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Last-Mile Delivery Offers Big Opportunities for 3PLs

A recent report published by Armstrong & Associates, Inc. and the National Home Delivery Association predicts that last-mile delivery of large and bulky e-commerce items will be big business for 3PLs through 2025.

According to the report, the transport and logistics industry is well-positioned for growth in the coming years, with the highly-fragmented $9.3 billion e-commerce market expected to expand at an impressive 11.8% rate annually over the next three years. This lucrative sector has drawn interest from many major service providers as they seek out opportunities to capitalize on its relatively unpenetrated potential, according to Evan Armstrong of Armstrong’s president.

As e-commerce retail sales continue to surge, 3PLs have been upping their game by utilizing fleets of independent contractors and freight brokering operations for last mile orders. In addition, industry specialists are broadening the scope of their services to handle large items like furniture or appliances in response to consumer demand.

The report noted that in the increased demand for last-mile delivery, there’s a growing trend of utilizing freight brokers to source last-mile carrier capacity. Brokers will also play a more relevant role in last-mile relationships as carriers seek to avoid conflicts arising from state worker classification laws.

The report canvassed 24 companies, ranging from very large enterprises to businesses with as little as $7 million in annual revenue.

Last-mile delivery of small packages continues to dominate e-commerce; however, consumers and businesses are increasingly ordering larger items like furniture and appliances. Unfortunately, the costs associated with delivering these bigger products can be daunting – comprising up to 40% of total transportation expenses! Making matters more difficult is that such deliveries often require a number of steps beyond just dropping off merchandise, including entering customer residences for setup or installation.

Last-mile delivery services could prove beneficial for LTL carriers. In the report, it was revealed that specific value-added ‘white glove’ services can bring in significantly more revenue than smaller shipments – citing a bedroom set delivered, assembled, and installed as an example of a $250 upcharge compared to only $50 from less intensive deliveries. By investing into this specialized service sector, many carriers could potentially increase returns and expand their business opportunities.

Last-mile delivery remains a challenge for 3PLs, but recent improvements in service and IT have seen the segment become increasingly competitive. According to Armstrong, this sector of logistics is only getting better.

 

Source: Freightwaves