One of the surprising developments from the pandemic was how quickly consumers took to online shopping for all manner of goods and services. Sheltering and working at home, unable to go to their favorite store to touch and feel the merchandise, their reluctance to buy online evaporated. That trend was particularly notable among the baby boomer generation. Once they became comfortable with the experience, the idea of having that order delivered to the home in the next day or two became not just acceptable but expected—for just about anything.
The result was an explosion in last-mile deliveries to the home. And not only of small parcels and packages. It also fueled a surge in the so-called large-format “big and bulky” items that required not just basic dropoff, but also “over-the-threshold white-glove” delivery services in the consumer’s home that included assembly and installation—for items like furniture; appliances and mattresses; desks, chairs, and computers for newly organized home offices; and exercise equipment.
It’s a segment of the transportation industry that some believe has the most compelling prospects for growth. “The market will continue to have a need for big and bulky deliveries; it will be a growth area,” notes Satish Jindel, president of transportation data analytics firm ShipMatrix, “particularly as consumers are more and more comfortable ordering online and the conversion [to e-commerce from brick-and-mortar retail] continues to take place.”
One industry estimate of the heavy-goods delivery market calls it a $13 billion business currently, with 33% of that revenue from orders placed online. Several years down the road, researchers project that number will grow to $16 billion, with 38% of that revenue from online sales.
SPEED BUMPS AHEAD
The surge in demand has retailers, e-tailers, and their last-mile providers scrambling across many fronts. As the 2021 peak season begins to hit its December stride, challenges with capacity, product availability, and delays due to supply chain bottlenecks and port congestion all are conspiring to make this holiday season one where consumers are more likely to see coal in their stockings than presents under the tree.
“The market for capacity is definitely tight, and we’ve experienced increased carrier costs like the rest of the industry,” notes Erik Caldwell, president of last mile for transport and logistics giant XPO. “With supply chains strained everywhere, we are working more closely with our customers than ever before. We’re forecasting together, planning together, and working with them to be as open and transparent on timing for them and the end-consumer.” XPO operates North America’s largest network for big and bulky last-mile deliveries. It has 85 locations, some 1,800 carriers, and access to about 4,400 trucks. For the 12 months ending Sept. 30, XPO’s last-mile operation made over 11 million deliveries for customers such as Ikea and Peloton.
Likewise, Jeff Abeson, vice president of Ryder Last Mile, notes that his company is “not immune to what is going on” in the industry. “Most certainly, the sheer amount of volume is creating some challenges,” he says. A shortage of delivery contractors also is requiring more creativity in recruiting and retention. “It is a competitive market, and we have to be very attractive to get them to come in and support our business,” he notes.
Nevertheless, Abeson believes that the large-format home-delivery market continues to present opportunities and will only continue to grow, given how consumers have embraced online buying and won’t be going back. With more than 100 locations, the Ryder Last Mile network can cover 95% of the U.S., including Puerto Rico and Hawaii, within a two-day time frame.
Abeson believes players who have the network resources, expertise, and technology to ensure consistent, efficient deliveries and a superior customer experience will thrive. “The interesting part, and maybe a touch ironic, [is that] making deliveries that cross the threshold into the home has actually become a little easier [during the pandemic],” he says. That’s largely a result of the Covid-driven shift to remote work, he explains, noting that because consumers are working from home more often, “they are more available to take deliveries.” As a result, “our scheduling has actually become more efficient,” he says.
A recurring challenge in today’s stressed supply chains: getting all the pieces of an order together for final delivery, Abeson notes. A dining room table comes into the warehouse on Tuesday. Two chairs arrive on Thursday. The other four chairs don’t arrive until Monday. “So, we have [a partial order] sitting in the warehouse that we can’t deliver, and we don’t want to [make a delivery] twice,” which requires extra allocation of space and labor—and detracts from the overall consumer experience.
IT’S ALL IN THE RELATIONSHIPS
Like the other carrier executives interviewed for this story, Todd Soiefer, executive vice president of corporate development at Pilot Freight Services, acknowledges the difficulties presented by rising volumes, but he says he’s confident his company is up to the challenge. Soiefer leads Pilot’s last-mile service team. As the second-largest white-glove home delivery company in the market, Pilot Last Mile dispatches some 1,200 teams per day nationwide. Its network includes 65 company stations with Pilot-branded equipment and employees, as well as other Pilot-managed crews operating from some 100 customer locations.
