Why Jump To A Last Mile Logistics Strategy?
(1) Shrinking Driver Pool In Full Load & LTL Sectors
According to the American Trucking Associations, the United States currently has a shortage of roughly 50,000 drivers. The impact of this growing challenge, which could balloon up to 176,000 by 2026, has increasingly hindered shippers across the country. Primarily, the shortage has been most noticeable in the truckload (full load) and less-than-truckload sectors.
As a result of the driver shortage, freight capacity on American roads has continued to tighten up over the past few years. Unfortunately, there are few signs that point towards a near-future solution. Even with the hope that autonomous trucks may bring relief, it would still be several years before the technology could be widely adopted.
For now, shippers that depend solely upon LTL and TL service providers are experiencing:
- Higher shipping costs
- More delays and missed delivery appointments
- Fewer trucks with available space on a moment’s notice
(2) Increasing Accessorial Delivery Fees
While the driver shortage has made it more difficult for carriers to recruit and retain drivers, it’s also given them more power over shippers. As demand for service towers over supply, carriers are now in a position to cherry pick the freight they want to handle. They are now more likely to turn down shipments that would involve more than 15-20 minutes per delivery or take up more space on a trailer than a standard pallet.
To that point, carriers have been rolling out more accessorial fees than ever and turning to dimension-based pricing. Overlength fees, in particular, have been a strategy to weed out freight that can be more challenging to move. Such fees, while not desired, have put shippers in a nonnegotiable position.
(3) Impact Of Amazon Effect On Delivery Times
The Amazon Effect, or increasing demand for next-day and two-day delivery, is another strain on traditional supply chain operations. As the buying mentality has moved online, customers now increasingly expect to receive their shipments as soon as possible. This demand, however, is no longer limited to business-to-consumer (B2C) segment. It has also taken off in the business-to-business (B2B) segment.
B2B online sales are growing year-over-year. According to researchers, B2B growth in 2017 grew significantly in every area:
- Distributors: +6.2%
- Manufacturers: +7%
- Retailers: +26.6%
- Wholesalers: +5.8%
As companies, such as Amazon and Home Depot, invest millions of dollars on building out last mile delivery networks, many shippers are struggling to meet their own last mile needs with traditional carriers. The transportation industry is currently experiencing a metamorphosis as shippers try to puzzle together how they can meet their customers’ needs in today’s challenging climate.
While LTL and truckload carriers were the go-to for decades, the times are changing. They will still serve a vital role in the overall supply chain, but shippers still need solutions to the problems they are facing today.
As supply chains become increasingly localized to meet delivery times, last mile operators and freight couriers will be best positioned to meet the demands. They can provide more flexibility for deliveries, including residential delivery threshold and white glove delivery. More importantly, their networks are much larger than you may think. There are numerous last mile service providers that have warehousing networks and driver pools on the same scale as many of the largest LTL and TL carriers. The big difference is that they specialize in customized delivery solutions that haven’t always been utilized by B2B businesses.