A lower software price doesn’t always mean a lower cost to the business.
That’s especially true in last-mile delivery. The real financial question is how much the platform can change the cost of running the operation. If the savings outweigh the cost of the platform, the investment can pay for itself.
The challenge is knowing how much those operational improvements are actually worth. A percentage improvement might look impressive in a case study, but it doesn’t tell you how much the business could actually save. That will depend on what the delivery operation is costing the business today.
That’s where a total cost of ownership analysis becomes useful. It connects the operational impact of last-mile delivery software to the financial return the business can expect from the investment.
Key Takeaways
- Last-mile delivery software cost should be evaluated against the cost of your current delivery operation. Failed deliveries, manual dispatch labor, fuel, driver turnover, lost customer value, and additional capacity can all affect the financial case for a new platform.
- Delivery software ROI starts with putting a dollar value behind the costs a new platform could reduce. Use your own operational data and realistic improvement assumptions to estimate potential monthly savings.
- Payback period shows how quickly those savings can recover the investment. Compare estimated monthly savings with software costs, then account for any upfront implementation costs to calculate how long the investment takes to pay back.
- Real customer results can help inform the assumptions in your TCO analysis. With Onfleet, Bayshore HealthCare increased delivery volume from around 300 to 2,000 orders per day as route planning dropped from 30–60 minutes to roughly 5–10 minutes. ABD Transportation reduced failed deliveries by 82% and cut fuel costs.
What Should Be Included in Last-Mile Delivery Software TCO?
A TCO analysis starts with two things:
- What the new software will cost
- What your current delivery operation is costing you
Together, these numbers give you the baseline for estimating potential savings and ROI.
Cost of the software
Start with the full cost of adopting and running the platform:
- Software subscription
- Implementation
- Integrations
- Internal IT time
- Training
- Migration or process changes
Integration costs can vary significantly. Connecting the platform through an existing API may require relatively little work. A custom integration could require more development time and increase the upfront investment.
Confirm these costs before calculating ROI and payback so you’re comparing the potential savings against the full investment.
What Is Your Current Last-Mile Delivery Operation Costing You?
Before you can calculate delivery software ROI, you need to understand what the current operation is costing the business.
Some of those costs are easy to see. Others show up when something in the delivery operation takes more time or money than it should.
Putting a dollar value behind those costs gives you the baseline you need to evaluate the potential financial impact of a new platform.
Failed deliveries
Start with what happens financially when a delivery fails.
The most immediate cost is getting the order to the customer again. Use your average cost per delivery to estimate that expense. If the failed delivery results in a refund or replacement, calculate that separately.
Say your operation completes 5,000 deliveries per month and has a 2% failed delivery rate. That's 100 failed deliveries. If each one costs $30 to recover:
5,000 deliveries × 2% failure rate × $30 = $3,000 per month
For some businesses, the cost can go further. In meal delivery, for example, a failed delivery can mean a spoiled order. It can also put the customer relationship at risk. If your data shows that failed deliveries contribute to churn, include the lost customer lifetime value in the calculation.
The goal is to understand what a failed delivery actually costs your business. That gives you a number you can use in the TCO analysis.
Manual dispatch labor
Next, look at how much paid time goes into planning and managing deliveries manually.
You can calculate the cost using the hours spent on this work and the fully loaded hourly cost of the employees doing it.
If a team of four dispatchers each spends five hours per day on route planning:
4 dispatchers × 5 hours × 22 operating days × $38 per hour = $16,720 per month
That $16,720 is the current cost of the work. You can later compare it with the amount of manual work a delivery management platform could remove.
Keep the calculation tied to what happens financially. Saving time doesn't automatically mean saving $16,720. The value may come from delaying another hire or allowing the existing team to support more delivery volume.
Driver turnover
Driver turnover is another cost to consider. Before using an industry average, check with Finance or HR to find out how much your business actually spends to recruit and train a replacement driver.
Then look at whether your delivery technology could be contributing to turnover. If drivers regularly struggle with the tools they use on the job, a poor driver experience may be part of the problem.
When choosing a delivery management platform, check how drivers rate the app they’ll use every day. If better technology could help reduce turnover, use your own replacement cost to estimate the potential savings.
Fuel costs
Fuel gives you one of the clearest costs to work with because you're already paying it every month.
The question is how much of that spend is tied to route efficiency.
If your delivery operation spends $20,000 per month on fuel, even a 10% reduction would be worth:
$20,000 × 10% = $2,000 per month
To estimate a realistic reduction, ask the software provider how much similar customers have reduced their fuel costs. You can use those results to inform the assumption in your ROI calculation.
Lost customer value
Some delivery problems cost more than the order itself.
If a poor delivery experience causes a customer to leave, the financial impact is the value of the customer you lost.
For example, say you can attribute 10 lost customers per month to delivery issues and your average customer lifetime value is $500:
10 lost customers × $500 customer lifetime value = $5,000 in lost customer value
Use your own customer lifetime value and churn data for this calculation. If you can't connect delivery issues to churn with reasonable confidence, don't count it as a projected saving.
Delivery capacity
Growth can create another cost before the additional volume even arrives.
If the current delivery operation is close to capacity, Finance may already be planning to add internal drivers or increase its use of delivery partners.
Put a number behind that planned expense.
For example, say the business expects to spend an additional $10,000 per month on delivery capacity to support its next increase in volume:
$10,000 in additional monthly capacity costs = $120,000 per year
A delivery platform could change that cost in different ways. It could help the existing operation handle more volume or give the business access to additional delivery partners through a delivery network when more capacity is needed.
Calculate what each option would cost your business and use the difference to estimate the potential financial impact.
How to Calculate Last-Mile Delivery Software ROI and Payback
Once you know what your current delivery operation is costing you, you can estimate how much of that cost a new platform could reduce.
