How Trucking Companies Can Find Opportunities in Delivery

When you say last-mile delivery, most people will picture an Amazon delivery van or a FedEx delivery truck. But there’s also a market out there for big and bulky final mile services, including “white glove” deliveries.

Like the rest of the trucking industry, the delivery business was heavily impacted by the e-commerce boom that hit in 2020 with the Covid-19 pandemic — and by the hangover afterward.

AlixPartners in its May 2023 home delivery survey found that e-commerce softened in 2022 following the increase it saw in 2020 and 2021.

“But it looks like a lot of e-commerce activity is rebounding in 2023,” says Andrew Kerr, senior vice president for AlixPartners’ operations practice, who has specialized in distribution and logistics for 10 years.

A Bloomberg Intelligence report projects that e-commerce will account for 33% of U.S. retail sales by 2027. E-commerce will grow at a 10% compound annual growth rate to $2.55 trillion over the next five years, it predicts.

One aspect of the pandemic boom that will affect e-commerce and last-mile delivery in the future is the way it changed the way people shopped for big and bulky goods such as furniture and appliances.

Big and Bulky Delivery Growth

Jeff Abeson, vice president sales at Ryder Supply Chain Solutions, joined the company in 2018 with Ryder’s acquisition of big-and-bulky home delivery provider MXD. Ryder uses a partner model, relying on independent contractors running 24- or 26-foot box trucks.

During the pandemic, big-and-bulky delivery saw a big upswing.

“As people recognized that Covid wasn't going to disappear immediately, people had disposable income that they were not spending on entertainment, or travel or going out to eat,” Abeson explains. “And they started to spend their money in the places where they were spending the most amount of time — which was at home.”

While the huge growth seen in that big-and-bulky delivery business has slowed, Abeson says, e-commerce sales of big and bulky items such as furniture and appliances have become more normalized.

“I think people's comfort level with buying this type of product without seeing it, or sitting on it, or testing it… people are just becoming more accustomed to that. And that’s a pretty significant paradigm shift.”

“This is not a great time for heavy goods final mile — it's not a great time for freight in general,” said Bruce Chan at Stifel in an email news alert to investors. “Consumer durables are likely in a supercycle trough, with most consumers blowing the wad on appliances and big and bulky during and immediately following the pandemic.”

Eventually, however, that demand will head back up, meaning potential big-and-bulky last-mile opportunities for motor carriers operating medium- and heavy-duty trucks.

The Popularity of White Glove Delivery Service

A subset of big-and-bulky delivery is white-glove service. These are final-mile freight delivery services that go beyond a traditional dock-to-dock delivery or a traditional home delivery where items are left at the door. They often involve two-person crews, and can be done with tractor-trailers or straight trucks. White-glove deliveries can include: 

• Taking product inside its destination
• Uncrating/unboxing a shipment
• Placing items in the room where they will be used
• Assembly and installation
• Removing all packing material before leaving

‘We see white glove has become more and more popular,” Kerr says. AlixPartners' latest home delivery survey found that 35% of shippers are offering some type of white glove delivery.

In late 2022, Armstrong & Associates, which provides insights into the third-party-logistics market, estimated the U.S. 3PL big and bulky last-mile delivery market experienced a compound annual growth rate of 18% from 2017 through 2021 and projected CAGR of nearly 12% from 2022 through 2025. (At press time it was in the progress of updating that report, “Making it Count: Big and Bulky Last-Mile Delivery in the United States.”)

Typically, last-mile e-commerce orders are shipped as small packages and transported by parcel carriers. However, with expanding e-commerce product categories such as furniture and appliances, other last-mile options are growing in significance, Armstrong noted. Third-party logistics providers with fleets of independent contractors and freight brokerage operations deliver many last-mile orders.

In addition, less-than truckload, truckload, last-mile and household goods carriers are expanding last-mile services for big and bulky items to accommodate the rapid growth in e-commerce retail sales, according to the report.

Some of the well-known names that operate final mile operations for big and bulky goods are ArcBest, Southeastern Freight Lines, TForce Logistics, and J.B. Hunt.

Late last year, Hub Group bought Forward Air Final Mile from Forward Air Corp. to expand its Hub Group Final Mile offerings of white-glove delivery of big and bulky goods such as appliances.

Armstrong said that home delivery models will continue to evolve, and the need to create new, innovative solutions will be important for the future. Enhanced services in the white glove space are becoming more of a norm.

Last-Mile Big and Bulky: Not for Everyone

“For a couple years we tried to get into last-mile delivery with refrigerators, appliances, treadmills, the larger stuff,” says Dwayne Andreasen, president of DDA Transport, Londonderry, New Hampshire. DDA operates a fleet of about 160 trucks under a contract to the U.S. Postal Service, and also a smaller operation as a FedEx Ground contractor. They provide line-haul service between distribution centers via tractor-trailers and delivery to small post offices in smaller trucks.

