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.
Gartner, Inc.