What is Delivery Management? A Guide to the 6 Pillars

Are you a new delivery manager, or a small business owner who’s feeling the pressure of increased demand for home deliveries? Want to know how to streamline delivery operations, keep your customers happy, and still have a life? You're not alone!

Online shopping has skyrocketed since the pandemic, and there’s no sign that the growth is going to slow down. That means delivery management has suddenly become a core competence in many businesses that never had to think about it before. The change has been most intense when it comes to local food and beverage suppliers: from farmers and grocers to bakers and chocolatiers, everyone has to manage deliveries now.

The good news? We’re all in this together, and all learning as we go. You don’t have to be a Iast mile logistics expert! In this guide, we’ll cover the basics of delivery management, and what you need to do to create a stellar delivery experience that will satisfy your customers, empower you and your drivers, and keep your delivery business profitable. So let’s get started with the obvious question:

What is delivery management?

Delivery management is the art and science of getting things where they need to be, when they need to be there. 

Or, for a more complex formal definition: Delivery management is the process of planning, coordinating and tracking the movement of goods through the last mile, or the final stage of their journey from their point of origin to their final destination.

We could go a step further and say that a good delivery manager won’t just get things to the right place at the right time -- they'll also implement best practices for deliveries. They will  minimize costs by being efficient, and maximize customer satisfaction by communicating clearly and ensuring goods are delivered in excellent condition. We’ll go into more detail about all of this in the next sections.

Why is delivery management important?

Around the world, the market for delivery services is exploding along with e-commerce. According to Statista, worldwide revenue from food deliveries is expected to grow by over 12% a year from 2023 to 2027. For grocery deliveries, the largest segment, growth is expected to be over 20%! That’s a lot of deliveries. As the demand for deliveries grows, so will the need for delivery management — and delivery managers.  

The main benefits of delivery management

For delivery providers, the benefits of investing in delivery management include:

• Faster delivery
• Lower cost per delivery
• Increased profitability
• Increased customer satisfaction and better customer retention.

The broader social, economic and environmental benefits of more efficient delivery management processes include:

• Less traffic congestion 
• Lower emissions of carbon dioxide and other pollutants

The six pillars of delivery management

The delivery manager’s job starts with a list of orders, and a list of addresses those orders need to be delivered to. You may also have information like a delivery time window request from a customer, drop-off information or a driver roster. Here’s how to get from there to a completed delivery and a happy customer:

1. Route planning

A route plan answers the question: What’s the most efficient way to complete all these deliveries? How you arrange your delivery stops has a massive impact on time and costs.

For example, one really silly way to plan a route would be to start with the order that was made first, then the second order, and so on. This might make sense — until you realize that order 5 was on the same block as order 1, and could have been delivered at the same time.

So the first step in route planning is simply to cluster your stops by geographical area, so that you don’t waste time driving across town when you don’t have to. You could do this using just a spreadsheet. To have more control over how stops are ordered within a delivery area, and to make it easier to share routes with a driver, you could also use Google Maps to plan your delivery route. 

Frankly, though, we don’t recommend either of these methods unless you only have a small handful of deliveries to make, say less than 10-20. Beyond that, you’ll spend hours on your delivery route planning and won’t get great results. It’s much faster and more efficient to just upload your spreadsheet to a route planning app and let them do all the work for you! Most delivery management systems also support integrations to your order management system, so you may not even need the upload step.

The best route planning software includes route optimization, which uses smart algorithms to automatically plan the shortest, most efficient routes.

2. Driver scheduling

Autonomous delivery robots are a cute gimmick, but until they’re ready for the real world (we aren’t holding our breath), it takes a human + a vehicle to complete the delivery process. Depending on your business model and the kind of delivery service you want to offer, you might use one of the following:

• “Gig economy” drivers sourced through an app like Doordash, Instacart or Uber. This is convenient for on-demand deliveries that need to be made very quickly — but it can be expensive, and there’s no relationship between you and the driver. 
• Independent contract drivers can be hired via online recruitment sites and job boards like ZipRecruiter, Monster, and Indeed. This will enable you to develop a long-term relationship with a driver, without having to pay a full-time wage. You will still have to manage training, insurance, and contractual issues though. 
• You could hire your own in-house drivers, either full-time or part-time.

Whichever driver model you choose for your order fulfillment, you will need to schedule and assign your drivers to shifts and routes. You will need to consider questions like: What is your cut-off time for orders — can you plan a few days in advance, or do you have to plan in the morning for orders that must be made that day? Do you need to balance orders between drivers so everyone has roughly the same shift length? Will you have the same number of routes and drivers every day, or will you need more drivers on some days than others?

As you can see, things get complicated fast. If delivery driver scheduling is going to be a big part of your job, this is definitely functionality you should look for in delivery management software.

3. Dispatch management

You’ve planned your routes and assigned your drivers – now you need to get them on the road with the right loads, heading to the right stops and delivering on time. This could be as simple and old-school as printing out a packing list and a route plan, and handing the driver a clipboard. Alternatively, you could use a delivery management app to automatically send routes to your drivers on their mobile phones. This makes it easier for them to use apps like Waze or Google Maps for point-to-point navigation. Spending all day on the road is a tough job, so you’ll want to take advantage of any opportunity to make life a little smoother.

