Why Are U.S. Last-Mile Delivery Costs Still Rising as Order Volumes Grow?

U.S. last-mile delivery costs have increased by double digits for the second consecutive year. Higher order volumes and revenue have not necessarily translated into lower delivery costs.（freightwaves.com）

According to a survey of U.S. delivery operators conducted by last-mile delivery technology provider FarEye, median year-over-year last-mile delivery cost inflation reached 12% in 2026, matching the increase recorded in 2025.

Eighty-eight percent of delivery operators said delivery costs are growing at the same rate as revenue or faster. This raises a key question: why are higher order volumes not producing a noticeable decline in per-unit last-mile delivery costs?

Escalating Operational Costs and Internal Inefficiencies

Data from FarEye demonstrates that rising fuel, labor, and vehicle expenses remain the primary factors driving up last-mile delivery costs across the U.S.

Fuel expenses represent one of the top three cost pressures for 70% of last-mile delivery operators.

Internal operational inefficiencies also contribute to higher costs.

Twenty-one percent of delivery operators cited inefficient routing as a top-three cost pressure, while 18% cited failed deliveries and returns.

Inefficient route planning, underutilized drivers and vehicles, and the need to re-deliver failed orders continuously create hidden expenses.

Kushal Nahata, CEO of FarEye, estimated at the Last Mile Leaders America event in Chicago that roughly 6 percentage points of the 12% increase came from public rate increases by carriers such as FedEx and UPS, while another 6 percentage points came from operational inefficiencies.

Ultimately, these external cost pressures and internal operational inefficiencies help explain why higher order volumes do not automatically produce lower per-unit delivery costs.

Reliability and Visibility in Last-Mile Delivery Performance

Among surveyed delivery operators, 55.7% said predictable delivery or successful first-attempt delivery mattered most, compared with 11.4% who prioritized the fastest possible delivery.

Pursuing maximum speed for every single order often requires adding extra drivers, vehicles, and fleet capacity. However, not all orders require extreme speed. Prioritizing on-time delivery offers far greater fleet scheduling flexibility than pushing for same-day delivery, making it significantly more effective for controlling last-mile delivery costs.

Jeff Wolpov, an executive overseeing e-commerce and last-mile delivery at U.S. logistics giant Ryder, notes that many consumers are willing to trade a bit of speed for greater stability and reliability, provided companies clearly communicate delivery windows, maintain touchpoints throughout the process, and fulfill orders as promised.

Operational performance data reflects this clear difference in approach:

• Speed-first providers: Operators prioritizing maximum delivery speed reported 76% mean on-time performance and 24% median cost inflation.

• Predictability-first providers: Operators prioritizing predictable delivery reported 88.4% on-time performance and 10% median cost inflation.

• Visibility-first providers: Operators prioritizing real-time tracking visibility reported 90.3% on-time performance and 4.9% median cost inflation.

FarEye further found that WISMO rates moved with the last-mile delivery cost pattern.

Comparing WISMO rates against delivery performance reveals a stark contrast: delivery operators with WISMO rates exceeding 30% saw their last-mile delivery costs jump 17.2% this year. In contrast, companies that kept WISMO rates under 5% experienced a cost increase of only 7.3%. Lower WISMO frequency also correlated directly with higher on-time delivery rates.

Ultimately, end-to-end visibility does more than help businesses detect delays, track order statuses, and resolve exceptions early it serves as a crucial mechanism for reducing customer support, communication, and dispatching overhead.

Achieving Scale Economies: Ensuring Revenue Growth Outpaces Cost Expansion

When order volumes increase, a delivery operator's per-unit last-mile delivery costs often fail to drop because scaling up typically demands additional drivers, vehicles, routes, carriers, and customer support resources.

Without operational efficiency improvements, every batch of new orders drives a near-proportional increase in expenses. As delivery networks expand, operational complexity also increases.

Companies with annual revenues exceeding $1 billion still reported a 13.8% median increase in last-mile delivery costs this year.

FarEye's survey shows that mixed delivery networks are already common. Fifty-seven percent of delivery operators run a hybrid fleet combining owned and outsourced delivery capacity, 26% are fully outsourced, and 17% operate an owned fleet only. Among hybrid operators, 47% plan to increase outsourcing further.

A hybrid approach allows companies to handle seasonal demand surges without permanently expanding their fleet size. Offloading excess orders to external carriers can reduce the need for additional fixed costs associated with long-term vehicle ownership and driver payroll.

While rising fuel prices, labor rates, and carrier surcharges remain external pressures beyond a company's direct control, businesses retain full agency over route planning, driver scheduling, and vehicle utilization. Achieving economies of scale depends in part on keeping these operational and administrative expenses growing at a significantly slower rate than overall order volume.

FBD GROUPS is committed to simplifying supply chain management for international brands and cross-border e-commerce companies. FBD GROUPS serves as the U.S. domestic logistics and fulfillment arm within FBD GROUPS, specializing in warehousing, domestic transportation, and last-mile delivery.