Three Factors for Breaking into Last-Mile Deliveries

The coronavirus pandemic has accelerated the shift from physical stores to online shopping by four to six years, according to IBM’s U.S. Retail Index from August 2020, while brick-and-mortar store sales declined by more than 60% for the full year 2020. At UPS, business-to-consumer shipments increased 33.4% year-over-year in the third quarter, representing 61% of the parcel delivery company’s total volume.

If you’re a fleet with excess capacity, you might be considering how you can take part in the seemingly non-stop growth of the last-mile delivery market. The opportunities exist with small couriers to UPS and FedEx and from regional delivery fleets to big LTL (less-than-truckload) and truckload carriers.

Getting into the space could mean signing on as a local or regional contract hauler for a nationwide last-mile operation. Or it could mean developing a new angle on serving the expectations of today’s consumers who want quick delivery of goods straight to their doors.

“It’s tough to enter,” said Patrick Coughlin, vice president and general manager of Ryder Last Mile. “We have [last-mile] capability with e-commerce across the U.S. and Canada. LTL operations that might try to break in will have to develop partners across the country and have the technology in place to process the orders through to delivery.”

Scott Leveridge, U.S. president of Dallas-based TForce Final Mile, divides business-to-consumer last mile into three types: Smaller packages (mainly apparel); non-conveyable items that are not so
much big and bulky “but everything in between, like furniture flat in a box that needs two people to deliver;” and the heavy items such as appliances and patio furniture.

“The real interesting one is growth in non-conveyable,” Leveridge said. “Amazon created this space. It can be odd-shaped, so it takes up too much space to go through sorting systems set up by UPS and FedEx.”

For small packages, technology like drones and robots are being investigated. On the other end of the scale, an increase in delivery of larger items has led to LTL and truckload carriers getting involved. White-glove services, which include assembly and installation, are on the rise.

“The rise of e-commerce has created a tidal wave of demand for last-mile logistics — it requires ongoing investments in scale and technology to keep ahead of consumer expectations,” said Charlie Hitt, president of XPO Last Mile. 

Technology is Key

Mario Harik, chief information officer for XPO Logistics, said XPO uses technology to give last-mile customers visibility and self-service options.

XPO offers last-mile tracking of heavy goods through Google Search, which can be used on any internet-enabled device. Once a delivery is on its way, XPO provides customers with self-service options, including online order management, text updates, and voice-activated connectivity through Google Home and Amazon Echo. This helps keep the process as visible as possible.

“Consumer expectations are high for last mile,” said Harik. “That’s why our technology has to keep us close to them. We give them full tracking of the product, right on their phone. They can open a web app and ‘see’ the truck moving toward their house.”

Carriers like XPO and Schneider provide proprietary IT to allow shipper end-user customers to stay informed and control the delivery experience.

Ryder Last Mile’s RyderView technology allows customers to schedule and track orders with photo-capture digital proof-of-delivery. “For the customer, it comes down to getting visibility into the whole process,” said Ryder’s Coughlin.

Behind the scenes, computer technology helps last-mile companies figure out how to deliver goods efficiently and profitably.

At A. Duie Pyle, the transportation and logistics company separated its freight into large and small when developing its computer routing technology.

“It’s separating the freight under 400-500 pounds and routing that on the smaller trucks and the larger freight on the other vehicles,” said Randy Swart, formerly chief operating officer of A. Duie Pyle.

“Technology is much more necessary than nice,” said John Benko, chief strategy officer at Pace Runner. “Ten years ago, if you had a scanning solution, you were the exception to the rule. Today, very rarely are you going to pick up business if you can’t provide that transparency from pickup to the end delivery point. If [as a customer] I can’t see where my tennis shoes are at any point in the supply chain, I’m not a happy camper.”

Back-end technology can also be helpful when making logistics decisions and figuring out what’s profitable. TCG’s Final Mile Cost Information System provides detail in delivery options such as efforts required at each stop. The software looks at information like fuel consumption point to point and tolls paid through automated tolling systems. With this kind of data, the carrier can determine the most and least profitable customers, lanes, zip codes, etc., as well as figure out pricing for future bids.

Put Customers First

Last-mile is all about customer service. “In the past, retailers were able to dictate when a customer received deliveries,” said Will Salter, CEO of Paragon. “Now it’s the other way around – customers tend to drive the service levels. They want to choose the day and time window and are keen to see that at the point of sale before they commit to buy.”

To help address customer needs, TForce has a team of carrier managers, each of whom interacts with 15 to 20 carrier partners on how service levels are being met. Also, the company has a case management system “to allow a seller to open a case [with us] if a delivery issue arises. And along with push notifications on their deliveries, end consumers can put in a question or comment on their experience,” said TForce’s Leveridge.

Consider Partnerships

Developing partnerships can help a company expand its presence in the last-mile market and stand out with specializations.

Ryder has expanded its last-mile operation with partnerships in eight new cities. Its e-fulfillment network includes 136 facilities, covering 95% of the U.S. and Canada within a two-day timeframe.
Additionally, the company’s Ryder Last Mile has increased partnerships with authorized carriers that specialize in various last-mile delivery services. For example, an appliance delivery service operates 26-foot straight trucks specially designed to carry appliances, not furniture.

“White-glove” service is a type of partnership that can set a company apart in the last-mile market. This type of service includes delivery as well as assembly, setup, and installation of a product.
“What we are seeing is that there’s increased interest in these different installation or assembly services, where there is an additional value-added-service to be performed by the driver after the actual delivery component is performed,” said Mark Lamperi, managing director at AlixPartners, a management consulting firm.

Ryder operates last-mile hubs where deliveries are prepped and may involve light assembly and setting up product installations. “We would assemble products shipped to us in boxes, such as furniture, and maybe blanket-wrap it before heading out for delivery,” said Coughlin of Ryder.

“Where the rubber meets the road [in last-mile] is with the service level,” said Coughlin. “While LTL can do a curbside delivery, going ‘over the threshold’ to deliver inside means scheduling the delivery and tracking it, as well as offering takeaway and installation services as needed.”