Delivery and dispatch management software should also make it easy to communicate with your team members if you ever need to send route updates or new instructions.

4. Delivery tracking 

Once your deliveries are on the road, you’ll want to keep track of whether everything is running on time and you’re meeting your ETAs. You will probably also need an efficient way to get proof of delivery, for your own records and to share with customers. 

You don’t want drivers to be distracted on the road, and text updates can be time-consuming, so ideally real-time GPS tracking should be built into your delivery management system. Which leads us directly to the next pillar:

5. Customer communication

A stressed customer is an unhappy customer! And the biggest causes of stress are uncertainty and lack of information. Both are much more likely with e-commerce, where it’s especially hard to create a satisfying customer experience. So keep your customers well informed about when to expect their deliveries, when the delivery is on the way and when it’s been successfully completed.

This can get very time consuming, very fast, so it’s definitely something you want to automate. If you maintain regular communication with your customers via real-time updates and they feel they know what’s going on, they’re far more likely to be forgiving if (or when!) anything ever goes wrong.

6. Cost optimization

Last mile delivery is notoriously the most expensive part of the supply chain. Depending on who you ask, it accounts for 40-50% of total shipping costs! So efficient delivery management means keeping your costs as low as possible, while still meeting your goal of delivering safely and on time. 

Cost per delivery is the single most important number you need to track in your delivery operations. This one number can tell you if your deliveries are profitable, or if you’re losing money. This is especially important since consumer expectations for free delivery are sometimes unrealistic – you’ll need to know what it’s costing you before you give in to the pressure! If each delivery is costing you $10-$15, that’s going to hurt your business. On the other hand, if you can get your cost per delivery metrics down to less than say $3, you might be able to consider offering free deliveries. 

How to lower cost per delivery  

Cost per delivery is your total cost to perform a single delivery, on average. The two largest components are driver wages (usually 70 to 80% of the total) and fuel. 

You can’t realistically lower wages, and you can’t change the fuel price. So how do you lower your cost per delivery? The single biggest thing you can control is what we call route density, or the number of deliveries you can make per hour. A dense urban area with multiple deliveries on a single block will have much lower cost than a rural area where there might be miles between deliveries. If you're only making one or two deliveries per hour while your drivers are on the road, that's going to be expensive.

Based on our experience of logistics operations, these are the benchmarks you should know:

• Anything less than three deliveries per hour is poor performance. 
• Three to six deliveries per hour is a healthy average. 
• If you can manage seven or more deliveries per hour, your performance is very good. 

Specialist courier companies like UPS or FedEX can achieve up to 12 deliveries per hour, but this is because they have massive volumes and can create super-dense routes. It will be much harder for a small or medium business to achieve this, but there are still ways to increase your route density:

1. Use delivery zones. Group your deliveries by geographical area so that you can assign them all to the same route – and maybe, if your volumes are low, different days. You could do downtown on Mondays, for example, and the next town over on Tuesdays.
2. Use route optimization software to automate your route planning and achieve the highest route density.

What to look for in delivery management software

It should be pretty clear by now that we’re big fans of automation and software. The right delivery management platform can save hours of hassle and planning time for every round of deliveries, save money by creating more efficient routes, and save drivers from frustration and distraction so they can deliver quickly without putting themselves or others in danger on the road. It can also create a much better delivery experience for the customer. 

Every business will have slightly different needs, but in general the main features any delivery management solution should offer include:

• Route optimization. This feature is now widely offered, but the quality of route optimization algorithms varies a lot (in our tests, there’s up to a 20% difference in route efficiency between different apps). Test a few different options to see which one creates the most efficient, optimal routes, how accurate the ETAs are, and how well clustered or logical the routes are. 
• Multiple routes. Even if you only have one route per day now, don’t hinder your future growth by using a limited solution.
• Time windows. Everyone hates a delivery ETA like “sometime on Tuesday”! People often need to plan their day around an expected delivery, so you can make your customer experience much better by offering delivery windows that match their schedules. The time frames could be as long as a morning vs an afternoon, or as short as a 15-minute time slot. 
• Easy dispatch. Dispatching routes to your drivers should be a one-click operation.
• A driver app. Drivers shouldn’t have to juggle clipboards or bulky tablets. The best delivery management systems now include smartphone apps so drivers can manage their day straight from their mobile phone. 
• Automated customer notifications. Look for software that will make it easy to set up automated messages to let customers know their delivery ETA, and when it’s completed. Including proof of delivery is an added bonus.
• Real-time tracking. You should be able to see the status of your deliveries at a glance. Live tracking also means drivers don’t need to call or text to report their progress.
• Delivery tracking links for customers. One of the best things about apps like Uber and Doordash is the way you can actually see your driver approach in real time. Offering a similar link will instantly elevate your customer experience. 
• Reporting tools. Your delivery management system should make it easy to generate reports at the end of each day, week or month so it’s less hassle to manage driver pay and track your KPIs. 
• Good customer support. When things don’t work as expected, you often need to fix them fast. Look for speedy, responsive customer service.
• Ease of use. Last, but not least! Software training is so last decade – if you can’t figure out how to use a delivery management system within a couple of hours on your own, it’s probably not right for you. 

That’s it! You’re now in a position where you can build and streamline your own delivery management processes that improve profitability and customer satisfaction. Good luck!