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CSCMP EDGE panel looks at the current state and potential for the final mile sector

The ongoing emergence of the final mile delivery segment has only continued to see its profile and level of importance raise, especially going back to the onset of the pandemic, when many consumers were buying an unprecedented amount of goods online. And even though the economy is saddled with 40-year highs for inflation and slowing GDP, the demand for final mile services has remained elevated.

The role of the final mile market and where it fits in to the overall logistics landscape were key themes at the “Final Mile Issues and Opportunities” session at this week’s CSCMP (Council of Supply Chain Management Professionals) EDGE conference last month in Nashville. Panelists on the session included: Corry Dickerson, President Dickerson Transportation Services LLC; Bill McCoy, Director, Last Mile Logistics, Electrolux; and Pete Ziegler, Director of Final Mile Services, Averitt Express. The session was moderated by Logistics Management.

A key theme of the session was how the final mile market is defined, as it is a sector that often means different things to different industry stakeholders and verticals.

Dickerson explained that from his company’s perspective, it tends to focus more on what he described as big and bulky moves, in the form of two-man, white-glove types of deliveries. And he added that is different in that a fair amount of the final mile segment there are a lot of small package deliveries, which he said tend to be very complex.

From a shipper perspective, Electrolux’s McCoy said it is much broader than a white-glove, home delivery movement, which is what many people talk about.

“It is really about consumer journey management; it is about focusing from order entry all the way to the final delivery, as well as reverse logistics,” he said. “For me, it is the total consumer experience.

Averitt’s Ziegler was in line with Dickerson, saying final mile at his company is focused on big and bulky items and beyond parcel carriers’ forte, in that it focuses on any type of delivery that a parcel carrier does not handle or move.

“Final mile is definitely different than white glove—and it seems like the definition has improved in the last three years—but three years ago you had to be very specific about what it meant to your agent or your shippers,” he said.

Looking at perceived gaps in final mile services, McCoy observed there are plenty of them, in that final mile services do not provide exactly what shippers want on a few different fronts.

One is that while shipments often start in a regional distribution center, while operational aspects like picking and shipping aspects tend to get overlooked. He also added that there are gaps with how independent contractors focused on final mile are being leveraged and managed.

“It is a fragmented market, and there is specialization [needed] for big and bulky goods…we need to find ways to consolidate within the industry to get that specialization that consumers demand and deserve,” said McCoy.

Ziegler noted a network can have its large locations covered, but it is different when moving into smaller cities and rural areas, where there not as many final mile agents.

“Clearly, we have gaps where we still need to use our own equipment, which is not necessarily the appropriate equipment in those markets,” he said. “That is difficult, as in those smaller cities and rural areas it is difficult to find an agent to handle deliveries for us. There is also no across-the-board quality when you are dealing with 20-plus agents. There are some that are outstanding and some you need to micro-manage very closely. And that can even be the case where you have an agent with five, six, or seven locations for you. In one, it may be the best agent you have but in others it may not have a good quality structure internally. When it comes to quality, there is a lot to be desired. I think we will get there, but we are clearly not there yet.”

Technology systems, said Ziegler, can be viewed as disparate within final mile, as different stakeholders have different ideas and methods for utilizing it. He noted that needs to change, in order to improve customer experience and to also improve the visibility of shipments going through the network.

Dickerson explained that his company’s network has about 200 locations and 140-to-150 agents, with the agents being small and have one-to-two locations.

“Many of them are branching off of what they have done for 20-to-30 years to add big and bulky, so this is a brand-new venture for everybody,” he said. “I think the biggest gap is just recognizing who the vendor is and how much help they need. Most of the vendors are very good businesspeople but are also very proud and won’t ask for help. A big gap we have is defining what the opportunity is and exactly what the final mile provider will do.”

Addressing technology, Dickerson said it is getting the process down “from A to Z” and getting the visibility all the way through the system.

