Consultant Insight: Retailers take control of their last mile

The last-mile delivery market is getting crowded as shippers look for additional capacity beyond what FedEx and UPS can provide. [caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Higher parcel volumes due to increased consumer spending and the rise in e-commerce have driven up average daily ground volumes (ADV) for FedEx and UPS by 16.9% and 4.5%, respectively, for the first half of this year. FedEx ADV volumes are from Dec. 1 to May 31, while UPS volumes were during the period from Jan. 1 to June 30. Rather than focusing on increasing volumes, FedEx and UPS are concentrating on the most profitable volumes. As such, both carriers have limited their capacity for unprofitable customers. In addition, several surcharges — including COVID-19-related peak surcharges that have been in use since June 2020 — have resulted in FedEx and UPS becoming cost-prohibitive for shippers. Alternative last-mile delivery solutions, such as regional small parcel carriers like OnTrac, LaserShip and LSO, benefited as shippers turned to these providers for their capacity requirements. However, as we head into the peak holiday season, many of these carriers no longer have available capacity. Retailers rise to the occasion Retailers with physical locations have invested in curbside pickups and last-mile deliveries by partnering with crowd platforms such as Instacart and DoorDash to reduce shipping costs. Several retailers are taking it a step further by acquiring last-mile providers in order to have more control over this costly part of the supply chain. According to a Capgemini study , last-mile costs account for about 40% to 50% of the entire supply chain. Target, for example, in 2017 acquired crowd-delivery provider Shipt, which operates as a Target subsidiary and also delivers on behalf of other shippers. And just this month, American Eagle Outfitters (AEO) acquired AirTerra, a Seattle-based logistics startup. "We have already made tremendous strides in our efforts to increase speed, resiliency and diversification; yet believe we have an incredible opportunity before us to become even faster, more agile and more efficient," AEO Chief Supply Chain Officer Shekar Natarajan told the online publication Insider. "The acquisition of a leading logistics business, AirTerra, and the deep experience its leadership team brings, only further fuels our excitement in the pursuit to provide a differentiated, best-in-industry experience for our customer." Another new last-mile option is from Walmart, which also in August announced its new, white label last-mile service GoLocal through its crowd-sourced driver program Sparks. However, according to online publication TechCrunch, Walmart plans to expand GoLocal over time to include more “associate-powered” delivery by its employees. Already, Walmart is testing associate delivery in electric vans in northwest Arkansas. “We’ve worked hard to develop a reliable last-mile delivery program for our customers,” said Tom Ward, senior vice president, last mile, Walmart U.S., in a statement. “Now, we’re pleased to be able to use these capabilities to serve another set of customers, local merchants. Be it delivering goods from a local bakery to auto supplies from a national retailer, we’ve designed Walmart GoLocal to be customizable for merchants of all sizes and categories so they can focus on doing what they do best, leaving delivery speed and efficiency to us.” All about the data Target and Walmart offer interesting last-mile solutions, providing services for their own customers as well as to other shippers. Both services are technology-based, allowing shippers to manage and analyze their needs. The greatest benefit of these tech offerings is the data collected: demographics, delivered items, origin and destination of the delivery, and more. This information can also help Target and Walmart develop new services, improve inventory positioning based on customer demand, and optimize their own last-mile delivery routes for faster delivery times. As the number of last-mile startups continues to grow, expect more retailers to acquire these players in order to better manage their own last-mile deliveries.

Consultant Insight: Retailers take control of their last mile

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