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.
Sometimes, all you need is the right partner to solve your logistics problems.
In 2021, global paint supplier Sherwin Williams faced driver and hazardous material (hazmat) capacity constraints: There simply weren’t enough hazmat drivers available in its fleet to maintain the company’s 90% fleet utilization rate expectations for key partner store deliveries while also meeting growing demand for service. Those challenges threatened to become even more acute in the future, as a competing paint supply company began to scale back its operations in the Pacific Northwest, leaving Sherwin Williams with an opportunity to fill the gap.
The paint supplier needed a logistics partner that could help it overcome the shortage of hazmat drivers while also helping to manage its West Coast trailer pools, out-of-region runs, and ad-hoc freight. It also needed a solution that would meet quarterly and annual fleet budgets.
SCALING UP
Enter ITS Logistics, a third-party logistics service provider (3PL) that offers supply chain solutions for drayage, network transportation, distribution, and fulfillment across North America. ITS proposed a combined owned-asset and asset-light approach that would provide Sherwin Williams with the equivalent of 21 additional drivers. The 3PL would leverage its carrier network to overcome the shortage of hazmat capacity while also certifying its own drivers via a three-month process. Further, ITS would help manage Sherwin Williams’ trailer pools and coordinate carriers, providing the paint company with a single point of contact for transportation.
The project would address cost concerns as well: “ITS Logistics aligned its solution with Sherwin Williams’ budgetary cadence and offered a quarterly business review to align on price structure, adding a level of transparency and trust to the relationship,” according to a case study the partners released earlier this year.
The companies soon sealed the deal and launched the program.
Not long after that, Sherwin Williams began to feel the effects of the anticipated challenges in the Pacific Northwest—but the company was prepared. When the competing paint supply company shuttered its operations, causing demand for Sherwin Williams’ products to spike, ITS injected a blend of owned trailers and carrier power to alleviate equipment challenges, cover all locations and regions, and help the paint supplier scale to meet volume.
CLOSING THE GAPS
The project has helped Sherwin Williams rapidly scale its capacity, meet fleet utilization requirements, manage trailer pools, coordinate carriers, and flex to meet spikes in regional demand.
And the results speak for themselves.
“ITS integrating themselves into our fleet was instrumental in helping increase our outbound volume by 18.4 million pounds [year over year] in the last seven months of 2023,” said Ted Taxon, regional transportation manager at Sherwin Williams, in the case study. “This equated to approximately 460 truckloads of extra freight, a large portion of which ITS [handled] on an ad-hoc basis with no operational constraints or quality issues.”
The partnership also helped Sherwin Williams maintain a 90% fleet utilization rate with big box retailers—an increase from less than 70% prior to the partnership’s launch.
Robots are revolutionizing factories, warehouses, and distribution centers (DCs) around the world, thanks largely to heavy investments in the technology between 2019 and 2021. And although investment has slowed since then, the long-term outlook calls for steady growth over the next four years. According to data from research and consulting firm Interact Analysis, revenues from shipments of industrial robots are forecast to grow nearly 4% per year, on average, between 2024 and 2028 (see Exhibit 1).
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
Material handling is among the top applications for all those robots, accounting for one-third of overall robot market revenues in 2023, according to the research. That puts warehouses and DCs on the cutting edge of robotic innovation, with projects that are helping companies reduce costs, optimize labor, and improve productivity throughout their facilities. Here’s a look at two recent projects that demonstrate the kinds of gains companies have achieved by investing in robotic equipment.
FASTER, MORE ACCURATE CYCLE COUNTS
When leaders at MSI Surfaces wanted to get a better handle on their vast inventory of flooring, countertops, tile, and hardscape materials, they turned to warehouse inventory drone provider Corvus Robotics. The seven-year-old company offers a warehouse drone system, called Corvus One, that can be installed and deployed quickly—in what MSI leaders describe as a “plug and play” process. Corvus Robotics’ drones are fully autonomous—they require no external infrastructure, such as beacons or stickers for positioning and navigation, and no human operators. Essentially, all you need is the drone and a landing pad, and you’re in business.
The drones use computer vision and generative AI (artificial intelligence) to “understand” their environment, flying autonomously in both very narrow aisles—passageways as narrow as 50 inches—and in very wide aisles. The Corvus One system relies on obstacle detection to operate safely in warehouses and uses barcode scanning technology to count inventory; the advanced system can read any barcode symbol in any orientation placed anywhere on the front of a carton or pallet.
