How the Final Mile Is Changing for Fleets

How the Final Mile Is Changing for Fleets

Mindy Long
October 2020

E-commerce sales continue to grow and today’s consumers can buy virtually any product online anywhere and anytime. Online sales gained even more traction as shoppers stayed home to minimize the spread of Covid-19. What’s more, shoppers want fast deliveries and greater visibility. Increasing customer demands, sales growth and the need to social distance are all affecting the final mile for delivery fleets.

“We’re seeing an acceleration in the consumer trends that were already underway before the pandemic hit, especially the growth in e-commerce. This is clearly evident in our area of specialty in the last mile business – namely big and bulky goods that require in-home delivery,” said Mario Harik, chief information officer at XPO Logistics.

Last year, consumers spent $601.75 billion online with U.S. merchants, a 14.9% increase over the $523.64 billion spent the prior year, the U.S. Department of Commerce reported. The first quarter of 2020 also saw growth, with the Department of Commerce estimating U.S. retail e-commerce sales of $160.3 billion, an increase of 2.4% from the fourth quarter of 2019.

“Consumers are more urbanized, more connected, wealthier and shop more than ever before. They now prioritize products and services that lighten the day’s tasks, fulfill errands quicker and generally make their lives more convenient to enjoy,” DHL reported in its whitepaper, Shortening the Last Mile: Winning Logistics Strategies in the Race to the Urban Consumer, which it produced by Euromonitor.

Offering Choices

Technological advancements and the ongoing migration of business operations to online, or e-commerce, platforms have dramatically improved consumer experiences and expectations, according to Impacts of E-commerce on the Trucking Industry, a report produced by the American Transportation Research Institute, known as ATRI.
The 2019 UPS Pulse of the Online Shopper Study, which captures trends and shopper expectations in 15 countries and regions, found that shoppers want choice and convenience when it comes to their deliveries and delivery speed is important for the majority of shoppers. Still, they'd rather not pay for it. Respondents like next-day deliveries, but they will consider other options, such as lower fees or incentives, for slower shipping.
Online shoppers also take other actions to obtain free shipping, with 36% of the UPS respondents saying they add items to the cart, 32% said the choosing the slowest transit time, and 32% said they search online for a promo code. 

Adjusting Operations

Consumer expectations regarding delivery speed have forced retailers and their supply chains to accommodate shifting and shrinking delivery windows, ATRI reported.
“Business models that revolved around centralized distribution networks and a substantial brick-and-mortar store presence are evolving into flexible omni-channels that are defined by varied consumer interfaces, points of sale and modes of order fulfillment,” ATRI reported.  
Research conducted by CBRE, a commercial real estate brokerage firm, found that last-mile routes have shrunk. By analyzing the 15 largest metropolitan areas, CBRE researchers found that the “last mile” of order fulfillment averages between six and nine miles, and these distances are expected to shrink further as distribution/fulfillment networks continue to expand near large urban populations.
Additionally, fleets are seeing changes in their length of haul as well as the equipment they need to meet final-mile needs, ATRI reported. The organization said that average trip lengths decreased by 37% from 2000 to 2017 while urban vehicle miles traveled increased.
The emphasis on purchasing equipment that supports final-mile deliveries is evident in truck registration data. ATRI said Registrations for single-unit trucks grew by 7.8% between 2007 and 2016 compared to 4.4% growth in combination truck registrations. 

Increasing Efficiency

Fleets said they are working to increase the efficiency and lower the cost of residential deliveries.

In March, FedEx Express started contracting with FedEx Ground for the transport and delivery of select day-definite, residential Express shipments. As part of the contract, FedEx Express packages will be selected for delivery by FedEx Ground if they are residential deliveries for which FedEx Ground can meet the service commitment. The rollout started in Greensboro, N.C. and is phasing in throughout the remainder of the year.

“This move makes residential deliveries more efficient by putting the right package in the right network at the right cost to serve our customers,” said Raj Subramaniam, president and chief operating officer of FedEx Corp. "We continue to flex our network to stay ahead of e-commerce growth, and that includes adjustments to handle the demand for residential deliveries better while lowering our cost to serve."
By optimizing last-mile residential deliveries, FedEx said it is also improving safety and sustainability by reducing the number of delivery vehicles in neighborhoods.
DHL reported that the logistics industry is faced with the task of balancing a seamless experience within the last mile, while also bearing in mind their more nuanced requirements in being environmentally responsible. “By targeting a more adaptive approach towards fulfillment and the last mile—through localization efforts, flexible delivery options, improved seasonal logistics and the gradual integration of innovative technology—the logistics industry will be well placed to absorb these new customer requirements,” according to DHL’s whitepaper.  

Reacting to Pandemic Sales Surges

Covid-19 has kept consumers home as they social distanced, and online sales have surged as a result. For example, a study by Emarsys reported that online retail growth year-over-year increased 118% in early May as consumers socially distanced.

The pandemic has strained supply chains and final-mile delivery. The Institute for Supply Chain Management reported that nearly 75% of companies experienced supply chain disruptions in some capacity due to the new novel coronavirus-related transportation restrictions.

Fleets not only had to react to increased final-mile deliveries but also implemented additional precautions to prevent the spread of the new novel coronavirus. To ensure everyone’s safety during the Covid-19 pandemic, XPO logistics has instituted a ‘no contact’ solution when making deliveries.

“Now, with the exception of appliances and some other essential products, deliveries are placed on the porch or another safe location outside the home designated by the customer,” Harik said. “We’ll continue to monitor the situation as consumers buy more goods online, as the safety of all involved in the delivery process remains our top priority."