The pandemic supercharged last-mile delivery as stuck-at-home consumers ordered everything from treadmills to computers and furniture for their homes. Now with COVID subsiding, pocketbooks thinner, and inflation rising, is last-mile growth hitting a wall?
Gary Frantz is a contributing editor for 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.
During the pandemic, fitness equipment for the home, computers and monitors, and furniture for newly established home offices filled the trucks of last-mile delivery providers. That, along with consumers relegated to their homes and undertaking all types of home improvement projects, drove last-mile volume growth at a 40% annual pace as over-the-threshold, “big and bulky” deliveries surged.
Fast forward a year. Consumers are still ordering goods for home delivery and installation, but often after visiting a brick-and-mortar store versus going online and filling a digital shopping cart. And while by some accounts, orders of fitness equipment and electronics have “flattened,” consumers have tossed the market a change-up, ordering goods for delivery to hybrid offices, being more selective about what they’re buying for the home, and scaling back on discretionary purchases as inflation raises the costs of virtually everything.
“What [the last-mile market] did in 2020 and ’21 was not reality,” nor was it sustainable, notes Satish Jindel, chief executive officer of shipping analytics firm ShipMatrix. “With [government stimulus payments,] everyone believed there was a Santa. But Santa is real only for children,” he quipped.
Instead, consumers are shifting much, though not all, of their spending back to services, Jindel says, adding: “People want and need human interaction, which is why you find people [doing more] eating out, spending more on travel and entertainment, and going back to the gym” while dialing back on buying big and bulky goods for the home or office.
Residential on a roll
Estes Express Lines, as a less-than-truckload (LTL) carrier, has performed residential deliveries for years, notes Billy Hupp, the company’s executive vice president and chief operating officer. But it’s only been in the last five years that the company has formalized last-mile home delivery as a discrete service, investing in specialized equipment, driver training, and a complementary agent network in locations where Estes doesn’t have a significant presence.
“[During the pandemic,] we delivered more 65-inch TVs than the world could ever use,” joked Hupp. Estes does not itself do the “white glove” in-home delivery and installation service, instead deploying a network of agent-partners to provide those deliveries with two-person teams. The majority of Estes’ home deliveries are “to the threshold” service. “We do help get it in the house or put something in a garage or the backyard, as an accommodation if the customer requests it,” he clarifies. A dedicated customer service team for residential is there to help as well, while Estes’ technology platform texts consumers with real-time updates on the “estimated time of arrival” (ETA).
Like other providers, the company has seen a shift in the types of products going to homes in the past year. Where there once was a preponderance of electronics, fitness equipment, and office furniture, now it’s goods like pavers for a driveway. Patio furniture and backyard play structures. Outdoor grills. Tools and materials for home improvement projects, where the customer orders online and Estes delivers it to the home on behalf of the retailer.
Nationwide, Estes operates from 220 terminals, with a fleet of some 7,500 tractors and 30,000 trailers. As the residential business has grown, so has Estes’ investment in it. Today, Estes deploys some 2,000 lift-gate–equipped units, a combination of straight trucks and 28-foot pup trailers, and 1,000 electric pallet jacks. The carrier has also upped its game on mobile technologies and customer-facing apps that improve visibility and communication. An added benefit of these investments has been driver satisfaction, says Hupp. “Adding lift gates and providing pallet jacks is a real advantage that improves driver’s daily work experience and makes for a better customer experience as well,” he says.
He cites the company’s LTL network, which provides often-needed flexibility and capacity, as another advantage. “When a residential delivery agent gets swamped, we can swing some of that freight into LTL and vice versa,” he notes. And while the overall last-mile home delivery market has flattened somewhat, it remains an in-demand service that will continue to grow. “We’re here to stay,” he says. “We’ve equipped ourselves to be multifaceted in our approach so we can be more flexible, and that’s a competitive advantage.”
The toughest job in trucking
The last-mile, big-and-bulky over-the-threshold business is one of the hardest jobs in trucking from a driver’s standpoint, observes Jeff Abeson, vice president of business development for Ryder. “You’re driving a very large vehicle in residential areas. You’re carrying heavy stuff into people’s homes, goods they’ve spent a lot of money on,” he explains. “And then you’re assembling it and sometimes taking away the old goods that are being replaced.”
