AVOIDING THE CARRIER CAPACITY CRUNCH WITH LAST-MILE OFFERINGS
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By Victor Zhou
ince the start of the pandemic and the associated influx of e-commerce, the shipping landscape has tilted heavily in favor of the carriers. Faced with record breaking volume and limited capacity, UPS, FedEx, and even regional or niche carriers such as OnTrac or Shipt are no longer pursuing revenue (and customers) as eagerly as in the pre-pandemic environment. While each local situation (and each local carrier rep) is different, this operational inflexibility has enhanced the flexibility of the carriers in selecting what kind of customers they prefer, as evidenced in Q4 2020 when both UPS and FedEx issued ultimatums and forced major rate increases of up to 20-50% upon some of their least profitable — and even optimal — clients. Looking forward, industry analysts are projecting a daily shortfall of five to 10 million packages to exceed carrier capacity for the current holiday season. When all is said and done, 2021’s peak season will likely be as bad or worse than 2020 in terms of higher costs,
increased service delays, and carrier capacity quotas. Will the logistics landscape ever improve again to one that is more favorable to shippers? The answer is yes and no. Both UPS and FedEx are investing millions of dollars to expand their capacity to catch up with the current market, but shippers will not likely see the benefits for years to come. The recently announced merger of OnTrac and LaserShip might eventually mean we see a “regional” carrier operating as a viable national competitor to UPS, FedEx, and USPS (and Amazon, if and when it ever launches its own propriety carrier). However, while we always recommend utilizing regionals as part of a multi-carrier solution where practical, this option is unfortunately no longer immediately available for many shippers as most regionals face the same capacity constraints as the major carriers, and are no longer taking new customers until 2022. But even as the ongoing supply chain crisis of 2020-2021 has exposed the depths of the vulnerabilities shippers face, it has also revealed the
22 PARCELindustry.com NOVEMBER-DECEMBER 2021
non-omnipotence of the UPS/FedEx duopoly in their failure to meet current market demands and challenges. There are market inefficiencies to exploit, and players from Europe to Silicon Valley to America’s heartland have been hard at work for years now materializing the next era of supply chain solutions. For many of these new companies (as well as Amazon), the opportunity lies in the least profitable and desirable space for UPS and FedEx: last-mile delivery. Two of the top trends surfacing in the marketplace are not new concepts by any means. Neither the gig economy nor drones and robotics represent new terms to the general public, but the integration of these technologies into the current supply chain has been expedited by the pandemic. Amazon has been making headlines for years, whether touting its drones as the future of package delivery or continuing to grow subsidiaries such as Amazon Flex. Since 2015, Amazon Flex has been crowdsourcing deliveries via individual ‘contractors’ driving their own personal vehicles (or bicycles, in some cases), not dissimilar to food and grocery delivery services such as Postmates or Fresh Direct. But Amazon is far from the only player in the same-day delivery game. UPS’s September acquisition of Roadie, a courier delivery company already utilized by major retailers such as Best Buy, shows that the major carriers themselves see the need to move beyond their traditional models. Because UPS’s union-based labor model serves as basically the antithesis of Roadie’s gig-based drivers, most expect Roadie to operate semi-independently from its new parent company, meaning that it will remain a viable “alternative” for shippers with a local presence in urban and suburban markets. Many brick and mortar retailers such as Best Buy and Home Depot have long been utilizing companies such as Roadie for their own direct to consumer needs. The latter has additionally just announced a partnership with GoLocal, a third-party delivery service launched by fellow retailer (and competitor) Walmart. Meanwhile, the Bentonville giant’s largest traditional competitor hasn’t been standing still either. 2017 saw Target acquiring both Grand Junction’s