E-commerce driving surge in ‘final mile’ deliveries, but who does it the best?

With e-commerce growing at the rate of more than 15% annually, logisticians have been studying the best way to deliver all these home deliveries faster and cheaper than ever.

Driving this need for speed, naturally, is the 800-pound gorilla on the loading dock, Amazon. The retail e-commerce giant recently said it would spend about $800 million to develop a next-day delivery network for its 100 million Amazon Prime members.

Morgan Stanley analyst Ravi Shanker has called it Amazon’s “coming out” party that could mean more business for the U.S. Postal Service (USPS), FedEx and UPS. But LTL carriers such as XPO Logistics (which claims to make in excess of 12 million deliveries a year out of 50 dedicated facilities in the U.S.), Estes Express, Southeastern, some YRC units, ABF Freight and other traditional LTL concerns are spending capital to get into the last mile business. But should they?

“Yes, they’ve been doing last mile deliveries for all the years they’ve been in business,” says Satish Jindel, principal of SJ Consulting, which closely tracks the LTL sector. “They’ve done residential deliveries for a long time, but now it is growing because of e-commerce.”

There can seem to be nearly as many ways for traditional trucking companies to get into the last mile space as there are home addresses. Carriers can create a separate unit within the company, sharing dock space. They can make acquisitions of stand-alone companies. Or they can outsource to independent contractors working largely on their own.

Recently, two units of TFI International, Dallas-based TForce, a customized final-mile logistics services provider, and Joplin, Mo.-based CFI Logistics, a truckload giant, teamed up to create a dedicated final-mile delivery network comprised of truckload transportation assets and logistics expertise to support high-velocity, time-definite supply chain operations.

What LTL carriers must do, Jindel said, is make sure they have the right processes, people, technology and communication skills in place “to ensure that drivers don’t waste time and money by making second and third delivery attempts when people are aren’t home to receive their furniture, appliance and other heavy freight deliveries.

“It’s not complicated but it is time consuming,” Jindel said. “It requires training and planning.”

Jindel said he would advise most LTL carriers, if they have the opportunity and planning wherewithal, to enter the last mile space to some degree.

“I think every LTL carrier should pay attention to opportunities for deliveries to residential addresses that have either ignored or treated like a stepchild,” he said. “What they have to ensure is it is done with the correct processes and planning. But it can be a profitable business.”

Perhaps oddly enough, it is a truckload giant, J.B. Hunt, which has had the most early success while emphasizing its final mile services for furniture, washers, driers and other durable goods.

“If J.B. Hunt can do it profitably, all LTL carriers should be able to do,” Jindel predicted.

Called “J.B. Hunt Final Mile,” the service operates what the nation’s second-largest TL company calls “the largest nationwide, commingled cross-dock network” with 92 locations. Final Mile specializes in home delivery of non-conveyable products with services ranging from drop-off to white glove deliveries. It uses two distinct service models—asset-based delivery network and a dedicated non-asset-based solution – that allows customers to determine their value and service propositions.

“J.B. Hunt is more known as a truckload carrier but they are very far ahead of most carriers in the last mile sector,” Jindel said.

Bottom line, according to Jindel: “It all comes down to how well you manage the costs and customer expectations. One company can do it profitably and another one can lose its shirt.”