“The final mile provider tends to react the second the product hits the dock,” he said. “Well, if you are dealing with a consumer, it is too late, because they want updates and want to know their order is on the way, when it is coming and to receive very quick updates either by phone call or appointment. The visibility of the technology is difficult, and most final mile providers use different [proprietary] software. There are eight or nine dominant software providers, and they all have variations of it. The software is very difficult on the final mile side. It is about getting all that visibility through the process so people can get prepared for it.”

As for what shippers need to do to craft a successful final mile strategy, Dickerson explained shippers need to be willing insert themselves into the process and step on the final mile stock, in that they know their own expectations better than anyone else, but said that comes with a few caveats.

“It is difficult, because you are walking on someone else’s dock as a welcomed guest,” he said. “But this is an industry that is so young and so new and we have such high expectations and needs that the biggest thing I would say is that the shipper needs to be willing to drive the success. I think it is up to the shipper to define it and vet the final mile agents and to hold everyone accountable all the way up to the consumer.”

From a shipper perspective, McCoy said that shippers too often times are taking the traditional customer-supplier relationship path, in that they are signing up a provider, giving them the order and letting the provider take things from there.

“Shippers have to take on full ownership of the entire journey and recognize that the 3PLs and providers they are working with are simply extensions of their team,” he said. “They have to partner with them.”

As an example, he said if Electrolux gives an order to a delivery partner and the order is missing a phone number or address, Electrolux is setting the delivery partner up for failure. This translates into the shipper needing to be responsible for order quality, as well as ensuring the expectations with consumer customers are in line with what the shipper and its partners agreed upon.

“If my communications are unclear, and if I am vague about what to expect, then I am setting up my provider and partner up for failure or challenges,” he said.  “I have to own it [the order] from the time it enters all the way to the time it delivers to the dock. And I still need to stay in tune with where the order is, as I use platform and technologies to communicate with the consumer and let them know where things are at. That my responsibility.”

As for what the final mile market may look like in the next three-to-five years, Averitt’s Ziegler said it is reasonable to expect abundant growth, as it will be a standalone product in that timeframe.

“From my world, it is not just going to be another LTL shipment,” he said. “It may move through our network the same way, but it is its own thing,” he said. “Speed-to-market is what is going to change in the next five years, in terms of how we get the product from shipper to consignee faster. That is going to have to be a priority. Maybe we do that through more unattended deliveries; our shippers are allowing us to do that more often for products that are not of extremely high value.”

Dickerson said that the biggest challenge in the next three-to-five years is that a lot of people starting to solve final mile on their own, with some very large international companies buying domestic final mile networks, which, while good from their perspective is removing capacity from a very immature market.

“Over the next three-to-five years, I think we will see that shippers will need to get more directly involved in building a direct final mile agent delivery network themselves or working with 3PLs and having 3PLs doing it directly on their behalf,” he said. “They will need very specific on that in order to address the capacity.”

McCoy said shippers will continue to need 3PLs and final mile providers.

“Even a company as large as Electrolux does not have enough in a given market to fill a truck on a daily route,” he said. “I actually need my competitors’ appliances on that truck as well. Where we go from here is that we keep discussing systems and get it right. We have to understand it is a total customer journey. It is not just the trucks on the map. It is the order flow and all the milestones and communications. The digital side is something I think will continue to evolve. I see a lot of strong players emerging now and entering the markets. That will naturally start to evolve. As a whole, where we go from here is we back up a little bit and we look at the supply chain infrastructure that was built and designed to serve the B2B business and we adapt. It needs to be adapted to serve the consumer.

That requires looking at the entire supply chain infrastructure starting with the inventory positioning, as a big part of the success in final mile and direct-to-consumer business is going to be predicated on product availability and lead time and how long it takes for things to get to the market. We have to get back to what our stocking strategy is and where we position goods in the market to do forward stocking. There is so much broadening that needs to occur from where we are today. I think it will naturally occur, but the best way to get there more quickly and more accurately is to back up and look at the total supply chain and talk to your peers and colleagues, shippers and providers, and independent contractors.”

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About the Author

Jeff Berman's avatar
Jeff Berman
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review and is a contributor to Robotics 24/7. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis.
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