Ryder operates a national network of 82 locations that serve as hubs for last-mile home deliveries. And while the market has shown signs of softening, “we are still seeing an incredible amount of volume” of last-mile business, Abeson notes. Companies are still dealing with back orders of goods, balancing and repositioning inventories, and managing through the residual supply chain effects of earlier port delays and rail congestion.
Where future demand is headed is tough to predict. Yet the fact of the matter is that the business of hard goods delivered into the home, in Abeson’s view, has not really slowed. “It’s hard to get your head wrapped around that [post pandemic] … since while many are back in an office, many more people are still working from home.” And because they’re spending so much time in the same space, that’s where they’re making their investments.
The majority of Ryder’s last-mile business is over-the-threshold, in-home deliveries, often with installation, Abeson notes. The infrastructure supporting that service is challenging. It requires systems, physical warehouse capacity, labor resources, and specialized equipment. Variability is constant in a business where “your forecast really is only as good as your customer’s forecast,” he says, adding that Ryder works diligently with its customers to flex capacity to match demand.
The biggest focus for Ryder, Abeson says, is continued material investments in technology evolving around the end consumer. “It could be as simple as scheduling a delivery and putting an appointment automatically on [the customer’s] calendar, then sending them text updates. It gives the customer confidence we’ve scheduled them and are following up,” he says. Such technologies “reduce inefficiency because we’re more predictable and we’re delivering the first time more often.” Speed to the customer also is high on the list. To enable quick deliveries, Ryder’s customers are forward-stocking fast-moving SKUs (stock-keeping units) at Ryder facilities. “We are all being conditioned in that way” to expect fast deliveries, he says.
One continuing wrench in the works, a holdover from the pandemic: supply chain delays creating partial orders. “You bought a table and six chairs, but only the table is in the warehouse,” Abeson explains. “You’re not interested in just getting the table. You want the whole order at one time. So, from an operator’s perspective, we have to account for how that affects warehouse space and labor, driver labor, and scheduling. Many of our customers’ supply chains continue to be challenged in this way, but we just have to manage it and support our customers.”
Flat volumes, changing mix
Fernando Rabel, interim president of last mile for RXO—a digital truck brokerage that was spun off from XPO as an independent company this fall—sees two immediate effects on last-mile logistics from the post-pandemic environment. “First, the increase in operating costs has been significant and impactful. Second, high inflation has impacted the overall market for furniture and appliances.”
And while RXO’s delivery volumes remain relatively flat compared with a two-year average, Rabel believes the company is well-positioned to capture even more share of the $16 billion last-mile logistics market.
“We’re seeing the typical cyclicality one would expect, with appliances more resilient than bedding, furniture, and fitness equipment,” he says. “By 2025, heavy and bulky penetration is expected to increase to nearly 30% of all e-commerce. We expect in the long term that this tailwind will drive continued demand for last-mile services.”
Rabel notes that RXO’s last-mile service covers 159 markets, with its network putting it within 125 miles of 90% of the U.S. population. The company handled more than 11 million deliveries last year.
No more white boards and spreadsheets
Roadie, a company that utilizes a crowdsourced network of drivers to make same-day deliveries and which is now part of UPS, is also seeing shifts in its business. According to its chief operating officer, Dennis Moon, shipper supply chains continue to evolve in an effort to get product closer to the customer. “That’s everyone’s holy grail,” he says.
Roadie has an advantage in that type of business environment, according to Moon, because of “the scalability of our platform and its flexibility to move up and down with a customer’s volumes.”
Lately, Moon has also seen a shift in the types of products Roadie drivers are delivering. “We are seeing a lot of lift in the medical area—everything from crutches to wheelchairs. Prescription and medical deliveries are one of our largest growth areas,” he says.
The company is also doing more shipment consolidation to gain density. Before, one of Roadie’s “on the way” drivers might make one pickup and deliver it. Now through sophisticated technology, they are doing more batching and consolidating, which is good for drivers, who can make more money, and good for shippers, who benefit from a better rate.
