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Oct. 14 2008 04:49 PM

Earlier this decade, word went out that last-mile delivery was a tough genre to master. Karl Meyer apparently didn’t get the memo. In 2001 — at a time when “e-tail” enthusiasm was beginning to wane and many aspiring last-mile providers were throwing in the towel — he decided to start 3PD Inc., a company that specializes in providing last-mile delivery services for heavy goods.
Today, his $300 million venture has close to 500 locations, makes nearly five million deliveries per year and routinely works with most of the biggest names in retail.
“A lot of people may have gotten off the last-mile bandwagon,” says Meyer. “But it’s still an exciting business proposition with a lot of opportunity.”
In this exclusive interview, PARCEL caught up with Meyer to discuss why he thinks the prognosis for last-mile excellence has never been more promising — and what he thinks companies are still getting wrong.
PARCEL: When you started 3PD in 2001, dot com fever was going strong, and last-mile delivery was at the top of many supply chain agendas. Given all the changes in the marketplace, if you had to do it all again . . .
Meyer: We’d do it in a heartbeat. The e-tailing boom may have come and gone. But the need for strategic last-mile delivery is as critical as ever, especially with heavy goods. Any way you look at it, it’s still an $8 billion to $10 billion industry with a steady supply of customers and a wide range of revenue streams ranging from the Internet and catalogue sales to in-store orders.
PARCEL: The big challenge at the beginning of this decade seemed to be finding a way to avoid shipping dollars out the door with each individual order. Do you think that’s still the case?
Meyer: It is — but not necessarily for all of the same reasons. Today’s consumers are more knowledgeable about the fact that their orders will include a delivery cost. But they still don’t have a firm grasp of exactly what’s involved with getting purchases to their doorsteps, so they continue to be prone to delivery sticker shock, especially if they’ve purchased a big-ticket item.
Their feeling is, “I’ve just spent $1,500 on a new refrigerator or couch, so surely you can give me a break on the shipping,” when, in fact, you probably can’t because you’re probably running your delivery operations at cost.
By contrast, retailers and logistics industry players have become a lot savvier about the complexities of home delivery. Many have learned the hard way about what is — and isn’t — possible with residential delivery. And they’re trying to apply those lessons where they can.
PARCEL: You said “trying to apply” those lessons. Does that mean they haven’t been successful?
Meyer: The last-mile sector is still a huge work in progress. For starters, there haven’t been a lot of big players beyond the small package delivery level. So in order to get nationally consistent delivery service, many retailers that sell larger or heavier items have had to operate their own fleets, and that’s a tough feat to pull off well if you’re not the kind of company that eats, sleeps and drinks home delivery. Few companies can honestly say that managing a private fleet is a core competency of theirs.
Plus, many companies’ logistics resources have been focused on other pressing matters — like setting up global supply chains and coping with escalating fuel costs.
PARCEL: So do you think last-mile transportation has fallen off most companies’ agendas?
Meyer: At the very least it’s been back-burnered. Companies have been faced with a large number of simultaneous supply chain challenges, and as a consequence, some initiatives like last mile have had to take a number.
PARCEL: All of which begs the question: Is it a good time or a bad time to be a last-mile logistics professional?
Meyer: In many ways, it’s a great time because there’s so much potential to make a positive impact on customer service and the bottom line. Most companies’ last-mile operations still have vast pockets of inefficiency and wide windows of opportunity. And if those are addressed, it could actually help companies do a better job of coping with some of those other challenges.
PARCEL: Care to elaborate on any of them?
Meyer: For starters, there’s the whole issue of order visibility. Most shippers are more than willing to pay for sophisticated tools that allow them to keep a handle on inventory all the way from Asia to the Americas. But a lot of them are still working blind after products leave the DC to travel the final 50 to 100 miles to the customer, which is a shame, considering that’s the time when most customers are likely to want very precise details about their shipment location.
Supply chain autonomy at the store level is also huge. Too often, companies’ individual stores seem to function as their own logistics silos with their own fleets or designated transportation vendors. It sounds good in theory, but it eliminates the possibility of combining multiple stores’ orders, running them through a route optimization program and taking advantage of economies of scale.
But the biggest problem by far is probably just the way people underestimate the last mile.
PARCEL: In what way?
Meyer: In every way. For example, a lot of businesses underestimate the complexity involved with last-mile deliveries. They assume it’s predominantly about the driving when, in fact, it’s often about a lot of other premium services like installation or assembly — and pricing and scheduling accordingly.
A lot of retailers’ employees underestimate last mile’s cost, which is why some store associates or customer service reps don’t think twice about agreeing to rebate the cost of a delivery when a customer implies the expense is going to be a deal-breaker. They truly don’t realize that by doing so they may have practically given away the store.
And I truly believe that most companies underestimate what having a high-quality last-mile delivery process in place can do for their overall sales — and not in terms of the products people buy and get delivered. Delivery doesn’t just get products from point A to point B. It often keeps people shopping in your stores instead of someone else’s.
PARCEL: You mentioned that there weren’t a lot of large last-mile delivery providers in the industry, at least not for heavy products. Do you think that’s played a role in the inefficiencies you describe?
Meyer: Absolutely. Our industry has historically been very fragmented, and anytime you have fragmentation you have fewer opportunities to leverage and analyze based on higher volumes. Bigger isn’t always better. But there’s something to be said for having the bandwidth to invest in the right kinds of systems and operations — and being able to provide consistent service across multiple markets.
PARCEL: One last question: Where do you see the last-mile industry going in the next 10 years?
Meyer: Nowhere but up. The attention paid to the function may wax and wane, and final-mile delivery may never get easy to provide. But some customers will always need their retailers to make “house calls,” and professionals with the expertise to help them do that should be able to parlay it into great success.