China's online shipping to face 'last mile' delivery challenges that now confront the west
 ONLINE shopping, and therefore, shipping, have come to China, driven by massive consumer demand, and with much official encouragement of Beijing, anxious to boost domestic economic activity to replace too great a reliance on exports.
But while truckers are pleased to have fresh fields of endeavour in which to grow and prosper, "last-mile deliveries" as they are called may well be an inescapable way of life in which old skills will have little place and new skills must be acquired simply to stay in business.
This is revealing itself in the west, where online shopping has acquired such a grip it has changed the way shipping is done in an ever-growing sector and now threatens the entire retail world.
"Amazon and Uber are really just changing consumer expectations. That endline customer is looking for different things today and different things in the future, and if LTL carriers don't adjust, they may become obsolete," said Geoffrey Muessig, vice president of Pitt Ohio trucking at the recent SMC3 Connections 2016 conference in Chicago focused on this very topic.
Mr Muessig said the goods Pitt Ohio once delivered to warehouses and distribution centres are now going straight to homes.
Shippers such as Walmart and Home Depot also are directly involved in the last mile market, sometimes by offering buy-online, deliver-from-store strategies through contractors.
"It's the Amazon effect, but Walmart isn't standing still," said consultant Adrian Gonzalez, president of Adalante SCM. "They're experimenting, piloting local delivery with the likes of Uber, Lyft and Deliv."
Home Depot now offers "deliver-from-store" last-mile service at more than 400 of its 2,200 US stores and expects to roll out the service throughout the US by the end of this year.
"This is one more arrow in our quiver to support our customers," said Stephanie Smith, vice president of direct fulfilment and delivery for the $88.5 billion retailer.
Said Mr Muessig: "We focus on industrial dock-to-dock business, not even doing much in the retail space. But in the past year our residential deliveries have increased 20 per cent."
Home-delivery demand is growing at Estes Express, the largest privately owned US less-than-truckload carrier.
The trucking company will launch a last-mile division this year. Trucking and logistics operator Schneider in June acquired Watkins & Shepard, a trucking company specialising in difficult deliveries, and Lodeso, a last-mile logistics company.
"Online shopping is no longer constrained by the size of the product," said Schneider's vice president Mark Rourke.
"Furniture and appliances are among the fastest-growing segments of e-commerce, and those over dimensional products don't go through the parcel networks," he said.
Even UPS, the largest US transport company with its very name "United Parcel Service" citing its small scale roots, now thinks in bigger terms, and to this end has invested in Deliv, a same-day delivery company founded in 2012.
Deliv uses crowd sourcing technology that does for retail delivery what Uber has done for riders, "getting consumers to deliver packages and goods purchased locally to other consumers.
"We want to learn from what they're doing on the cutting edge of this market," said UPS vice president Tom Jensen.
Amazon may be the "instigator", but it's not necessarily the "propagator" for the expansion of last-mile logistics. To find that propagator, look in a mirror, said Ross Elliott, vice president and vice president of HighJump, supply chain Software Company.
"We as a people have fundamentally changed the way we think about buying. Our expectation is now that we can get anything within two days at the outside," he said.
But last-mile logistics is also about inventory, he said. "I've got to know where to have inventory to efficiently make deliveries. It's about the delivery, but it's also about optimising inventory locations so you've got the right goods in the right place to make that delivery."
Last mile delivery isn't the easiest market to join, especially for companies used to handling business-to-business freight.
"To compete against like Deliv, traditional carriers and couriers are going to have to start thinking of on-demand service, rather than aggregating shipments into an LTL load," he said. "Over time, the bigger trucking companies are going to wind up working with companies like Deliv.
"They'll do the linehaul and hand the shipment off to local services. This Uber-like service is going to disrupt traditional service," Mr Elliot said.
And difficulties arise when the goods don't fit into an SUV or hatchback, or require skilled assembly when they reach a customer's home.
Said XPO marketing chief Will O'Shea: "This is a very complex space. We do over 12 million deliveries a year, and a lot of them require special services. We're delivering everything from an envelope in New York City to a stove in Dallas."
Retailers long to provide a smooth unified service across the US. That's one reason why larger LTL and truckload companies are looking to enter the last-mile business.
But there are hazards. Many LTL fleets will have to add equipment to make residential deliveries, or partner with contractors. "They've got pups (28-foot trailers), and there's difficulty attaching lift gates to pups.
There's also added liability. When moving heavier items, there is a chance for driver injury. "As more and more LTL carriers look at getting into last-mile, we need to rethink our whole position" when it comes to liability insurance and benefits, he said.
If it's hard to hire and keep truck drivers, it's no easier to find qualified last-milers. "You can't just take a regular delivery driver and put them in someone's home," Mr O'Shea said. "This takes a different skill set."
That includes "soft" customer relations skills. "It's very different working with a consumer, going into their home, than bumping a dock," said Mr O'Shea. "These people need to be the ambassadors for our customers' brands, as well as drivers."
Even with simpler deliveries, trucking companies need to ensure they have the right systems in place to support demanding last-mile customers.
Returns can also pose a challenge. "The goal is to get the product there in great condition so it doesn't come back through the reverse logistics channel," Mr Rourke said. "That's a big value proposition. Sending a sweater back is one thing, sending a dining room suite back is another."
XPO Logistics has separate reverse logistics channels for LTL and last-mile returns. "In Last Mile, we operate from both customer facilities and our own sites," Mr O'Shea said. "We recycle packaging as part of the service. We consolidate shipments and send them back weekly."
Another big problem is providing the kind of visibility for consumers that Amazon does through its fulfilment services.
Supply chain visibility is translucent at best and often opaque. Of course this is less of problem in China where less is transparent at the best of times. But all the other problems faced in west's last mile delivery are likely to be just as great in China - and present much the same opportunities. |
