Welcome back to our two-part blog series taking a closer look at last-mile operations across the country. In our first blog, we talked about how current and new operators can break into the last-mile market. Today, we are going to discuss the challenges and opportunities facing those operating in the sector.
It is painfully obvious to just about anyone that 2020 was an extraordinary year, and we do not mean that in a positive way. As COVID-19 relegated everyone indoors, people turned to their devices, but now with the vaccination campaign in full swing, people are starting to get out again. Still, don’t expect online ordering to drop off any time soon.
As more consumers continue to expect higher levels of service from companies and shippers, they do business with, last-mile delivery companies will continue to be an essential cog in the nation’s supply chain. So, what are some challenges and opportunities facing companies who operate in this space or those looking to break into it?
Demand Will Continue to Rise
The shipping industry saw an incredible peak at the end of 2020. Not only were we dealing with a global pandemic upending purchasing patterns, but the holiday season created an insane rush of orders, all of which needed to be shipped somewhere. Now, even with the country reopening and people feeling more comfortable going back outside, many are wondering whether this shipping craze will drop off. Let us be the first to tell you: It won’t.
The key to managing this incredible rise in demand is to stay flexible as an operator. The sustained demand for shipping and delivery means that fleets will need to be nimble. For those operating in the last-mile sector or looking to break into it, scaling up must be a main consideration. To grow into expanding markets, you must be ready to grow and grow quickly.
In many cases, retail brands traditionally rely on third-party contractors to meet last-mile delivery needs, but with demand only growing, many are looking at developing their own in-house options. Fortunately, there are several ways that motor carriers can adapt to meet the changing demands of the marketplace while remaining profitable and flexible in the market.
One way to do this is to transition vehicles that may have been short-term rentals to begin with and switch it up to long-term funding, which could save you a significant amount of money. Also pay close attention to vehicle use and analyze you can change it up to turn some assets into last-mile delivery vehicles. Also keep seasonal patterns in mind. Last-mile delivery is very much driven by seasonal and holiday needs.
Success in a Post-COVID Marketplace
There are several factors currently putting the squeeze on last-mile delivery operators. The big one right now is the semiconductor shortage, which is putting a major crimp in supply chains all over the globe. Many OEMs have announced sharp drawbacks this year because of funding and production problems. And when the semiconductor issue is resolved, a red-hot economy is going to continue putting pressure on last-mile delivery operations.
This means that these operators will need to pay close attention to vehicle acquisition. The vehicles you use are the linchpin of your last-mile strategy. So, if it is difficult to obtain these vehicles in the short-term, you need to be able to think ahead.
Even if your fleet factory orders are not currently out of stock, think about what you will need to do to stay ahead of the game should inventories suddenly drop. Buying ahead is not a bad idea in an operating environment like this. You may also want to consider used vehicles as a viable option. Many have been recertified by the dealer and you’ll save a lot of money taking that route.
Still, there are numerous challenges facing last-mile operators. And if you aren’t ready to address these challenges, you’ll find yourself left behind by your competitors. Let’s take a closer look at what those challenges are and how you can address them.
Last-Minute Orders Increase
Many fleets set up their last-mile delivery route plan ahead of time. Yet, last minute order often put a wrench in the most carefully laid plans. There are plenty of times when inventory may be ordered after the route is already set, which creates logistical challenges. Fleet managers should mitigate these situations by ensuring their truck drivers aren’t maxing out their hours.
Route optimization software is often the answer in these types of situations. Using software like this can help your fleet quickly adapt to changing circumstances and last-minute orders. Majority of these systems work with algorithms that run a new delivery scenario in a matter of seconds, allowing the fleet manager to transmit the new route to the truck driver and avoid needless delays.
Using optimization software also allows delivery trucking companies to accommodate changes that come with fast growth. Rather than taking hours to game out a plan by hand or with a human mind, optimization software can take multiple factors into account and come up with a workable solution much faster than human operator.
Without such options, last minute orders could cripple your route and create big problems for your truck drivers and your overall operation. Do you really want to spend more hours planning routes as your business grows? Going with an advanced optimization solution allows you to resolve problems in seconds and get back to running the fleet.
Missed Delivery Windows
Another challenge is missed ETAs. The problem is that when one delivery is missed, it generally causes a chain reaction down the line. This shows the importance of having a realistic and efficient route already set up so that if a truck driver does fall behind for an unforeseen reason, they can quickly get back on track. So, what’s the solution?
While it may seem like routing efficiency is the easy answer, what you really need to do is have contingency plans in place and build extra time into your routes. If you give your truck drivers enough buffer time, they can still make it on time even accounting for minor delays. You also want to look for routing solutions that take customer expectations in mind. Remember, getting the job right and ensuring end user satisfaction is about a lot more than focusing on how many miles you can shave off the deliveries.
Fleet management solutions and route optimization software can help ensure you keep up with changes in volume and capacity. You want to make sure you deliver the orders on time and staying flexible in the face of changing delivery factors will keep your reputation intact.
Keep Truck Drivers Accountable
Even when fleets take everything into account, use software, and build in extra time, they are still relying on the human element to get the package to its destination. Fleet managers need to have visibility into how their truck drivers are operating on their routes. Without that visibility, one bad egg could cause efficiency loss, lower productivity, and poor customer satisfaction outcomes.
Yet dealing with truck driver behavior problems manually could cause problems with late deliveries, result in truck driver overtime or hours issues, and create delivery gaps that you must scramble to fill. Fleet managers that use fleet management systems and telematics have the upper hand in dealing with these problems.
Last-mile vehicles may not have all the open space inside that a Class 8 big rig does, but there is still plenty of internal real estate for cameras, an ELD, and other accessories to help your truck drivers stay on track. If you are using route optimization software, you could even pair it with your telematics solution to provide even greater insight into truck driver behavior.
Some last-mile fleets are even installing AI-driven cameras to catch risky events in real-time. In many cases, these AIs can provide alerts to both the truck driver and the fleet manager using predictive analytics, nipping a dangerous activity in the bud before it even happens.
The e-commerce boom was well on its way to reaching stratospheric heights before the COVID-19 pandemic. But the pandemic only accelerated this shift. Last-mile transportation of packages and goods is more important than ever, which is why it is so important to conduct proper due diligence before embarking on a last-mile conversion for your fleet. Take a big picture look, and your last-mile transition is likely to be successful!