Start with the areas where you have enough data to make a reasonable assumption. Then calculate the expected savings for each one.
For example:
These percentages are examples. Ask each software provider for results from customers with similar delivery operations. Use those results alongside your own data to decide what assumptions make sense for your business.
Once you have your estimated monthly savings, compare them with the cost of the software.
If the platform costs $5,000 per month:
$11,180 estimated monthly savings − $5,000 software cost = $6,180 monthly net benefit
You can then calculate how long it will take to recover any upfront investment. If implementation costs $5,000:
$5,000 upfront investment ÷ $6,180 monthly net benefit = 0.8-month payback period
You can also calculate the expected return over the first year.
The annual savings would be:
$11,180 × 12 months = $134,160
The first-year cost of the platform would be:
($5,000 × 12 months) + $5,000 implementation = $65,000
That gives you a first-year ROI of:
($134,160 annual savings − $65,000 first-year cost) ÷ $65,000 × 100 = 106% first-year ROI
The numbers will look different for every delivery operation. What matters is that the business case uses your actual costs, realistic improvement assumptions, and the full cost of the platform.
How Onfleet Helps Reduce the Cost of Last Mile Delivery
If you’re building the business case for Onfleet, start with the delivery costs you want the platform to help reduce.
Onfleet is an AI-powered delivery orchestration platform built for businesses managing last-mile delivery. It supports companies running their own delivery operations with internal drivers and external delivery partners, as well as couriers delivering on behalf of their clients.
The platform brings together four areas that can have a direct impact on delivery costs and performance:
- AI-powered delivery automation: Optimize routes and automate dispatch to reduce manual planning and use delivery resources more efficiently.
- End-to-end visibility: Track deliveries in real time across internal drivers and external delivery partners.
- Premium customer experience: Keep customers informed with accurate ETAs, branded tracking, and delivery updates.
- Onfleet Connect: Access a network of vetted delivery partners when you need additional capacity.
Together, these capabilities can help reduce the cost of running last-mile delivery. The impact will look different for every operation, which is why real customer results are useful when building your own ROI assumptions.
For Bayshore, it meant scaling without adding hours to route planning
Bayshore HealthCare manages medication deliveries to patients across Canada.
With Onfleet, Bayshore grew from around 300 to 2,000 orders per day. Route planning that previously took dispatchers 30 to 60 minutes dropped to roughly 5 to 10 minutes.
That’s a significant increase in delivery capacity without route planning time increasing alongside it. Read the full case study here.
For ABD, it meant fewer failed deliveries and lower delivery costs
ABD Transportation is a pharmaceutical courier serving pharmacies across the Greater Toronto Area.
Before Onfleet, ABD was dealing with around 22 failed deliveries per day. That dropped to about four per day, an 82% reduction.
ABD also used Onfleet to avoid Highway 407 tolls that could cost as much as $1,500 per month. Read the full case study here.
Bayshore and ABD operate on different sides of last-mile delivery, but both show how operational improvements can translate into financial value.
Still comparing your options? Download our Last-Mile Delivery Software Evaluation Template to compare vendors across 30 weighted criteria and calculate the annual cost of your current delivery setup.
Want to see what Onfleet could mean for your delivery operation? Book a free demo or start a free trial.
FAQs About Last-Mile Delivery Software Cost and ROI
What should be included in the total cost of ownership of last-mile delivery software?
The total cost of ownership of last-mile delivery software should include the subscription, implementation, and any other upfront costs. The analysis should also establish what your current delivery operation costs in areas the software could affect, such as dispatch labor, fuel, failed deliveries, driver turnover, and additional capacity. Those costs create the baseline for estimating potential savings.
Onfleet helps businesses reduce several of these operational costs through route optimization, delivery automation, and more efficient use of delivery capacity. Businesses can use their current costs to estimate the financial impact those improvements could have on their operation.
How do you calculate ROI for last-mile delivery software?
Calculate last-mile delivery software ROI by estimating the annual savings the platform could generate, subtracting the total annual investment, and dividing the net benefit by that investment. The most important part is the savings estimate. Start with your own operating costs and use results from comparable customers to determine a realistic improvement range.
Onfleet publishes customer results across different delivery operations that can provide additional reference points when building those assumptions.
How can last-mile delivery software reduce operating costs?
Last-mile delivery software can reduce operating costs when it lowers the resources required to complete deliveries or allows the same resources to support more volume. Depending on the operation, that may mean reducing route planning time, fuel spend, failed deliveries, or the need to add capacity as volume grows.
Onfleet customers have seen these savings in practice. ABD Transportation reduced fuel costs by 45% and failed deliveries by 82%, while Bayshore HealthCare increased daily volume from around 300 to 2,000 orders as route planning time fell from 30–60 minutes to roughly 5–10 minutes.
How should businesses compare the cost of different last-mile delivery software platforms?
Businesses should compare last-mile delivery software using the same financial assumptions for every platform. Calculate the full cost of each option, identify which current delivery costs it could realistically reduce, and estimate the resulting net benefit. This makes it possible to compare platforms based on expected financial impact instead of subscription price alone.
Onfleet’s Last-Mile Delivery Software Evaluation Template provides a structured scorecard for comparing vendors and calculating the annual cost of your current delivery setup.
What industries use Onfleet for last-mile delivery?
Onfleet supports last-mile delivery across many industries. These include grocery, prepared meals, restaurant, retail, cannabis, and healthcare organizations such as pharmacies, medical labs, health systems, long-term care providers, and medical device and equipment companies.
The potential ROI will vary by industry. A pharmacy may place greater financial weight on failed deliveries, for example, while a high-volume grocery operation may see more value from route efficiency and capacity. Businesses should build their TCO analysis around the costs that matter most to their delivery operation.