The system was the perfect answer to the inventory challenges MSI was facing. Its annual physical inventory counts required two to four dedicated warehouse associates, who would manually scan inventory to determine the amount of stock on hand. The process was both time-consuming and error-prone, and often led to inaccuracies. And it created a chain reaction of issues and problems. Fulfillment speed is one example: Lost or misplaced inventory would delay customer deliveries, resulting in dissatisfaction, returns, and unmet expectations. Productivity was also an issue: Workers were often pulled from fulfillment tasks to locate material, slowing overall operations.
MSI Surfaces began using the Corvus One system in 2021, deploying a small number of drones for daily inventory counts at its 300,000-square-foot distribution center (DC) in Orange, California. It quickly scaled up, adding more drones in Orange and expanding the system to three other DCs: in Houston; Savannah, Georgia; and Edison, New Jersey. The company plans to add more drones to the existing sites and expand the system to some of its smaller DCs as well, according to Corvus Robotics spokesperson Andrew Burer.
Those expansion plans are based on solid results: MSI’s inventory accuracy was about 80% prior to the drone implementation, but it quickly jumped to the high 90s—ultimately reaching 99%—after the company initiated the daily drone counts, according to Burer.
“We actually had an incident early on where one of the forklift drivers ran into the landing pad, rendering it inoperable for about a week while the Corvus team fixed it,” Burer recalls. “When we restarted the system, we noticed MSI’s inventory accuracy had dropped down to the 80s. But after flights resumed, accuracy quickly improved back to near perfect.” He adds that such collisions are rare as Corvus mounts landing pads high off the floor to avoid impacts but that accidents can still happen.
Overall, the system has helped speed warehouse operations in two key ways: First, the accuracy improvement means that associates no longer waste time searching for missing material in the warehouse. And second, the associates who used to conduct the physical inventory counts have been reallocated to picking and replenishment—creating a more efficient, and optimized, workforce.
A SAFER, MORE EFFICIENT WAREHOUSE
Robot maker Boston Dynamics is well-known for its Stretch and Spot industrial robots, both of which are at work in warehouses and DCs around the world. Earlier this year, Stretch made its debut in Europe, teaming up with Spot at a fulfillment center run by German retail company Otto Group. The deployment marks the first time Stretch and Spot are being used together—in a partnership designed to improve Otto Group’s warehousing operations by increasing efficiency and making warehouse work safer and more attractive to workers.
The partnership is part of a two-year project in which Boston Dynamics will deploy dozens of its warehouse robots in Otto Group’s European DCs. The first location is a fulfillment site operated by Hermes, the company’s parcel delivery subsidiary, in Haldensleben, Germany—a facility that handles as many as 40,000 cartons of goods on peak days.
At the site, Stretch—which is a mobile case-handling robot—autonomously unloads ocean containers and trailers, using its advanced perception system to pick and place boxes onto a telescoping conveyor inside the container or trailer. Spot—a quadruped robot—helps with predictive maintenance by collecting thermal data and performing acoustic and visual detection tasks throughout the facility to reduce unplanned downtime and energy costs. One of Spot’s jobs is to detect air leaks in the facility’s warehouse automation systems; future duties may include conveyor vibration detection, according to leaders at Otto Group.
Both Stretch and Spot will help the Haldensleben facility run more efficiently, especially during fall peak season when volume increases and work intensifies. The addition of Stretch addresses safety and comfort issues as well: Trailer unloading—a process that entails repeatedly lifting and moving heavy boxes inside a trailer, which can be dark, dirty, cold, and/or hot, depending on the weather—tends to be unappealing to workers. Along with reducing the amount of labor required, automating these tasks will have the added benefit for European facilities of helping them comply with EU (European Union) regulations limiting the amount of time workers can spend in those conditions.
Essentially, the robots are making life easier on the warehouse floor and for the company at large.
“Stretch is going to have a ton of benefits for customers here in the EU,” Andrew Brueckner, of Boston Dynamics, said in a recent case study on the project.
The trucking industry faces a range of challenges these days, particularly when it comes to load planning—a resource-intensive task that often results in suboptimal decisions, unnecessary empty miles, late deliveries, and inefficient asset utilization. What’s more, delays in decision-making due to a lack of real-time insights can hinder operational efficiency, making cost management a constant struggle.
