The main reasons why the first and last mile unit costs are usually higher than those in the intermediary stages of the transport sequence (chain) include:
- Composition and decomposition costs. For the first mile, loads have to be consolidated to improve their economies of scale as well as to meet the minimum load requirement for transportation modes (e.g. truckload, container load). Since the first mile commonly concerns manufacturing activities, there is a propensity for composition costs to be lower as they concern larger loads. The exact opposite occurs for the last mile as costs are incurred to break down transport loads. Additionally, the consignees tend to be more dispersed as they are individual buyers, implying higher unit load mile costs. A similar pattern applies to passenger transportation, particularly for long-distance transportation.
- Linehaul costs. Once shipments have been consolidated, transport costs at the international (or intercity) level are usually lower per unit due to the economies of scale that composition allows.
- Congestion. The locations where cargo is generated (origin) and attracted (destination) usually take place in metropolitan areas. There is thus a congestion factor that is salient for the last mile, particularly when the distribution of retail goods is concerned. This brings forward the concept of city logistics that seeks to mitigate the challenges of moving freight within metropolitan areas. The origins and destinations of passenger movements are usually in metropolitan areas. For commuting, the last mile is commonly the most costly as it concerns circulating on local streets.