.

Storage systems also improve delivery security by requiring a PIN

number, QR code, or token to unlock, rather than leaving a package
on someone’s front doorstep for anyone to steal. Customers can
pick up their packages whenever they want, resulting in a faster,
more flexible service.

Some retailers are also using their brick-and-mortar locations

as local fulfillment hubs, providing smart lockers for fast, secure
customer pickup.

FIRST MOVERS
Delivery locker and storage system adoption is significantly higher
outside the US, especially in Europe.

Stockholm-based Instabox is one of the leading players in Europe.

It offers an e-commerce fulfillment and logistics service that
delivers through a smart locker network. Instabox has raised
over $300M in funding and has made acquisitions to expand into
neighboring markets in the Nordics and beyond.

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 A SET OF INSTABOX SMART LOCKERS. SOURCE: INSTABOX

In the US, Amazon has built out a network of thousands of lockers

in over 900 cities and towns.

More experimental solutions include US-based Bell and Howell’s

QuickCollect GO! Pod, an automated and temperature-controlled
outdoor grocery pickup solution. The system relies on intelligent
software and robotics to prepare online grocery orders for pickup.
Customers access their orders with a QR code that they can scan
on the pod’s console screen.

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 IMPLICATIONS
• Alternative delivery solutions, including lockers and storage
systems, will allow logistics providers to place multiple
packages in a single location rather than deal with the
complexities of delivering to individual homes and apartments.

• Consolidating deliveries will reduce fuel usage and

congestion, which will help lower the cost of goods for end
consumers. It can also be valuable for e-commerce sellers that
don’t have store locations.

• Tradeoffs could include compromising on convenience. Most

people are used to the convenience of at-home delivery, and
many may resist having to leave their homes to pick up their
packages.

• Returns remain one of the more inconvenient, expensive facets

of e-commerce. Lockers could help streamline reverse
logistics by enabling carriers to pick up returns in bulk,
reducing the number of trips required and saving money.

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 Digital twins optimize the flow of
resources across the supply chain

Logistics-focused digital twins will enable more powerful modeling

and simulation tools. These could be used to improve supply chain
planning and vehicle routing, ultimately driving efficiencies in last-
mile delivery.

NEWS MENTIONS OF DIGITAL TWINS FOR LOGISTICS HAVE CLIMBED STEADILY OVER THE
PAST COUPLE OF YEARS, INDICATING INCREASED CONSUMER INTEREST IN THE SPACE.
SOURCE: CB INSIGHTS

WHAT ARE DIGITAL TWINS?

Digital twins are virtual simulations of real-world physical objects
and systems. These digital representations can help accurately
model potential scenarios, which makes them valuable tools for
efficient planning.

Though the technology still has relatively low adoption in logistics,

the shift to cloud-based platforms and adoption of automation
across the supply chain have laid a foundation for digital twins to
be used to predict trends, optimize inventory, and identify process
improvements — all of which impact the future of last-mile execution.

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 For delivery applications in particular, a digital twin of an entire
fulfillment network (e.g., highways, streets, homes, and workplaces)
could provide the customer location, demand pattern, and travel
time data required to inform route planning and the establishment
of inventory storage locations.

FIRST MOVERS
Digital twins for the logistics space remain in the very early
testing and development stages. A very small handful of
companies are beginning to integrate digital twin capabilities
into their broader offerings.

Supply chain orchestration platform TADANow is offering a digital

twin-enabled Production Control Tower that helps improve visibility
within a factory or a set of factories, coordinate operations, and
improve productivity.

IMPLICATIONS
• Creating a digital twin of a logistics network will help reduce
disruption along the shipping journey, as transportation
providers will be able to visualize traffic, accident, or inclement
weather developments in real time. These solutions could also
help optimize routing.

• Digital twins could also support warehouse and distribution

center layout optimization. Introducing automation could
reduce labor costs and improve the flow of freight.

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 • Digital twins can model how different packaging conditions
impact a product along the shipping journey, which could help
identify ways to minimize spoilage or maximize security.

• The logistics space is highly fragmented, which could make it

challenging to build out digital twins for entire networks.

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 Looking ahead

In 2030, last-mile delivery solutions will leverage new

advancements in AI, robotics, and digital twin technology to reduce
costs and improve delivery speeds. Fulfillment and distribution
models will continue to evolve.

An increasingly competitive landscape and falling hardware costs

will drive the adoption of this technology. Smaller retailers will also
likely explore more collaborative fulfillment solutions to tap into
economies of scale.

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