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.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”