Last mile distribution - i.e. the process of delivering goods and services to end users in remote, rural or otherwise underserved areas - is a persistent bottleneck that many MSD programmes seek to resolve.
This challenge often prevents the benefits of market development from reaching those who need them most, particularly in developing economies.
In underperforming markets, businesses that sell products or services to the poor tend to focus on maximising short-term returns from individual transactions and on customers coming to them rather than actively marketing to current and potential customers. Where underserved populations don’t know about or don’t think they want a product or service, market systems programmes can often work through supply-side players or seek to address demand gaps.
Successfully addressing last mile challenges requires a nuanced understanding of local contexts, innovative partnerships and tailored solutions that address the specific constraints at play.
Sustainable last mile input distribution describes how input distribution companies can reach the last mile by making money with farmers, not simply from them.
Why last mile challenges persist
Last mile distribution challenges are multifaceted and often interconnected. They may involve, for example:
- Geographic barriers: emote locations, poor road infrastructure and challenging terrain can significantly increase transportation costs and delivery times. Seasonal weather patterns (e.g. floods, droughts) can further exacerbate these challenges.
- Low population density and scattered demand: reaching dispersed populations with small individual demands can be expensive and logistically complex. Small volumes may not justify investment in dedicated distribution infrastructure.
- High transportation costs: fuel costs, vehicle maintenance and driver salaries can be a significant portion of last mile distribution costs, especially for small businesses and entrepreneurs.
- Limited access to information: end users in remote areas often have limited access to information about available products, services, and their benefits. This can hinder demand and adoption.
- Low purchasing power: affordability is a major constraint for many last-mile consumers. Even if products are available they may be unable to afford them.
- Lack of trust and awareness: inability of local businesses to grow with a long-term vision or with an intent for quality.
- Security concerns: in conflict-affected or insecure areas, distribution can be particularly challenging due to safety risks and logistical constraints.
How to! Stimulate last mile delivery of vital goods and services explains how one programme in Nigeria tackled some of these common last mile distribution challenges using an MSD approach.
Tactics to resolve last mile distribution challenges
The following outlines some common tactics for addressing last mile distribution challenges.
- Addressing geographic barriers and high transportation costs
- Developing hub-and-spoke models: this involves establishing centralised distribution hubs in strategically located areas with good infrastructure, and then using smaller, more localised transport providers to reach remote communities.
- Establishing last-mile agent networks: partnering with local entrepreneurs or community-based organisations to serve as last-mile agents, distributing products and services within their communities. Agents are often locals who are trusted and understand the environment.
- Mobile distribution: using mobile units (e.g. trucks, motorcycles, bicycles) to reach dispersed populations on a regular schedule. This can involve partnering with existing transportation providers or supporting the development of new mobile distribution businesses.
Facilitating last mile distribution of agro-inputs explores some of these models as they pertain to the distribution of agricultural inputs, looking for signs of sustainability, impact and scale.
- Promoting demand and awareness:
Reaching and empowering women with digital solutions in the agricultural last mile identifies the main barriers for women's limited participation in digitised agricultural value chains and sheds light on best practices to increase their participation and empowerment in these value chains.
- Improving affordability:
- Microfinance and credit: working with a private sector partner to provide access to microfinance and credit that enable businesses and individuals to purchase products and services.
- Group purchasing: facilitating group purchasing schemes to enable communities to buy in bulk and negotiate lower prices.
- Subsidies and vouchers: where appropriate, and carefully targeted, providing subsidies or vouchers to make essential products and services more affordable for vulnerable populations.
Going beyond the last mile: adaptation to increase refugee adoption explores how one programme continuously worked with partners to adapt their business models to ensure they reflected the needs of refugees as consumers.