Last-mile providers navigate “the mother of all peaks”
Last-mile logistics had been experiencing a growth spurt leading into 2020. Then the pandemic—and the e-commerce explosion—put it on steroids. How will that change the dynamics of—and the demand for—last-mile service?
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
Last-mile deliveries, whether small packages; large, oversized “non-conveyable” goods; or big and bulky items like furniture and exercise equipment, have always been the most challenging and often most complex segment of the supply chain cycle. Already one of the strongest growth areas for freight, the last-mile market has exploded in the past eight months, the result of a pandemic-driven surge in residence-delivered goods of all types as consumers found themselves sequestered at home, with malls shuttered, offices dark, and shops closed down for the duration.
“As we’ve all seen, the pandemic has supercharged demand for more goods with the growth in e-commerce,” noted Erik Caldwell, president of last-mile logistics for Greenwich, Connecticut-based XPO Logistics, the largest provider of last-mile logistics service for heavy goods in North America, managing some 10 million deliveries and installations annually.
And with more people at home, the demand for final-mile delivery and installation has gone through the roof. “This year, we’ve seen the big and heavy delivery market grow to $13 billion, up from $8 billion in 2013,” with the market expected to reach some $16 billion to $18 billion by the end of 2023, Caldwell says. By then, online purchases are likely to make up some 40% of heavy-goods home delivery.
XPO’s last-mile network consists of 85 hubs in North America that are within 125 miles of 90% of the population, enabling daily delivery to 80% of ZIP codes, the company says. It dispatches more than 3,500 last-mile delivery trucks per day.
PARCEL “BLEED OVER” PUTS PRESSURE ON CAPACITY
The crush of e-commerce–ordered goods, and the resulting capacity constraints faced by major parcel carriers, is creating a “bleed over” of some shipments into traditional last-mile networks, notes John Hill, president and chief commercial officer of Glen Mills, Pennsylvania-based Pilot Freight Services, which among other offerings, provides last-mile delivery. With parcel carriers imposing surcharges and volume limits, particularly with larger, non-conveyable shipments, e-commerce shippers are looking for other options.
“This phenomenon is absolutely happening,” Hill says. “Large e-retailers [faced with volume limitations from parcel carriers] are going to other providers and saying ‘I know you are my heavyweight provider, but instead of 150 pounds and up, can you take my 100 or 75 [pound shipments],’” he notes. “That’s not easy to do because we have to protect our current customers and not inundate ourselves with [freight] that might come and go.”
Early in the pandemic, Hill and his team were preparing to retrench, scale down the business, and take care of employees. Yet he was surprised by the market’s quick turnaround. While traditional B2B (business-to-business) volumes slid in April, by May, an unexpected and sustained surge in e-commerce volume emerged—driving up demand for B2C (business-to-consumer) home deliveries. “We didn’t expect that … now we are moving more B2C traffic,” which took up the slack but came with some additional soft costs typical of residential deliveries.
Pilot has 65 locations in North America that offer the full range of what Hill calls “full mile” delivery services. Another 39 sites are a combination of some dedicated last-mile delivery operations and some multiclient warehouses that provide forward-stocking and staging. Pilot also runs several “back of store” operations for big-box retailers and e-tailers for fast delivery within a 100-mile radius.
A CONTINUOUS PEAK, THEN A FLOOD OF RETURNS
Virtually all last-mile providers agree that the market has been in a continuous “peak” since late March—thanks to the explosion in e-commerce as consumers began ordering all manner of staples online. The traditional holiday season has added even more pressure.
“And just like we’re seeing the mother of all peaks today, we’re expecting the “mother of all returns” season come January,” comments XPO’s Caldwell. He believes there is a natural connection between the rise of e-commerce and the business of returns. According to Caldwell, XPO’s network has centers dedicated to returns, which typically manage the pickup of the item and the return to the original manufacturer. He notes that about 10% of XPO’s last-mile deliveries involve managing some type of return—“either the homeowner decides they don’t want the new product, or we remove an old item when we install the new one.”
Scott Leveridge, president, U.S., for North American final-mile provider TForce Logistics, categorizes the last-mile market into three segments: small package, heavier non-conveyable, and big and bulky. He echoes the experience of other providers that the pandemic has brought about a “huge explosion” in small-package volume as consumers ramped up their online ordering.
It’s also driving increasingly severe capacity constraints among large national parcel carriers, who, Leveridge says, “have gotten really picky about what they will and will not handle,” especially with non-conveyable goods. As non-conveyables are rejected, that’s created secondary opportunities for last-mile carriers to take on more of these heavier, larger, and sometimes odd-shaped shipments, which often exceed 150 pounds.
