Last-Mile Costs Eat Over 40% of Delivery Spend as Peak Season Arrives

Last-mile delivery can consume more than 40% of total delivery costs, according to industry estimates — and this year those costs are outrunning revenue for many operators just as peak season puts the segment to its hardest test.

That is the uncomfortable arithmetic facing shippers, carriers and forwarders as holiday order volumes move from distribution centers to doorsteps across the United States. A survey of more than 500 delivery operators by the last-mile platform FarEye, published in its "Eye on the Last Mile America 2026" report, found that 70% of last-mile operators ranked fuel among their biggest cost pressures, while more than 50% cited labor issues. Many respondents said last-mile costs are now outpacing revenues, with rising fuel and labor prices at the heart of the problem.

Put simply: the most expensive leg of the logistics journey is getting more expensive.

Why the last mile keeps getting harder

The final mile has long been considered the most difficult part of the logistics journey. Over the past decade, three forces have tightened the squeeze simultaneously: accelerating e-commerce order volumes, persistent labor shortages in both warehousing and transportation, and customer expectations that have shifted from next-day toward same-day delivery.

None of those pressures shows any sign of easing. And for carriers, the commercial consequence is direct — every additional dollar of fuel or driver cost lands on a leg of the network that already carries the highest cost-per-unit in the supply chain.

What does the Supreme Court ruling change?

Cost is not the only pressure point this peak season. Compliance has moved to the foreground following the May Supreme Court ruling in Montgomery v. Caribe Transport II LLC, which held that freight brokers can be held liable under varying state laws for accidents involving the federally licensed motor carriers they hire.

Gaurav Srivastava, co-founder and chief product and technology officer at FarEye, said the ruling is creating an urgent need for compliant, certified and insured drivers across the delivery chain — a requirement that is itself feeding into higher costs.

"Companies are now trying to find [better, vetted] drivers," Srivastava explained, noting that in this case the added costs are "for good reasons. But at the end of the day, it's creating a lot of pressure for our customers."

The ruling reaches beyond brokers. Shippers who use unvetted carriers or substandard brokers in pursuit of better rates now face exposure they did not have before May. The cheap-capacity trade-off carries legal risk that did not previously exist.

The caveat is worth stating plainly: vetted, insured capacity costs more. Srivastava frames that as money well spent, but for shippers already absorbing fuel and labor inflation, it is one more line item climbing at exactly the wrong time of year.

Is AI the escape valve?

The industry's response, at least according to the technology vendors, is automation. FarEye and others report growing demand for tools that help shippers and carriers bring costs under control — chief among them agentic AI products addressing route planning, capacity optimization and demand forecasting.

The survey data suggests operators are acting, not just talking. More than 66% of last-mile operators said they were implementing or using AI products in 2026, up from more than 46% in 2025 — a jump of roughly 20 percentage points in a single year. The share reporting "extensive operational adoption" of AI rose to nearly 14% this year from 4% last year, meaning it more than tripled.

The use cases are notably specific:

• ETA prediction — 39% of operators, the leading application
• Demand forecasting — 36%
• Customer support — 31%
• Real-time dynamic routing — 21%

Srivastava's argument for these tools is a pragmatic one. Last-mile operators cannot control fuel prices or labor markets. What they can control is how much fuel, labor and capacity each individual delivery consumes — and that is precisely where route optimization, capacity planning and demand forecasting intervene.

It is a credible frame, with one limitation the vendors tend not to volunteer: the survey counts adoption, not results. A company implementing an ETA-prediction tool and a company measurably cutting cost-per-drop both register identically in a 66% adoption figure. Whether this year's surge in deployment translates into genuine margin recovery will only become visible in operators' peak-season performance data — and in whether the gap between last-mile costs and revenues, which respondents say is already negative, begins to close.

What happens next

The near-term test is already underway. Peak season will show whether the preparations of recent months — the AI implementations, the driver vetting programs, the routing overhauls — were equal to a final mile that is costlier, more litigious and more demand-intensive than the one that faced operators last year.

If the FarEye numbers hold as a leading indicator, AI adoption in the last mile should keep climbing into 2027, with compliance-driven carrier vetting costs rising in parallel — leaving operators hoping that the savings from smarter routing and forecasting arrive faster than the cost increases they are meant to offset.