“We didn’t stay in that very long. It was a tough business to be competitive in, especially with labor issues. Most of that you needed a couple of people on the truck that had some muscles to move stuff around and had to be professional in somebody’s home, and we found that was a bit of a challenge. We opted out of that after about a year.”

Ryder’s Abeson points out, “It’s not like delivering an iPhone case. With big and bulky, someone's spent a lot of money. So there’s a lot of emotion around that, and you’ve got people that are coming into your home, going into the most intimate spaces in your house. And so the business is hard, because you’re dealing with emotion. And it's got to be right.”

AlixPartners’ Kerr says there’s a demand for white-glove delivery, but “the real problem is all the challenges that it presents,” such as:

• Equipment: What equipment do you need to deliver? Can you do it with a tractor-trailer? Do you need a box truck? Is a lift gate required, or will you be backing up to a dock?
• Scheduling: Can you coordinate if the homeowner is home to receive the shipment? What type of technology platform is there for you to connect to, to make sure that you're scheduling that the right way?
• Routing: Routing is a significant challenge when it comes to white glove delivery. “White glove delivery is usually a single piece delivery,” Kerr says. “And so you may have more shipments packed into a truck than you did previously, and more stops.”
• Reverse Logistics: Even less-than-truckload providers are probably not used to the high frequency of loads being rejected. “If you're dropping off a refrigerator at a customer's home, and there’s a dent on the front, they're unwilling to accept it,” Kerr says. “So you also introduce this entire reverse logistics and returns process into the equation that you’re not as used to dealing with.”
• Customer service: “In the white glove type environment, you're asking someone who drives a truck for a living to suddenly be the face of an organization and interface directly with the customer,” Kerr says. “And so that type of training that’s required for truck drivers and employees is something that providers definitely need to consider.”

In fact, Armstrong's report noted that as retailers look to add to their service offerings, it increases the premium for skilled white-glove delivery drivers/workers, driving up labor costs.

Kerr says fleets that are interested in opportunities in delivery but are turned off by some of the customer-facing requirements may have an opportunity in business-to-business, or B2B, delivery, such as delivering medical equipment, or restaurant equipment.

“You still have the challenges of connecting to the demand source and the technology of routing and things like that,” he says. “But you can ease some of those customer service requirements.

"Dealing with a business customer who's receiving something is typically simpler than dealing with your average shopper who's ordered something online and has a higher expectation when it comes to customer service.”

Finding Customers for New Forays into Delivery

Kerr points out that one of the key factors in traditional truckload or LTL carriers being successful adding last-mile or big-and-bulky delivery is access to the freight, to the customers.

“If you think about what it would take for a full truckload provider to connect into the white glove delivery demand market, or the B2B type demand market, where it's these smaller one-off type shipments, there’s obviously some of the equipment and labor and customer facing requirements that are challenges,” he says.

“But the big one is, how would you even tap into to that type of demand, and get connected with that demand and customers who are involved in that space?”

One opportunity for local and regional carriers, Kerr says, is to connect with larger nationwide shippers as a last-mile provider for them.

AlixPartners’ most recent home delivery survey found growth in the number of shippers that are pursuing a diversified carriers strategy by adding regional carriers, up to 49% this survey from 45% the year before.

“As shippers become more aware of mitigating risk and having a larger or more diverse pool of carriers to lean on, I think there may be an opportunity for your more local operators to find a way to connect with larger shippers who are getting involved in e-commerce, and they can provide a localized service for, to fulfill their e-comm demand.”

Technology Paramount to Delivery Success

For anyone involved in the delivery business, whether it’s as a contractor for USPS or FedEx freight or doing big-and-bulky last-mile white glove delivery, using technology to optimize those operations is becoming key to success — and even survival.

For big and bulky direct to the consumer delivery, “the technology really is the enabler,” explains Ryder Supply Chain’s Abeson. "When you’re talking about in-home delivery appointments, technology is essential for making that efficient for the carrier and at the same time easy for the end customer.”

For instance, Abeson says, Ryder has a proprietary system called RyderView geared towards the end consumer.

Instead of the age-old frustrations of consumers having to wait around all day for the cable guy to appear, he says, “what we've really tried to do is allow self-service capability through your phone or through the web, to be able to schedule your own delivery at your convenience,” Abeson says.

“And then there's continued communication along the way to make sure that [the consumer is] updated on exactly what's happening, all the way up to the days and hours and minutes until the delivery is made.”

He Couldn't Find FedEx Ground Contractor Software so He Built it Himself

Tim Goff came from a tech background and got into trucking as a FedEx Ground contractor.