Truckload carrier Paper Transport Inc. (PTI) experienced this firsthand when the company sought to expand its over the-road (OTR), intermodal, and brokerage offerings to include dedicated fleet services for high-volume shippers—adding a layer of complexity to the business. The additional personnel required for such a move would be extremely costly, leading PTI to investigate technology solutions that could help close the gap.
Enter Freight Science and its intelligent decision-recommendation and automation platform.
PTI implemented Freight Science’s artificial intelligence (AI)-driven load planning optimization solution earlier this year, giving the carrier a high-tech advantage as it launched the new service.
“As PTI tried to diversify … we found that we needed a technological solution that would allow us to process [information] faster,” explains Jared Stedl, chief commercial officer for PTI, emphasizing the high volume of outbound shipments and unique freight characteristics of its targeted dedicated-fleet customers.
The Freight Science platform allowed PTI to apply its signature high-quality service to those needs, all while handling the daily challenges of managing drivers and navigating route disruptions.
STREAMLINING PROCESSES
Dedicated fleets face challenges that evolve from day to day and minute to minute, including truck breakdowns, drivers calling in sick, and rescheduled appointment times. PTI needed a tool that allowed for a real-time view of the fleet, ultimately enabling its team to adjust truck and driver allocation to meet those challenges.
The Freight Science solution filled the bill. The platform uses advanced analytics and algorithms to give carriers better visibility into operations while automating the decision-making process. By combining streaming data, a carrier’s transportation management system (TMS), machine learning, and decision science, the solution allows carriers to deploy their fleets more efficiently while accurately forecasting future needs, according to Freight Science.
In PTI’s case, Freight Science’s software integrates with the carrier’s TMS, real-time electronic logging device (ELD) data, and other external data, feeding an AI model that generates an optimized load plan for the planner.
“We’re an integrated data analytics company for trucking companies,” explains Matt Foster, Freight Science’s president and CEO. “We’re talking about AI.”
The benefits of the real-time data are difficult to overstate.
“We’ve been able to execute in the toughest of situations because we’ve got real, live data on how long each event is actually going to take and a system to aid and even automate the decision-making process,” says Chad Borley, PTI’s operations manager. “From what traffic patterns we are battling in the morning and evening with rush hour and things like that, to the impact of additional miles to a route, or even location-specific dwell times, it’s been a huge differentiator for us.”
REALIZING RESULTS
A case in point: the collapse of Baltimore’s Francis Scott Key Bridge in March. PTI was scheduled to go live with a new dedicated account in the area just days after the collapse, which would mean rerouting and the potential for longer transit times. Instead of recalculating based on assumptions or latent data, PTI was able to reroute freight based on real-time information and analytics to give the customer timely updates.
“With the bridge going out, that changed our ability to make as many turns a day as the customer would expect,” Stedl explains. “But one of the things Freight Science could do [was to] quickly [assess] how much of an impact that traffic would have [and] what the turns [would] be based on what’s happening on the ground.
“So we were able to go back to the customer and readjust expectations in a real way that made sense, using data. Now expectations can be reset¾we’re not asking for forgiveness when there’s no reason for it.”
The system’s advanced algorithms make load planning more cost-effective and scalable as well. The platform allows PTI to monitor trucks, trailers, and driver hours in real time, recommending additional loads with remaining driver hours that would otherwise be wasted.
And they’re doing it all with much less. Stedl says tasks that used to require five people and hours of work can now be accomplished by one person in mere minutes, improving productivity and profitability while reducing labor and operational costs.
Terms of the deal were not disclosed, but Aptean said the move will add new capabilities to its warehouse management and supply chain management offerings for manufacturers, wholesalers, distributors, retailers, and 3PLs. Aptean currently provides enterprise resource planning (ERP), transportation management systems (TMS), and product lifecycle management (PLM) platforms.
Founded in 1980 and headquartered in Durham, U.K., Indigo Software provides software designed for mid-market organizations, giving users real-time visibility and management from the initial receipt of stock all the way through to final dispatch of the finished product. That enables organizations to optimize an array of warehouse operations including receiving, storage, picking, packing, and shipping, the firm says.
Specific sectors served by Indigo Software include the food and beverage, fashion and apparel, fast moving consumer goods, automotive, manufacturing, 3PL, chemicals, and wholesale / distribution verticals.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”