Last-Mile Technology Comes of Age
UPS and FedEx lead the US parcel market in terms of volumes and revenues. However, while both last-mile carriers noted strong revenue growth, the combined parcel volume from smaller carriers outpaced UPS and FedEx volume growth rates in 2021 according to Pitney Bowe’s latest estimates.
Gone are the days when shippers depend solely on a combination of UPS, FedEx, and perhaps USPS as their last-mile strategy. The sudden shift to purchasing goods online in 2020 due to the COVID pandemic, caught shippers and last-mile carriers off guard.
To reset their networks to address this sudden shift, last-mile carriers, in particular UPS and FedEx, limited capacity from some shippers, introduced new surcharges and raised existing fees while struggling, in varying degrees, with delays for most of the year and into 2021.
In addition, shippers were finally making the much-needed investments in omnichannel strategies such as Buy Online, Pay in Stores (BOPIS), curbside pickups, fulfillment in stores, and same-day deliveries to connect their websites to their physical stores.
To ensure capacity, address speed in delivery, and provide options for last-mile delivery locations (in-store, curbside, locker, or other 3rd party location or to the consumer’s home) shippers needed to diversify their last-mile carriers.
But diversifying last-mile carriers is easier said than done for many shippers. A Pitney Bowes/Cipher Research survey of 168 US retailers found that the two largest obstacles were technology integrations (42%) and risk of losing volume discounts (39%).
Other obstacles were:
· Bandwidth for internal teams/procurement (32%)
· Unable to manage multiple carriers’ invoices (30%)
· Unable to segregate volume by carrier (29%)
· Prefer a single point of contact (28%)
A group of last-mile technology providers is emerging to address these issues and more.
One such provider is OneRail. Bill Catania, Founder, and CEO describes the company as a “delivery operating system” – not quite a transportation management system (TMS) but similar with some overlaps. “We work with TMS providers as well as with shippers by providing such solutions as parcel rate comparison to optimize the last mile” Catania said in a recent interview.
OneRail is a SaaS solution that matches orders to carriers, couriers, and internal fleets to meet customer-specific service level agreements. Along with the ability to integrate with TMS, OneRail’s platform can also integrate into warehouse management systems (WMS).
Other tech providers in this space include Bringg and Delivery Solutions.
UPS acquires Delivery Solutions
UPS entered the same-day delivery space last year by acquiring a same-day delivery crowd-sourced platform, Roadie and on May 31 of this year, UPS acquired Delivery Solutions, a SaaS technology provider.
According to its website, the boot-strapped tech startup offers same-day delivery, ship from store and distribution centers, curbside and in-store pickups, and post-purchase customer experience.
UPS’ announcement of the acquisition notes that once a company plugs into the Delivery Solutions’ platform, it can connect to a ‘global ecosystem’ of delivery companies in the same space’ while maintaining complete control of their e-commerce brand experience.
Catania points out that shippers are given an API to connect and upload their own rates to Delivery Solutions’ platform to manage whereas with OneRail, rates are already provided, as an option, and shippers can just log into a web-based platform to choose the right carrier for each delivery.
UPS notes that the purchase of Delivery Solutions “supports its customer-first strategy while positioning UPS to be a digital leader. We’re focused on helping our customers navigate the digital commerce ecosystem quickly and effectively.”
However, others see the reason for the acquisition differently. Catania sees it as a way to build volumes for UPS whereas former Boston Consultant Group consultant turned entrepreneur, Saurav Banerjee said in a tweet, “UPS wants the drop-density data to selectively grow its network.”
Outlook
Last-mile platforms continue to evolve. OneRail has added reverse logistics management and microfulfillment capabilities to its platform while Bringg introduced fleet management capabilities a few years ago.
In 2020, FedEx acquired ShopRunner, an e-commerce platform that connects brands and merchants with online shoppers. It also announced a partnership with Microsoft to “transform commerce by combining the global digital and logistics network of FedEx with the power of Microsoft’s intelligent cloud.”
While UPS and FedEx’s strategies seem to differ, at the end of the day, both are focused on growing their e-commerce solutions. However, as new entrants enter the last-mile space, are shippers willing to continue to stick with UPS and FedEx?
-Cathy
While I aim for a weekly story, sometimes life gets in the way, so think about subscribing (free) so that you don’t miss anything.
For daily thoughts and shares, be sure to follow me on Twitter and LinkedIn.
I wear a number of hats these days. Catch my weekly column on air cargo, freight forwarding, and the express markets, as well as a monthly podcast on Air Cargo World. I’m also helping out the Reverse Logistics Association as a research manager and at JOC I help out as a research analyst and write a weekly LinkedIn article, Freight Forward, summarizing JOC articles and providing an outlook for the week ahead.
In June, I’ll be heading to a couple of conferences. Currently I’m in Miami where I’ll be moderating a few sessions at Air Cargo World’s Air Cargo Tech Summit today and tomorrow and on June 20 and 21, I will be participating at NRF’s Supply Chain 360 discussing returns.