First and Last Mile Unit Cost Structure

First and Last Mile Unit Cost Structure

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 concern manufacturing activities, there is a propensity for composition costs to be lower as is concerns larger loads. For the last mile, the exact opposite takes place as costs are incurred to break down loads. Additionally, the consignees tend to be more dispersed as there are individual buyers, implying higher unit load mile costs. A similar pattern applies to passenger transportation, particularly for long distance transportation.
  • Congestion. The locations were cargo is generated and attracted usually takes place in metropolitan areas. There is thus a congestion factor that is salient for the last mile, particularly when retail distribution is concerned. This brings forward the concept of city logistics that seeks to mitigate the complexities 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.