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December 2017 | ISE Magazine 33 tion points are considerably high. Unfortunately, this option can be inconvenient for some customers. Other options, like using cargo bicycles for final delivery, if feasible, may result in savings up to 40 percent. And secure boxes on premises can reduce costs by 20 percent. Combining the use of bikes and security boxes provides a cost similar to that obtained from using collection points without bikes. In the technological innovations focus scenario, the logistics features that focus on technological innovations, namely an eco-friendly fleet, the use of routing tools, improved materials handling and reverse logistics, were added incrementally to the base reference case. According to the cost model simula- tions, improvements in the vehicle fuel efficiency have a lim- ited effect on last-mile delivery costs. A sample of the results from the model are shown in Figure 3. Routing systems can reduce costs by up to 25 percent. In sectors with high return rates, such as the fashion industry, company performance could be improved significantly with better handling processes in reverse logistics. What are the implications? Last-mile logistics is a challenging issue. The rapid growth of e-commerce and social trends like the increase in single households along with the desire for sustainable and green so- lutions contribute to the complexity of the problem and the demand for new solutions. Based on this study, delivery costs across an entire state can be up to 65 percent more expensive than deliveries in urban areas. Routing tools have a sizable impact on last-mile logis- tics costs and should be pursued by all logistics providers. The impact of fuel efficiencies on final costs is lower than other alternatives, although eco-friendly options should be considered. Collection points decrease costs dramatically with the same fleet. The costs of implementing returns are significant. A returns rate of 8 percent can increase costs up to 20 percent. Bi- cycles can reduce costs up to 40 percent in high-population density areas. Secu- rity boxes eliminate failed deliveries and can have a major impact on final costs. Combining the use of bikes with secu- rity boxes allows the company to offer time windows and increase customer service with costs that are comparable to the savings generated by using col- lection points. Perhaps the most important conclu- sion from this research is that customer service is quite expensive and is liable to incur significant costs. Each company should carefully evalu- ate its customer offering to balance costs with service levels. The right delivery mode choices, combined with innovations in routing tools, in-vehicle technologies and handling im- provements, can enable an enterprise to offer better customer service with lower costs and can make the difference in a very competitive sector. Gurram Gopal is a professor i dustrial tech ology a d ma ageme t at Illi ois I stitute of Tech ology with a kee terest i dustrial e gi eeri g applicatio s. He has published more tha 0 papers a d articles a d has prese ted exte sively at academic co fere ces. I 011- 2012, he received a Fulbright Scholar Award to teach a d co duct research at Galway Mayo I stitute of Tech ology i Irela d a d is a Fulbright Specialist ca didate from 2013 to 2018. Gopal's professio - al career i cludes developi g marketi g strategies for some of the world's largest pharmaceutical compa ies as a strategy co sulta t a d ma ager for ZS Associates. He also worked i trategic marketi g, supply chai ma ageme t a d strategic quality at Tellabs I c. He is a member of the board of gover ors of IILM I stitute for Higher Educatio , New Delhi, I dia. He holds a bachelor's degree i hemical e gi eeri g from the I dia I stitute of Tech ology a d a M.S. a d Ph.D. i i dus- trial e gi eeri g from Northwester iversity. Alvaro de Miguel has a master's i dustrial e gi eeri g from the Tech ical U iversity of Madrid a d a master's i dustrial tech ology a d operatio s from Illi ois I stitute of Tech ology. He has experi- e ce as a quality ma ager. Curre tly he is a master's ca didate i he predictive a alytics program of DePaul U iversity. FIGURE 3 A wide variation Three scenarios offer different cost structures for last-mile delivery depending upon the logistics provider's focus.