How to reduce last-mile delivery costs

Where the money goes

For most local delivery operations, driver labor is the largest single cost. That is why small changes in stops per hour have a big effect.

To record clock-ins, breaks and overtime automatically, see EZTime time and attendance software.

Measure cost per stop

Start with one number everybody understands: cost per stop (or per delivery).

Track it weekly by route, driver and day of the week. Also track stops per hour, failed delivery rate and overtime hours per driver. The labor burden calculator helps you get the true hourly cost of a driver.

1. Increase stop density

• Group deliveries by area and day instead of serving every area every day.
• Offer customers delivery windows or days that match your routes.
• Set order cut-off times that let you plan routes the night before.
• Use routing tools to reduce backtracking and left turns across traffic.
• Combine pickups and deliveries on the same route where possible.

Higher density means more stops in the same driver hours, which lowers cost per stop directly. Even one or two extra stops per route each day adds up quickly over a year.

2. Cut failed deliveries

Every failed delivery doubles the cost of that stop. Most failures are preventable:

• Send customers a delivery window and a reminder on the day.
• Let customers choose a safe place, a neighbor or a pickup point.
• Capture access instructions, gate codes and phone numbers at order time.
• Have drivers call or text before arriving for high-value or signature deliveries.
• Record proof of delivery with a photo.

3. Schedule drivers to volume

Driver hours should follow delivery volume, which changes by day and season. Use order history to forecast volume by day, then schedule the right number of drivers and start times. Keep a pool of trained part-time or on-call drivers for peaks instead of relying on overtime. Stagger start times so loading is not a bottleneck. See the staffing model guide.

4. Control overtime and idle time

Overtime at 1.5 times pay quickly raises cost per stop. Idle time, such as waiting for loads, at customer docks or for dispatch, is paid time that produces nothing.

• Watch weekly hours per driver and rebalance routes before drivers cross 40 hours.
• Measure loading time and fix bottlenecks at the hub.
• Track waiting time at large customers and discuss it with them.
• Plan breaks into routes instead of losing them in traffic.

For non-exempt drivers, waiting time while on duty, loading and time between stops is generally working time and must be paid. See travel time pay rules and how to reduce overtime costs. Drivers of certain commercial vehicles in interstate commerce may be subject to federal hours-of-service rules and may be exempt from FLSA overtime under the Motor Carrier Act exemption, depending on the vehicle and the work, so check how the rules apply to your fleet.

5. Keep vehicles efficient

• Preventive maintenance to avoid breakdowns mid-route.
• Right-size vehicles for the load and the area; smaller vehicles may suit dense urban routes.
• Monitor fuel use per route and driving habits such as idling and harsh braking.
• Plan winter preparation and emergency kits. See winter driving safety.

6. Keep good drivers

Driver turnover is expensive: hiring, checks, training and route knowledge all walk out the door. Experienced drivers complete more stops per hour and have fewer failed deliveries. Predictable schedules, fair route assignment, safe vehicles and respect from dispatch help retain them. See warehouse and logistics retention.

Price delivery to match its cost

Free or flat-rate delivery hides real differences in cost. A stop 40 minutes from the hub costs far more than one in a dense neighborhood near it. Consider pricing by zone, charging more for narrow windows or same-day service, setting a minimum order for free delivery and offering a discount for flexible delivery days. Customers often accept a later window if it is cheaper or free. Even if you keep free delivery, knowing the cost by zone tells you where to focus routing and where a pickup option would help.

In-house drivers or outsourced delivery?

Many businesses mix their own drivers with third-party couriers. In-house drivers give you control over service, presentation and handling of high-value or bulky items. Outsourcing can be cheaper for sparse or irregular volume and for peaks. Compare the full cost per stop of each option, including your own management time, failed deliveries and damage claims. Be careful with classification: drivers you control as employees should not be treated as independent contractors. See independent contractor vs employee.

A weekly delivery cost review

Example (fictional)

A local appliance retailer delivering across a metro area was serving every zip code every day. By switching to zones served on set days, offering customers two-hour windows and sending a reminder the evening before, it raised average stops per route and cut failed deliveries. Overtime dropped because routes ended earlier, and cost per stop fell even though fuel prices rose that quarter.

Common mistakes

• Measuring total delivery cost but not cost per stop.
• Promising same-day delivery everywhere without pricing it.
• Ignoring failed deliveries as a cost.
• Relying on overtime instead of flexible drivers for peaks.
• Not recording driver waiting and loading time.

How EZTime helps

EZTime records driver hours with GPS clock-in from the mobile app, tags time by job or client and flags drivers approaching overtime with labor rule alerts. Dispatchers build schedules by volume, post open shifts to on-call drivers and send announcements when routes change. Expense management captures fuel receipts from the road.

Frequently asked questions

Where to go next