“I found there were no tools in this FedEx Ground ecosystem,” he says. So he developed software to automate much of what it takes to run a contractor’s business and opened up GForce Software.

“We essentially train robots to do all the administrative work in a logistics company,” Goff explains. “All the financial data that you could ever imagine is crunched by these robots running at light speed. The robots talk to the ELDs and the trucks and pull information down and do automatic maintenance planning and automatic notifications and automatic work order creation and report generation and compliance management — all these things that used to take people.”

That kind of efficiency, he says, is going to be vital for FedEx contractors and others in the delivery business going forward.

“You have to find a way to automate your business,” he says. Companies such as FedEx already are using powerful tolls to help them optimize last-mile delivery routes.

“There are some even more powerful training systems under development,” Goff says. “Technology is going to be the game-changer.”

Goff says he and his fellow FedEx contractors will find that any increases in contract payments are not going to keep pace with increases in expenses.

“The only way you're going to reach your profit targets in future years is, you have to reduce the cost of your operation,” he says. “The only way to do that is to truly understand what the cost of your operation is, and what levers to pull to improve it. And then when you pull those levers be able to monitor the results and see if you achieved what you're trying to do.”

And data is the key to making that happen.

Efficiency and Visibility in the Delivery Business

Sun Logistics is a recent convert to the opportunities for improvement using technology.

Sun uses a variety of straight trucks and tractor-trailers to deliver in the New York City area and and in Miami and Southern Florida. It has the capabilities to deliver inside, ground level, dock-to-dock, with one or two delivery people, as well as white-glove service.

“We handle first and last mile freight in two of the hardest markets in the U.S. — New York City and Miami,” says COO Nathaniel Klein. Customers include major less-than-truckload carriers.

But when Klein came to work for the company that was his father-in-law’s, he discovered what he called “archaic” computer systems and worked with company leadership to change that.

“Our legacy system was not able to help us modernize our processes and grow as a leader in first and last mile logistics.”

The new system, for instance, allowed the company to improve how early drivers make their first stop, which in turn reduced the number of returns.

“We used data to identify, where’s our waste. And that data we made actionable to make changes," Klein says.

DDI Transport Provides Delivery Transparency to USPS

DDA Transport’s latest technology investment is a traffic management system that helps with scheduling, using the GPS information from the trucks and providing alerts if a truck is off-route or running late.

Not only does that improve efficiency and on-time deliveries, Andreasen says, “It provides transparency so the Post Office knows where their stuff is. The Post Office is getting into the package service and needs to provide that transparency to their customers.”

DDA is also processing payments using EDI, electronic data interchange.

“We get an electronic order that says here’s what we need you to do tomorrow, we send the information back electronically here’s what our truck did, and now we get payments,” he says. “The days of generating a lot of paper are kind of the past.”

That move to technology may be a challenge for some contractors.

“A lot of postal contractors have been in this business for three, four generations, and not a lot has changed,” Andreasen says. “Change is sometimes hard to adapt to, and I think there are a lot of postal contractors that are smaller, that have been in it for a long time, that aren’t going to be able to adapt to that change as fast as USPS requires it.”

He also believes we will see more third-party logistics companies that already are tech-savvy becoming postal contractors, then contracting with asset-based transportation providers.

“We have already seen turnover in the postal contract world,” he says, and that’s likely to continue.

Do or Die Spells Opportunity for Others

Ryder’s Abeson believes we will see more consolidation of last-mile providers.

“This post-Covid timeframe has made it challenging for many, especially those who have physical assets,” he says. “The key to the game is customer service — but you've got to have an efficient operations,” which means asset utilization.

“If you don't have the amount of volume that you need to be able to cover up those fixed costs, it's challenging from a financial standpoint," Abeson explains. "I think some of those smaller guys either could be consumed or could go out of business.”

Goff, too, predicts that many delivery contractors won’t be able to compete because they are trying to do things the same way they’ve done for decades — which could open up opportunities for more tech-savvy operators.

You Can't Run Your Trucking Business on Paper Anymore

Two years ago, Goff bought a six-truck FedEx Ground contractor operation in Memphis.

“The guy was wanting to sell, he'd been doing it 20 years. And he had no information. And when I say none, I'm talking zero,” Goff says. “He couldn't produce financials, he couldn't produce anything. When I asked him for his employee information, he wrote it on notebook paper, took a picture and sent it to me. And I don't think he’s the exception to the rule.”

Goff has been a contractor himself for five years now.

“It was way easier to make money in 2018, 2019 than it is now,” he says. “There’s nothing that I do as a contractor that is less expensive than it was four years ago. Costs have gone up three times more than my revenue.”

“So if you're one of these guys that’s been doing things on notebook paper, and you've been getting by, you didn't even realize how inefficient you were, but it didn't matter, you could still put food on the table. That's going to change.”