TForce Logistics operates in over 50 U.S. markets, maintains some 2.5 million square feet of warehouse space, and deploys 6,000 drivers. The company also has 23 operating sites in Canada with 300,000 square feet of warehousing and cross-dock space, and 2,000 drivers. “We call it an urban cross-dock,” Leveridge says of TForce’s facilities. “Ninety-eight percent of the inventory that goes through our building came in tonight and it’s gone in the morning. We are the final-mile launch point to get the product to that end-consumer quickly.”
A CHANGE IN MIX
Like other last-mile providers, TForce has seen its mix change. Mostly gone is retail replenishment. Replacing that and then some has been e-commerce–driven consumer home deliveries, across all three segments. “There is no question e-commerce has grown and continues to do so,” Leveridge says. “Quite frankly, we have cut off some customers for peak, and we are scheduling new starts for Q1.”
An unexpected source of new last-mile deliveries for TForce: meal kits. “People are not eating out as much, and that’s really accelerated the meal-kit industry,” Leveridge says. Companies like Hello Fresh, Plated, and Blue Apron are thriving. Some restaurants have pivoted from inside dining to fully prepared and delivered meal kits. Consumers watching celebrity chefs on YouTube are ordering online and having kits delivered with all the ingredients for that chef’s recipes of the week.
The last significant shift Leveridge has seen has been a rise in store-to-door deliveries, particularly in the home improvement space. “More and more e-commerce orders are being fulfilled at local stores, where we send a truck and do the last-mile delivery to the customer,” he notes. For one big-box home improvement brand, TForce supports final-mile expedited delivery for some 500 stores in 40 markets.
THE GYM COMES HOME
Like other segments of the last-mile logistics market, the “big and bulky” piece has been on a roller coaster ride this year.
“This business has always been tough,” Jeff Abeson, vice president of Miami, Florida-based Ryder Last Mile, says of home delivery of large-format goods. “Going across the threshold into some of the most private spaces of people’s homes, such as delivering [and assembling] a crib into a bedroom for a baby yet to be born …. there’s a lot of emotions that go into it,” he observes. “These are [often] fairly large financial purchases. The level of attention and care, being respectful of the homeowner, are really relevant and always will be.”
The pandemic initially slowed the volume of home delivery and installation work, as both consumers and delivery companies struggled to cope with the realities of Covid-19. “Safety [has been] the utmost concern for our employees and also for the end-consumer,” emphasized Abeson. He says Ryder is in compliance with CDC (Centers for Disease Control and Prevention) guidelines and has instituted multiple safety practices, including contactless delivery, social distancing, and extensive use of protective gear and disinfectants.
The biggest lift he’s seen has been in home fitness equipment. “With peoples’ aversion to going to public gyms, they have brought the gyms home to themselves,” he says. “Nobody expected this demand in home fitness products,” which typically are large and bulky and require a two-person crew for delivery.
Nevertheless, Covid has presented some unique challenges. “[Sometimes] when we go into homes, our drivers actually don’t feel comfortable because consumers might not be as diligent” about wearing masks, social distancing, and other safety practices. “It [can be] a somewhat challenging environment.”
Ryder Last Mile’s network consists of more than 120 locations throughout the U.S. that the company says can reach 99% of the U.S. population in two days or less. The company utilizes a network of trusted carriers for deliveries of big and bulky goods, and offers four tiers of service, including white glove.
A NEED FOR NATIONWIDE SOLUTIONS
Craig Stoffel heads up Werner Final Mile as vice president, global logistics for Omaha, Nebraska-based Werner Enterprises, one of the nation’s largest transportation and logistics companies. With some 175 last-mile service locations in the U.S. and 40 in Canada, the company offers traditional curbside and over-the-threshold final-mile delivery as well as “room of choice” and white glove service with assembly. “Once product arrives at the local station, we get it out [to the customer] the same day or next day,” Stoffel says.
Werner’s final-mile model is an integrated solution that leverages Werner technology with third-party professionals and assets in the household-goods moving and storage business. “These are crews experienced in dealing with the intricacies of in-home deliveries and all the nuances that go with that,” Stoffel notes. He adds that Werner Final Mile offers such advantages as a national network footprint that covers major metro populations and secondary communities; fast response and shorter travel times with experienced crews already in and familiar with local neighborhoods; and leading-edge delivery and visibility technology.
Stoffel has seen growth come from large-format brand-name retailers, e-tailers, and consumer goods brands—who are already familiar with Werner as a transportation enterprise—as well as many companies new to nationwide consumer-direct selling who have quickly upped their e-commerce game to survive the pandemic.
“They may have previously done local BOPIS [buy online/pick up in store], but with the pandemic, store traffic has disappeared,” he notes. “Now they are seeking an integrated, nationwide delivery solution that will get goods to consumers at home wherever that may be, from wherever the nearest fulfillment site is, which could be a former brick-and-mortar location. As long as they have a shopping cart on their website and a button for delivery, we can spin up an efficient and reliable final-mile solution for them,” Stoffel says.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.