Technology advances and innovation also are driving more responsive operations and customer service for last-mile carriers. End-user consumers want an Uber-like experience that gives them flexible delivery options, up-to-the-minute visibility into shipment status, and an immediate feedback loop post-delivery. New cloud-based, low-cost systems are rising to the challenge, bringing sophisticated tools that once were the domain of the large players to smaller operators.
Krishna Vattipalli is chief executive of software developer Fleet Enable, which provides a platform and workstreams that help last-mile fleets wean themselves off manual workflows and drive better processes. He says that many small to mid-sized operators are using at least four different systems—including spreadsheets and even white boards—to plan and run their business. Fleet Enable provides a single-source solution for last-mile delivery fleets, optimizing 16 workflows in the lifecycle of an order, including appointment scheduling, route and capacity optimization, visibility tracking and alerts, asset forecasting, payroll, and billing and invoicing.
Even with companies bringing workers back to the office, there are still many working from home or on a hybrid schedule. That’s extending demand for big-and-bulky last-mile service into business-to-business (B2B) markets, complementing business-to-consumer (B2C) deliveries. That, along with a continued demand for speed and convenience, is one reason last-mile delivery will continue to grow, Vattipalli believes. “Technology these days is no longer a differentiator; it is a basic requirement,” he says. “Carriers need to be smart about their investments in technology. That will help them achieve better margins and give them an edge to negotiate better with shippers.”
Editor’s Note: This article originally appeared in the December 2022 issue of DC Velocity.
A hefty 42% of procurement leaders say the biggest threat to their future success is supply disruptions—such as natural disasters and transportation issues—a Gartner survey shows.
The survey, conducted from June through July 2024 among 258 sourcing and procurement leaders, was designed to help chief procurement officers (CPOs) understand and prioritize the most significant risks that could impede procurement operations, and what actions can be taken to manage them effectively.
"CPOs’ concerns about supply disruptions reflect the often unpredictable nature and potentially existential impacts of these events," Andrea Greenwald, Senior Director Analyst in Gartner’s Supply Chain practice, said in a release. "They are coming to understand that the reactive measures they have employed to manage risks over the past four years will not be sufficient for the next four.”
Following supply disruptions at #1, the survey showed that the second biggest threat to procurement is seen as macroeconomic factors, which include economic downturns, inflation, and other economic factors. While more predictable, those variables can substantially influence long-term procurement strategies.
And the third-most serious perceived risk was geopolitical issues, including tariffs and regulatory changes, and compliance issues, including regulatory and contractual risks.
In addition, the survey also revealed that “leading organizations” are 2.2 times more likely to view energy availability and cost as a top risk; indicating a focus on future emerging risks. As electrification drives demand for power, brittle grid infrastructure raises concern about whether the energy supply can keep pace. Therefore, leading organizations recognize that access to energy will become a significant future risk.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
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Peter Weill of MIT tells the audience at the IFS Unleashed user conference about the benefits of being a "real-time business."
These "real-time businesses," according to Weill, use trusted, real-time data to enable people and systems to make real-time decisions. By adopting that strategy, these companies gain three major capabilities:
Increased business agility without needing a change management program to implement it;
Seamless digital customer journeys via self-service, automated, or assisted multiproduct, multichannel experiences; and
Thoughtful employee experiences enabled by technology empowered teams.
The benefits of this real-time focus are significant, according to Weill. In a study with Insight Partners, he found that those companies that were best-in-class at implementing automated processes and real-time decision-making had more than 50% higher revenue growth and net margins than their peers.
Nor is adopting a real-time data stance restricted to just digital or tech-native businesses. Rather, Weill said that it can produce successful results for any companies that can apply the approach better than their immediate competitors.
Weill's remarks came today during a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI" at at the “IFS Unleashed” show in Orlando, Florida.
