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YRC exec addresses intersection of LTL and e-commerce at SMC3 Connections event

When looking at the many challenges that come into play for companies competing in, or looking to enter, the last-mile logistics delivery market, there are more than a few direct challenges, to say the least, especially for those in the less-than-truckload (LTL) market.


When looking at the many challenges that come into play for companies competing in, or looking to enter, the last-mile logistics delivery market, there are more than a few direct challenges, to say the least, especially for those in the less-than-truckload (LTL) market.

That was made clear in a breakout session featuring Jim Ferguson, senior vice president, 3PL Channel Solutions, for YRC Worldwide, at this week’s SMC3 Connections 2019 event in Colorado Springs, Colorado.

The session, entitled “Managing LTL in the age of e-commerce,” addressed exactly what LTL’s are up against, and need to do, to succeed in a world in which e-commerce-based shopping continuing to grow at a staggering pace, with B2B and B2C e-commerce sales expected to grow to $500 billion and $1 trillion, respectively, in the coming years.

Perhaps the most challenging issue for LTLs in e-commerce, noted Ferguson, is that retailer cost sensitivity is high, coupled with e-commerce firms competing with “free” or “low cost” delivery, two factors, he said, that “make it difficult for LTL carriers to profitably invest and execute in the final mile.

What’s more, Ferguson pointed to other, but no less serious challenges for LTL, including: many different technologies attempting to communicate like ELD; different equipment and staffing needs than in traditional LTL; and things being tougher justify in terms of large investments.

And there are other things for them to be mindful of, too, like facing competition from small single unit SME’s (small and medium enterprises) with low overhead taking local market share, as well as risk from private fleet development by Amazon and digital freight matching companies.

“The expectation has been set that that cost of delivery is very low…or free,” said Ferguson. “And while we know that nothing is free, there is a lot of cost pressure on that to be able to deliver. Cost sensitivity is high so from an LTL carrier’s standpoint if the margins are extremely low, it is very difficult for me to want to invest more assets into it if the return is extremely low. We need to find ways to make it so that the cost is fair for the customer and there is enough margin for carriers to invest in it.” 

One way in which to potentially address some of those challenges is through ELD models, which Ferguson said are communicating things related to whereabouts, speed, and transit.

“These ELD models are starting to provide additional ways to be able to communicate, and I think they are empowering a whole group of new carriers at the final mile that can start up with relatively low capital and low barriers to entry and be able to come into the marketplace,” he said. “We see more of that activity coming…like with Amazon encouraging workers to potentially leave their companies and be a delivery agent for Amazon and offering up to $10,000 in some markets to do so. There is a lot of change going on at the final mile and solutions are being created to handle different types of services. The demand out there has been covered by traditional LTL carriers in the past, and I think we are going to continue to see change within this market….with more solutions and start-ups targeted.”

LTL carriers have traditionally used the equipment they pick up freight on to move on the highway and then to a distribution center, with Ferguson saying most LTLs don’t have a high degree of straight trucks, box trucks, or lift gates.

At YRC subsidiary Holland, he noted that the unit has recently added box trucks to its fleet, which is not something LTL carriers have traditionally done.

“If I think about the driver shortage we have experienced and the capacity pressures over the last two or three years, we have tried to stay away from residential deliveries,” he said. “To take a CDL driver into a residential area to deliver, that CDL driver is an asset and straight capacity. With them doing residential delivery, we can make four-to-six other B2B deliveries during that timeframe, with more margin and return on those deliveries. It is really difficult when you don’t have a separate network set up for residential delivery to take your assets, particularly CDL drivers, into that. With the straight truck and box truck flexibility that we have now, we do not have to have CDL drivers to be able to do that. I see that as an opportunity to be able to participate more in the [e-commerce] marketplace and also to use those non-CDL drivers as a farm team to grow our CDL drivers, and we are actively pursuing that.”  


Article Topics

News
Logistics
E-commerce
E-commerce
Holland
Logistics
LTL
YRC
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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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