It’s no secret that Latin America has a problem when it comes to logistics. Marked by fraught geography and sprawling urban landscapes, the region's tech and delivery speed lag behind that of Europe and North America — an issue that has been exacerbated during the pandemic.
Latin America is now the fastest-growing e-commerce market in the world, increasing by 37 percent in 2020, but its delivery infrastructure has struggled to keep pace with the stark increase in orders. For instance, in Mexico, half of all deliveries are made within seven days and 70 percent within two weeks — a far cry from the next-day and same-day delivery expectations of today’s typical consumer.
Fixing this last mile — the final leg of a product’s journey into a consumer’s hands — has to be a priority for the region’s delivery companies and e-Commerce operators. However, it won’t be possible with the current analog approach across the continent. Instead, as demand for online services skyrockets, it’s increasingly clear that getting Latin America’s last mile up to speed requires both new technologies and expanded fulfillment methods.
Use AI To Drive Smarter Delivery
Efficiency is arguably the biggest issue at play for last-mile logistics in Latin America. Many companies still track deliveries using pen and paper and lack operating scale and optimization, which leads to delays when pitted against the congestion of large cities like Mexico City or Bogota.
Artificial intelligence (AI) promises to help companies cut time and costs by automatically finding the most efficient routes possible. Unlike the majority of current deliveries, where dispatchers select routes without knowing the real-time road conditions or where drivers take it upon themselves to find shortcuts, AI removes the guesswork. Integrating AI capabilities into delivery platforms connects each stage of the logistics cycle, allowing for a more streamlined process, from retailer to customer.
Logistics services that introduce AI into fleet management and route planning can reap the benefits of:
- reduced costs
- faster transportation
- seamless inventory tracking
- reduced fossil fuel emissions
- real-time decision-making
- enhanced productivity
What's more, businesses of all sizes can leverage AI as the tech becomes more widely distributed. For example, SMEs can partner with AI-powered last-mile service providers without having to build internal machine-learning systems from scratch.
Strategic Distribution of Dark Stores
Applying AI becomes all the more powerful when used in conjunction with “dark stores.” Inaccessible to the general public, dark stores are urban fulfillment centers that are organized for the rapid fulfillment of online retail orders. These spaces are typically located in strategic urban points, such as commercial buildings, to bridge the journey from distributor to doorstep.
With the flexible distribution network in place, smart order planning and tracking provide a centralized focal point for logistics, which is essential in the disconnected geography of Latin America. As a result, both merchants and customers can more easily track deliveries and manage expectations based on their proximity to "dark stores."
Automate and Win
In the hunt for higher efficiency amid rising customer expectations, Latin America’s last mile must be automated wherever possible.
Whether operations are fully or semi-automated, or human-assisted, research shows that warehouse automation can increase profit margins by 8 percent due to higher throughput and lower fulfillment costs. For example, in a warehouse setting, automation frees up employees to focus on more strategic tasks. Take the automated warehouse at Ocado, the UK-based online supermarket that can fulfill a 50-item delivery in 5 minutes because of its automated processes — compared to the two-hour average without automation.
Meanwhile, automated delivery status updates additionally inform customers about delays as soon as possible. This communication and registering of the delay not only ensures that the customer is satisfied with the last-mile experience, but the automated data can also be used to review and improve processes in the future and avoid further delays.
New Capital, a Reshaped Market
It’s now time to reimagine Latin America's last mile. In light of the region's e-commerce revolution, the sphere is finally attracting venture capital as investors recognize its untapped potential. In fact, in the fastest-growing e-commerce market in the world, VCs are confident that buyers’ frustrated appetite for rapid deliveries spells huge opportunity.
Delivery solutions have already produced several unicorns in Latin America, including Rappi, Mercado Libre and Loggi, which have laid the groundwork for smart logistics companies to follow in their footsteps. With new capital flows entering the market, logistics has the financial backing to make Latin America's last mile the best mile.