Square Insights First Mile, Middle Mile, Last Mile,
Standards for Integrated Logistics Operation Optimization

Key Summary at a Glance

First Mile refers to the transportation of goods from the origin (producer or supplier) to the first hub (distribution center), and is the critical initial leg where the accuracy of collection and outbound of goods determines the overall logistics flow.

Middle Mile moves bulk shipments between hubs, covering long distances. Optimizations of load factor and freight rates determine logistics costs and network efficiency.

Last Mile is the final leg of the transport from a hub to the customer’s doorstep, where delivery speed and accuracy determine the customer experience and CS (Customer Satisfaction) directly.

1. Which “Transport Leg” Should Samsung SDS Logistics Focus on the Most?

Logistics operations can be seen as a single journey transporting seamlessly from the origin to the customer’s doorstep, but it is actually more complex, composed of “different legs” being connected. Because each leg requires different requirements for the necessary mode of transportation, operational method, cost structure, and delivery speed, logistics efficiency varies significantly depending on the purpose and which leg to focus on.

Being aware of which leg is the key clarifies investment, cost, and manpower allocation. This is because the more important leg varies depending on brand personality, product type, customer SLA (Service Level Agreement), and sales channel. For example, brands that prioritize customer experiences are impacted more by the “initial key leg,” the last mile; manufacturers with large shipping volumes are more significantly impacted by the first mile in terms of logistics performance.

Therefore, the logistics industry explains the delivery journey by dividing into three legs: First Mile, Middle Mile, and Last Mile. Each leg has different roles and levels of difficulty, and the focus area varies depending on the purpose and conditions.

2. The Leg Determining Logistics Efficiency: First mile, Middle mile, Last mile

When handling logistics tasks, the person in charge must accurately figure out where delays occur most frequently, where costs can be reduced, and which key legs require priority risk management within the complex logistics flow that involves customs clearance, shipping schedule, in-land transport, and delivery to customers. In particular, since the key leg to focus on varies by product features, customer requirements, and country-specific logistics environment, clearly understanding each operational leg is the starting point for integrated logistics operations optimization.

Source: Delivery SOLUTIONS A UPS Company『How to Optimize Middle-Mile Logistics』

1) First Mile: Starting Point of the Supply Chain

First Mile is the “initial leg,” which is the moving of goods from the origin (factory, warehouse, seller) to the first distribution facility (hub, center). In other words, this phase serves as a “starting point of logistics.”

• Example 1: Moving finished goods manufactured in Southeast Asia from the local factory warehouse to ports/export hubs
• Example 2: Collecting home appliances produced at the manufacturer’s factory from the factory to the central distribution center

Key Features

• Collection and pickup accuracies are the key, and failing to meet the shipping deadline can result in the entire delivery schedule

• Accuracy of the initial information, such as quantity, packaging, and customs clearance, is very important, and errors at this phase can lead to problems in subsequent phases as well

• There is a level of difficulty in managing multiple distribution centers simultaneously, and platforms equipped with numerous sellers require systematic management for mandatory

• Defects occurring in the initial phase have the broadest impact, potentially causing a chain of issues from hub operations to delivery and customer service

2) Middle Mile: Backbone of the Logistics Network

Middle Mile is the long-distance bulk transportation leg that connects hubs to hubs, a phase involving moving goods over hundreds of kilometers domestically and thousands of kilometers internationally. It utilizes various modes of transportation such as trucks, rail, air, or sea, and is a crucial phase that determines the logistics cost structure and overall operational efficiency.

• Example 1: Transporting containers from Busan Port to Incheon inland logistics center
• Example 2: Transporting the goods from Incheon Airport to Los Angeles (LAX) Airport

Key Features

• Since it is long-distance and bulk transportation, load factor and freight rate optimization (per ton-mile) are the key to cost efficiency

• Managing hub-to-hub schedule, routes, and transshipment is complicated, so operational strategies and network design capabilities are important

• Since various modes of transportation are often combined, the ability to coordinate multimodal transport is crucial for success

• Due to the long-distance nature, a single delay can easily spread throughout the entire network, so schedule management stability is extremely important

• Relatively standardized and repetitive leg: Due to frequently repeated operations between designated routes and hubs, line haul optimization and TMS (Transport Management System)-centered digitalization has been well developed

3) Last Mile: Final Phase of Completing Customer Experience

Last Mile refers to the final leg of delivery from the hub or local distribution centers to the end customer. Factors involving customer touchpoints such as delivery experience, brand trust, and customer satisfaction are all determined at this stage. It is the shortest distance in the supply chain but is also the most challenging phase operationally, where the most contingency variables occur.

• Example 1: Delivery of parcels from local sub-terminal to customer’s home or office
• Example 2: Delivery to convenience store or subway PUDO pickup locations followed by customer self-collection model

Key Features

• Unexpected variables such as address errors, urban traffic, missed deliveries, and restricted building access most frequently occur during the process of reaching the customer’s doorstep.

• Due to the high number of short-distance and single-item deliveries, unit costs tend to be high, making efficient truck dispatching and routing essential.

• Delivery speed and accuracy determine customer experience, and most customer satisfaction and brand trust that can directly have impact on CS and claims, including delivery quality, communication, and package condition, occur during this stage.

• Due to the strengthening of SLA with instant delivery, same-day delivery, and early morning delivery, time-sensitive operational capabilities determine competitiveness

3. Cello Square, End-to-End Integrated Logistics Operation Optimization Solution

If the shipping information is incorrect or schedule changes are not shared in a timely manner, it causes a chain reaction of delays in customs clearance, hub processing, and delivery. Samsung SDS Cello Square is designed to manage the entire logistics process, from international transport (sea and air), customs clearance, inland transport, warehouse storage, to final delivery. These are enabled by predicting, responding to, and automating various issues that may arise through digital-based integrated management technology, allowing management of the end-to-end logistics process all within a single platform.

• Provide end-to-end fulfillment and one-stop service
  With real-time visibility, you can easily figure out where the cargo is, what stage it has reached, and when it is expected to arrive, at a glance. It also immediately detects any problematic situations, enabling proactive responses and significantly reducing unexpected risks.

• Improve operational accuracy with data-driven forecast and analysis
  By automatically analyzing and providing key data such as monthly cargo volume, delivery speed, logistics costs, inventory flow, and carbon emissions, it is possible to respond more accurately to changes in demand and external risks.

• Minimize operational burden through document, settlement, and workflow automations
  Automate complex document tasks such as international transportation, customs clearance, and tariffs to reduce data input errors and omissions, and systematically manage up to settlement.

• Stable logistics operations based on a global network
  Based on Samsung SDS's global logistics network, you can operate international logistics and domestic delivery stably on a single platform.

[References]
[1] https://anvyl.com/blog/what-is-the-supply-chains-first-mile-and-how-do-we-manage-it
[2] https://www.upperinc.com/blog/what-is-middle-mile-delivery
[3] https://nextbillion.ai/blog/what-is-first-mile-middle-mile-and-last-mile-logistics

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