For example, millions of residents and workers in the Tampa region have now left their homes and jobs, heeding increasingly dire evacuation warnings from state officials. They’re fleeing the estimated 10 to 20 feet of storm surge that is forecast to swamp the area, due to Hurricane Milton’s status as the strongest hurricane in the Gulf since Rita in 2005, the fifth-strongest Atlantic hurricane based on pressure, and the sixth-strongest Atlantic hurricane based on its peak winds, according to market data provider Industrial Info Resources.
Between that mass migration and the storm’s effect on buildings and infrastructure, supply chain impacts could hit the energy logistics and agriculture sectors particularly hard, according to a report from Everstream Analytics.
The Tampa Bay metro area is the most vulnerable area, with the potential for storm surge to halt port operations, roads, rails, air travel, and business operations – possibly for an extended period of time. In contrast to those “severe to potentially catastrophic” effects, key supply chain hubs outside of the core zone of impact—including the Miami metro area along with Jacksonville, FL and Savannah, GA—could also be impacted but to a more moderate level, such as slowdowns in port operations and air cargo, Everstream Analytics’ Chief Meteorologist Jon Davis said in a report.
Although it was recently downgraded from a Category 5 to Category 4 storm, Milton is anticipated to have major disruptions for transportation, in large part because it will strike an “already fragile supply chain environment” that is still reeling from the fury of Hurricane Helene less than two weeks ago and the ILA port strike that ended just five days ago and crippled ports along the East and Gulf Coasts, a report from Project44 said.
The storm will also affect supply chain operations at sea, since approximately 74 container vessels are located near the storm and may experience delays as they await safe entry into major ports. Vessels already at the ports may face delays departing as they wait for storm conditions to clear, Project44 said.
On land, Florida will likely also face impacts in the Last Mile delivery industry as roads become difficult to navigate and workers evacuate for safety.
Likewise, freight rail networks are also shifting engines, cars, and shipments out of the path of the storm as the industry continues “adapting to a world shaped by climate change,” the Association of American Railroads (AAR) said. Before floods arrive, railroads may relocate locomotives, elevate track infrastructure, and remove sensitive electronic equipment such as sensors, signals and switches. However, forceful water can move a bridge from its support beams or destabilize it by unearthing the supporting soil, so in certain conditions, railroads may park rail cars full of heavy materials — like rocks and ballast — on a bridge before a flood to weigh it down, AAR said.
Imports at the nation’s major container ports should continue at elevated levels this month despite the strike, the groups said in their Global Port Tracker report.
To be sure, the strike wasn’t without impacts. NRF found that retailers who brought in cargo early or shifted delivery to the West Coast face added warehousing and transportation costs. But the overall effect of the three-day work stoppage on national economic trends will be fairly muted.
“It was a huge relief for retailers, their customers and the nation’s economy that the strike was short lived,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a release. “It will take the affected ports a couple of weeks to recover, but we can rest assured that all ports across the country will be working hard to meet demand, and no impact on the holiday shopping season is expected.”
Looking at next steps, NRF said the focus now is on bringing the International Longshoremen’s Association (ILA)—the union representing some 45,000 workers—and the United States Maritime Alliance Ltd. (USMX) back to the bargaining table. “The priority now is for both parties to negotiate in good faith and reach a long-term contract before the short-term extension ends in mid-January. We don’t want to face a disruption like this all over again,” Gold said.
By the numbers, the report forecasts that U.S. ports covered by Global Port Tracker will handle 2.12 million twenty-foot equivalent units (TEU) for October, which would be an increase of 3.1% year over year. That is slightly higher than the 2.08 million TEU forecast for October a month ago, and the strike did not appear to affect national totals.
In comparison, the August number was 2.34 million TEU, up 19.3% year over year. The September forecast 2.29 million TEU, up 12.9% year over year, November is forecast at 1.91 million TEU, up 0.9% year over year, and December at 1.88 million TEU, up 0.2%. For the year, that would bring 2024 to 24.9 million TEU, up 12.1% from 2023. The import numbers come as NRF is forecasting that 2024 retail sales – excluding automobile dealers, gasoline stations and restaurants to focus on core retail – will grow between 2.5% and 3.5% over 2023.
Global Port Tracker, which is produced for NRF by Hackett Associates, provides historical data and forecasts for the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.