Soiefer says Pilot has ample capacity to handle surging peak season shipping. “We can flex up our fleet with our carriers” and quickly deploy added capacity to meet peak demand, he notes.
“We have very long-standing relationships with our carrier base and are in all the major metro areas,” he adds. For last-mile trucking providers, the advantage to working with a large organization like Pilot, says Soiefer, is “access to multiple customers to keep the crews working.”
He also cites the importance of “treating people right,” referring to the truck drivers his company depends on. “We treat everyone like it is a family company,” he says. That includes not only offering competitive compensation, Soiefer notes, but also doing what he calls “the little things.” “When [the driver] shows up for a load, it’s ready. They don’t have to wait,” their route is organized, orders staged, and appointments for the day scheduled and confirmed. “We communicate extensively and try to make sure [negative] things don’t happen.”
And while he says it’s an “arm’s length relationship” with the company’s contract carriers, Pilot strives to build loyalty by helping small operators build their business. “We find some of these companies when they are small; they put a few trucks with us, they are able to grow to 15–20 trucks, and that generates loyalty leading to long-term relationships,” Soiefer says. He adds that Pilot doesn’t stand in the way of delivery providers working for other clients. “If they want to run five trucks with us and some with others, that’s fine,” he says.
TECHNOLOGY DRIVES MARKET CHANGE
At the same time it’s coping with record demand, the last-mile delivery market is undergoing a digital transformation—one driven largely by the emergence and adoption of powerful mobile-based technology for scheduling, routing, optimization, and engaging directly with the customer.
“In my 20 years of experience in last mile, [technology] is the part of the business that has changed the most,” says XPO’s Caldwell. “It amazes me how quiet the sites are without all the telephone scheduling and constant chatter on handheld radios for dispatch updates.”
He sees the industry quickly moving away from phone calls, with voicemail a relic of the past. “Everything is communicated to the end-customer via text or email,” from scheduling appointments to delivery updates, he notes. GPS tracking provides real-time information that “can alert customers when the delivery is 30 minutes away,” he adds. “Calls from customers about deliveries are down about 20% from the past year, which indicates our process is becoming more efficient,” Caldwell says.
And while large operators like XPO, Pilot, and Ryder offer comprehensive technology solutions used by many last-mile delivery contractors, those systems typically are built to support delivery orders within that company’s ecosystem. That’s left many final-mile white glove carriers, most of whom work with multiple shippers, retailers, and other distribution and logistics providers (and by extension, their various systems), standing on the sidelines of the digital revolution, says Krishna Vattipalli, founder and CEO of software developer Imaginnovate. What the market has lacked until now, he says, is a single system designed to help these carriers manage their business and seamlessly exchange information.
To fill that gap, Imaginnovate earlier this year launched Fleet Enable, a cloud-hosted mobile-app–focused suite of software tools that Vattipalli calls “the first software solution designed expressly for the operating needs of big and bulky white-glove delivery providers.” Offered on a subscription basis, Fleet Enable streamlines the full scope of a last-mile carrier’s planning, operating, and financial administration workflows and enables it to connect—through EDI (electronic data interchange) feeds, APIs (application programming interfaces), and other means—to the multiple third-party service providers and retailers for which it’s taking orders and making across-the-threshold deliveries. Vattipalli believes the addressable market is the more than 10,000 carriers who do last-mile white-glove deliveries, 80% of which are independent contractors with fleets of 50 to100 trucks and delivery teams.
Fleet Enable already has a supporter in Lorri Fairchild, vice president at Leigh-David Logistics, which specializes in complex white-glove deliveries. “This software will create efficiencies for our team in receiving, scheduling, load optimization, customer updates, accounting functions, and more. It is everything we had spent years looking for,” she says.
“ALL THE TRUCKS ARE FULL”
As peak season surges on, carriers who find themselves running short on capacity have limited options. “Right now, you have to think about how to maximize capacity use with what you have because you can’t add capacity. All the trucks are full,” says ShipMatrix’s Jindel. “There are no vans to lease. Trucks are not being produced.” And congestion among ports, rails, and truckers is throwing a wrench into everything, “It’s ruined [shippers’ and carriers’] ability to plan and forecast what they will get and when.”
Yet for those who are prepared, opportunity often presents itself out of seeming chaos. “We live for peak season. We spend all year planning for it,” says XPO’s Caldwell. “This is what we do—deliver Christmas.”
Gartner, Inc.
