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December 2017 | ISE Magazine 29 Modern transportation networks – including those used by supply chain and logistics opera- tions – usually are based on a "hub-and-spoke" model. Such a model enables highly efficient transportation across hubs by aggregating de- mand and supply, generating high-volume flows and creating economies of scale. However, shipping goods between a hub and the final de- livery address, "the last mile," historically has been one of the most expensive, inefficient and polluting parts of the supply chain, something replicated and expanded across much of the Western world, especially during the holiday season. The Council of Supply Chain Management estimated that 28 per- cent of all transportation costs occur in the last mile, while a recent McKinsey and Co. study reported estimates reaching or exceeding 50 percent. The high rate of failed deliveries, returns, partially full vehicles and the vehicle mix represent some of the main difficulties of these door-to-door deliveries, the so called "last-mile problem," especially in a business-to- consumer (B2C) environment. The term "last-mile logistics" refers to the last part of a business-to-consumer delivery process taking place within a predefined delivery area and consists of activities and processes involved in delivering products from the final transit point to the customer. Customers are become more demanding in terms of service, and new solutions, such as offering time win- dows or sophisticated reverse logistics operations, are becom- ing more prominent. Deliveries using drones and autonomous ground vehicles could address some of these last-mile logistics issues; however, such options could be at least a decade away. This article fo- cuses on solutions that exist and can be implemented today. An efficient last-mile logistics solution in terms of price, speed and service will distinguish winners from the also-rans. Growing more complex every day E-commerce growth is a major factor, with internet purchases worldwide expected to exceed 10 percent annual growth for the next few years, up from $1.5 trillion in 2015 to $2.5 trillion in 2018, according to eMarketer. China and the U.S. markets account for more than 55 percent of global internet retail sales. According to the Boston Consulting Group, free delivery, lower prices and free returns are the principal reasons for on- line shopping and delivery. These factors directly affect last- mile delivery and logistics costs. Demographics are a major factor, with Generation Z, those aged 18 to 24, already spend- ing almost 10 percent of their income online. Millennials aged 18 to 34 spend more money online than any other age group and are a significant driver of e-commerce. Both groups have lower incomes compared to older adults, but as they gain more workforce experience and make more money, e-commerce will capture a bigger share of their spending. Consumers are becoming more technologically savvy, with mobile purchasing growing by 39.1 percent in 2016 compared to 2015, accounting for nearly 2.6 percent of total retail com- merce, according to eMarketer. Rising incomes and growing internet access in emerging countries could lead to a $3 trillion online retail market in Brazil, Russia, India, China, Indonesia, Saudi Arabia, Mexico, Turkey and South Africa, with 1 billion additional online customers. In the long term, online purchases in these countries would be a bigger market than those in developed countries. Smart- phones will be the main driver of this trend, affecting both rural and urban areas. This growth creates logistics problems for retailers and other businesses. For instance, single-person households are a grow- ing social trend. With nobody at the house to answer the door, this makes home deliveries during the day more challenging, resulting in higher delivery failure rates, significantly reducing the productivity of logistics providers. In some cases, several attempts need to be made to deliver the goods. Beyond the customer dissatisfaction comes added traffic congestion and air and noise pollution. Market density and access also exert a significant influence over the profitability of the delivery process. If the density of the market is quite limited, the number of delivered goods might be too small to cover the vendor's extra costs. When fewer packages need to be collected or delivered in a specific location, logistics providers still must pay the price for a notori- ous portion of empty miles that the delivery route covers. Further, while consumers are becoming more aware of global climate change, many assume that suppliers should cov- er all the expenses for environmentally friendly deliveries – even though customers often refuse to slow down the delivery process and prefer to get their products early at the expense of the environment. Such attitudes force delivery companies to balance customer satisfaction and the environmental impact of their actions. One of the main challenges is that offering nar- rower time windows in the delivery process is more damag- ing for the environment, as we shall see. While carbon offsets help mitigate the environmental damage, somebody, some- where must pay the price. Suppliers can offer environmen- tally friendly delivery options to cover higher expenses. The carrier/courier market at the local level is highly fragmented, adding to the complexity of last-mile logistics. Strategies for performance and customer satisfaction Failed delivery rates have a significant effect on last-mile costs. Research conducted by Mikko Punakivi ("Identifying the success factors in e-grocery home delivery" in the 2001 I er- atio al Jour al of Retail & Distributio a ageme t) concluded that costs increased steeply for the first 60 percent of deliveries that needed to be confirmed. Costs tapered off subsequently. M