If you’re in logistics or e-commerce, you already know one brutal truth: last mile delivery is expensive, unpredictable, and crucial for keeping customers happy.
In fact, Gartner reports that the last mile delivery cost makes up almost 41% of total logistics expenses (Gartner).
Here’s the catch—most businesses track the wrong numbers. They look at generic shipping charges while ignoring the pricing metrics that truly matter.
That’s like judging an entire restaurant by the tip on the bill.
In this blog, you will read about the four pricing metrics that actually make or break your last mile delivery performance, why they matter for profitability, and how the right last mile delivery software can help you cut costs, secure operations, and delight customers.
Understanding Last Mile Delivery Costs
Before diving into metrics, let’s define last mile delivery cost. It isn’t just the visible shipping fee.
It’s a combination of driver wages, vehicle maintenance, fuel, insurance, technology, failed delivery attempts, and even customer service costs.
This final stage of delivery is messy, labor-intensive, and prone to unpredictability.
MIT Sloan reports that last mile expenses can account for up to 53% of overall supply chain costs (Source)
That’s more than half of a company’s logistics spend concentrated in just one phase of the journey.
For e-commerce and retail, this percentage is often higher because of free shipping pressures.
Here’s the problem: most companies oversimplify. They take “average shipping cost per package” as their guiding metric. But this is misleading.
One delivery could cost $6 while another could cost $20, depending on distance, failed attempts, and labor efficiency. Without the right measurement framework, businesses bleed money silently.
As Peter Drucker said, “What gets measured gets managed.” If you measure only surface-level averages, you miss opportunities to optimize.
But if you focus on granular metrics like cost per drop, driver efficiency, and customer value, you can turn last mile delivery into a competitive advantage.
The 4 Pricing Metrics That Matter Most
Not all metrics carry equal weight. Some are vanity numbers, while others directly impact profitability. Let’s explore the four most critical pricing metrics for last mile delivery.
1. Cost per Drop
Cost per drop refers to the actual cost of delivering a single package to its final destination. It factors in fuel, driver wages, time spent, and vehicle usage.
Capgemini’s research reveals the average organizational cost per delivery is $10.10, while businesses typically charge customers only $8.08.
To make matters worse, consumers’ willingness to pay averages just $1.40. That’s a massive gap that squeezes margins. (source).
If you don’t track cost per drop, you’re flying blind. A company with 10,000 monthly deliveries could be losing hundreds of thousands annually without realizing it.
Optimizing routes, consolidating orders, and reducing failed attempts are the levers that directly lower this metric.
2. Driver Efficiency
Drivers are the backbone of last mile operations. Their efficiency can make or break profitability.
On average, last mile drivers handle 9 stops per hour (FreightWaves/Scandit).
UPS’s ORION routing program saved $300–400M annually by cutting just one mile per driver per day (source).
Every wasted minute translates into higher labor costs. Considering U.S. light truck drivers earn a median annual salary of $44,140 (BLS), inefficiency compounds fast.
By measuring stops per hour, idle time, and route density, companies can maximize driver productivity and reduce costs per delivery.
3. Failed Deliveries
Nothing drains profit like failed deliveries. Each failed attempt costs about $17.20 (Loqate).
Common causes include incorrect addresses, absent recipients, or poor communication. With failure rates hovering around 5–8%, the losses pile up quickly.
By tracking failed delivery costs, companies can justify investing in last mile delivery software with features like address validation, real-time customer notifications, and proof of delivery tools.
These reduce failure rates and protect margins.
4. Customer Value Impact
Delivery experience directly influences customer lifetime value. Baymard reports that 39–48% of shoppers abandon carts due to high delivery costs (source).
On the flip side, Capgemini found 74% of satisfied customers spend more (source). Clearly, pricing and service quality shape customer loyalty and revenue.
How Software Changes the Pricing Equation
Manually tracking all these metrics is nearly impossible. That’s why last mile delivery software is no longer optional—it’s essential.
Affordable Last Mile Delivery Software
An affordable last mile delivery software solution empowers businesses to lower costs without overspending on tech. Core benefits include:
- Route optimization → reduces fuel usage and driver hours
- Automated dispatch → eliminates manual errors and idle time
- Real-time visibility → helps managers track cost per drop accurately
FixLastMile pilots revealed optimized routing cut fuel by 15% and improved on-time delivery rates by 32% (Source).
For companies with razor-thin margins, these percentages mean survival versus failure.
Secured Last Mile Delivery Solution
Security is another overlooked cost factor. Package theft, disputes, and fraud quietly inflate last mile expenses.
A secured last mile delivery solution solves this by integrating proof of delivery features like photos, signatures, and geo-tagging.
Capgemini found that two-thirds of consumers worry about package security. (Source)
If customers don’t trust your delivery system, they switch to competitors. Beyond trust, secured solutions minimize financial leakage from disputes and chargebacks.
It’s not just about safety—it’s about profitability. Securing your last mile is a pricing decision as much as a customer service one.
Case Examples & ROI
Let’s put theory into practice with real-world proof.
- UPS ORION: By cutting just one mile per driver per day, UPS saved $300–400M annually (Source). This shows the compounding power of tracking cost per drop and driver efficiency.
- E-commerce Retailers: Capgemini discovered that 74% of satisfied customers increase spending by 12% (Source). Deliveries done right don’t just cut costs—they generate revenue.
A secured, affordable last mile delivery software makes these outcomes attainable even for mid-sized companies.
Imagine reducing failed deliveries by 20% and improving driver efficiency by 15%. The ROI quickly justifies the investment.
“Small improvements in routing save big money at scale.” – UPS Operations Team
Conclusion
The wrong metrics drain profit, but the right ones—cost per drop, driver efficiency, failed deliveries, and customer value impact—unlock sustainable growth.
By focusing on these four numbers, businesses gain clarity, control, and confidence.
Pairing this focus with tools like an affordable last mile delivery software and a secured last mile delivery solution ensures that costs go down, trust goes up, and margins improve.
Don’t let last mile chaos eat your margins.
Turn your last mile delivery cost into a competitive advantage.
FAQ'
It’s the final stage of logistics where goods move from a distribution hub to the customer’s doorstep. It’s expensive, unpredictable, and crucial for customer experience.
Because it involves labor-heavy operations, traffic unpredictability, and high customer expectations. Gartner notes it consumes 41% of logistics costs【Gartner】.
Track cost per drop, improve driver efficiency, and reduce failed deliveries using last mile delivery software with automation and route optimization.
It automates tasks, optimizes routes, and provides real-time visibility, helping companies cut costs without overspending on expensive systems.
Because security issues lead to lost packages, disputes, and customer churn. A secured last mile delivery solution protects profitability and customer trust.
