Reading up on the latest news and assessing the hottest trends makes up a large part of staying competitive in any market. The transportation and logistics industries are no different. Having a great understanding of the past and present might just give a logistics business (like a courier service) a leg up on future competition.
Over the last two years, the fast-paced transportation industry has undergone evolution in a few key ways. Industry veterans with their hands on the market’s pulse will note the emphasis on new technology, the evolving transportation workforce, and the growing “final mile” transportation sector. Each of these trends are important. However, rising costs are creating a situation where these trends cannot be ignored. Instead, they must be regarded and optimized to save money in every facet of the transportation business.
Trends in Technology
For businesses in transportation and logistics, investment in technology is not just necessary during the “pandemic era.” Automation and service optimization technologies are here to stay—long after the pandemic passes. The companies with the best profit margins and most competitive rates are using technology to upgrade their business.
“The demand for automation will continue to increase steadily and that will lead to the need for software upgrades and expansion,” Chris Miller told the CLDA Magazine staff. Miller is the Chief Technology Officer at Key Software Systems—a company that provides cloud-based delivery management software for transportation companies.
“While those costs will rise, they will be offset by a reduction in operating costs and an increase in capacity and scalability. This will ultimately result in better profit margins.”
Leaders at an Indiana-based courier service known as Pillow Logistics have verified Miller’s findings.
“When COVID hit, the hospitals wouldn’t let people come in,” said Matthew Straub, Executive Vice President of Pillow Logistics. He recalled one client’s needs that shifted from bulk pharmacy delivery to direct-to-consumer delivery.
“It required live tracking, signature capture, ID verification, and more. So, clients instantly needed high-level visibility and that’s where we were able to step up. Luckily, these were capabilities we already had and have since expanded.”
In 2019, Straub was hired at Pillow Logistics. At that time, the 31-year-old company was making some upgrades that would position them for growth as the market changed in 2020.
“We upgraded internal technology. We moved forward with a reinvented dispatch system that gave greater visibility to the end user. Plus, it created efficiencies regarding dispatching and related to costs.”
The Pillow leadership unit invested in technology that worked. As costs have risen over the last couple years, the return on investment has translated to less of an overall service price increase. This equates to happier clients who aren’t bombarded with rising service costs each month.
“We’re willing to look at any opportunity to improve,” said Eddie Pillow, President of Pillow Logistics. “The reason we are where we are; is our willingness to invest.”
The Workforce Evolution
In 2019, the unemployment rate in Indiana was 3.2%. Two years later, the rate shrank to 2.7%. In this state, the total available workforce shrank. For courier service providers like Pillow, the outcome was wage increases for independent contract drivers.
Weirdly enough, business leaders across many states felt the shrinking workforce—regardless of unemployment rate. Californian business leaders, for example, could not find workers despite the unemployment rate rising from 4.2% in 2019 to 6.5% in 2021.
“People don’t seem to be inclined to work due to the pandemic, stimulus money, and other factors,” Unna Edmonds told CLDA Magazine reporters. Edmonds is the General Manager of Am-Tran, a final mile service provider in San Mateo, CA.
Strange times, indeed. Final mile service providers like Pillow had to combat the deflated workforce with increased efficiency and newly installed software programs.
“We had to provide visibility and react quickly to survive and prosper,” said Straub. “We made investments to use a contractor management software that allowed us to recruit and retain contractors at a high rate. We were able to combat rising costs and the labor shortage through our people and technology. We invested in better software—the same way people can track an Amazon package, who signed for it, where it’s at, and when it’s arriving.”
Labor shortage issues proved to be especially difficult for Pillow Logistics. This shortage came at a time when the courier service provider had to grow to meet increased demand. Over the last few years, their driver base in Indiana doubled in size. What’s more, the company expanded into Louisville, KY with a new office location and new driver base in this neighboring state.
“The rising costs of owner-operators smacked us in the face the hardest,” said Straub. “It was a difficult year to retain people. There were a lot of opportunities in the gig worker space. Companies were trying to beat each other out and stay ahead of driver costs. We must provide a rate that doesn’t impact our customers as much as it could in this environment.”
In more than two years, driver wages increased 10-20% in some cases. To give fair, market-priced wages to drivers, Pillow (like so many other courier services) had to increase efficiencies and lean on new technology. Offsetting rising costs meant that transportation businesses had to work smarter, harder, and faster to remain profitable as well as affordable.
The Final Mile
Fortunately for businesses like Pillow, the “final mile” was the place to be. While service providers in the “middle mile” sector took a heavy hit, “just in time” deliveries at the local level have become a necessary portion to any delivery business. The pandemic revealed an increased need for these services as home delivery demand skyrocketed. The last-mile delivery market is currently valued at more than $108 Billion and is expected to grow, according to Brandessence Market Research. Most recently, Maersk’s acquisition of US-based final-mile forwarder Pilot Freight Services is evidence of this growth.
“When COVID hit, we found out within a week that a client needed help with 200 pallets as well as secured storage. They also added final mile delivery—this was a big change because they used to get direct shipments. However, we supported their needs very rapidly,” said Straub. “Warehousing isn’t one of our specialties. But we soon found with high product demand and low supply, our clients would order in bulk when it was available. Luckily, we have partners to help us with warehousing.”
As demand for last-mile services has trended upward, couriers like Pillow have had to shift logistics capabilities beyond store-based delivery.
“As e-commerce demand has continued to skyrocket, retail shippers are now making significant investments in growing their logistics capabilities beyond store-based delivery... The pandemic sped these trends up faster than expected, as many people opted to stay home and shop online. E-commerce - once a convenience – has for many people become a necessity,” according to an ECA blog post.
These deliveries have been coined JIT or “just in time” and have necessitated a 24/7 business model that is customer service and technology heavy. For the team at Pillow Logistics, they’ve had to dedicate their time to providing service in the specific verticals that are “same day”, “next day”, and “dedicated routes”.
Trends in technology, driver workforce, and final mile services are here to stay. Technology is being implemented to upgrade services and increase efficiencies. Businesses need employees now—contract drivers especially. And the market has spoken: Demand has increased for final mile services. Each of these trending changes to the transportation community have been exacerbated by record-high inflation. As a result, businesses have had to pay extra attention to these details to manage costs and stay in business.
Leaders at Pillow Logistics are utilizing new information to satisfy the medical and healthcare clients to which they provide service.
“I believe we will see the home delivery model continue to explode,” said Straub. “This is why, as a company, we are broadening our Statewide Next Day Delivery model.”
Pillow’s leadership suggests that paying attention to current news, information from networking organizations, and listening closely to needs of clients has kept them ahead of industry changes. Eddie Pillow is a board member of the CLDA and Matthew Straub sits on the board of the ECA—both follow trade magazines like Inbound Logistics and Parcel Magazine.
“For our service and reputation, we pride ourselves on long term relationships,” said President Eddie Pillow. “In this current environment, we’re digging deep to find support for our clients. It’s hard to say what’s next for the labor shortage and final mile. But the reason we are still here is because of great customer service and the final mile market growth. We operate in real time and meet things like labor shortages head-on. We’re lucky that our team finds so much camaraderie in our offices—at the end of the day we’re trying to humanize our work and celebrate it.”