LTL carriers look to last-mile service to prop up sagging revenues
Less-than-truckload (LTL) carriers, struggling with weak demand for industrial traffic and perhaps facing another round of
price wars, have turned to the so-called final
mile of delivery services, a competitive and
specialized discipline, to build a sustainable
revenue channel.
It will likely take LTL carriers out of their
comfort zone. Working the “final mile,”
defined in today’s marketplace as deliveries
to a consumer’s residence from a manufacturer, distributor, or retailer, means serving
a segment largely unfamiliar to LTL carriers. It puts LTL carriers in front of a more
hyperconnected and demanding bunch of
end customers than they are accustomed
to. And it means entering a crowded and
fragmented field of providers.
About 7,000 carriers nationwide—many
of them undercapitalized mom-and-pop
type businesses—provide some form of
last-mile delivery service, according to FM2
Logistics Solutions, an Austin, Texas-based
firm that connects shippers and LTL carriers with a national network of final- and
“first”-mile carriers through its IT platform. These small firms have specific skill
sets in residential deliveries and could complement LTL carriers either as partners or
as bolt-on acquisitions, Kirk Godby, a partner at FM2, said in late June at a conference
held by transportation data provider SMC3
in Chicago.
LTL carriers will be entering the bailiwick
of companies like Seattle-based Amazon.
com, the world’s largest e-tailer, which
is building a last-mile delivery system to
be manned by hundreds of local delivery
companies, and San Francisco-based vehi-cle-hire service Uber Technologies Inc.,
which boasts that its model and network
can be leveraged for last-mile deliveries of
stuff. Amazon and Uber are the companies
resetting customer expectations about service that LTL carriers who seek to carve out
a niche in the final-mile business will need
to adhere to.
Meeting the constant pressure to grow
means leaving no stone unturned, however,
and the message coming from a session
devoted to the subject at the SMC3 event
was that LTL carriers ignore this
segment at their peril. The last-mile
delivery segment, which touches all
business-to-consumer e-commerce
shipments, is only going to get big-
ger. E-commerce today accounts
for about 12 to 13 percent of all
retail sales, according to various
estimates. This suggests there will
be much more share up for grabs,
especially as the traditional retailers
that now control most of the market
move more of their selling to the
digital world.
To succeed is likely to require
changes in fleet composition and
utilization, a better means of com-
municating digitally, and an empha-
sis on hitting tight and precise deliv-
ery-time targets, according to com-
ments made at the session. For those
carriers that want to provide “white
glove” service, industry parlance for
a full-blown customer experience
that includes product setup and
installation, it will require finding
drivers who not only can operate a
truck but are skilled in assembling
large complex items—and in inter-
acting with customers within very
personal areas of their residences,
such as a kitchen or bedroom. Last-
mile carrier executives said they will
weigh a driver applicant’s interper-
sonal skills above all other qualities;
prospective employees, they reckon,
can be trained to drive a truck and
assemble an appliance, but can’t be
taught how to properly interact with
folks in their homes.
Unsurprisingly, capacity is tight
because there aren’t p. 24
