Wednesday, June 22, 2016

Schneider Enters The Final Mile Battle - A Very Late Arrival

An interesting development over the last few weeks which I needed to digest was the entrance of Schneider National into the Final Mile foray.  My readers know I have followed the growth of final mile for many years (See where I showed XPO's acquisition in 2013 was "game over").  I was an "early adopter" of how important this segment was to the overall logistics network moving products to customers.  One thing we know is Schneider cannot be seen as an "early adopter" of anything - they are very disciplined and careful in investment.  So, this is why their entrance is so important.

The service is called Final Mile+ (JB Hunt has had Final Mile Services for many years - confusing branding by Schneider) and it appears to be a direct competitor to the XPO story of owning the supply chain from raw materials through manufacturing to retail then to the customer's home.  They acquired both an operating company, Watkins and Shepard, and a technology company, Lodeso.   The key will be whether Schneider is successful at stitching this together to give the customer a seamless view from the beginning to the end.  To this point, few companies have been able to do that and it has been tough for 3PLs to make the case that "one stop shopping" really adds value.

I personally believe the model is getting a bit crowded at the integrator level and very sparse at the operating level.  Remember, all these companies (XPO, Schneider etc.) are really just brokers to a final mile courier service.  It is at the bottom level where the problem exists.  We need more people actually doing the hard work of pick up, delivery and installation.  I don't believe we need more integrators.

JB Hunt Final Mile differentiates itself because, for the vast majority of what they do, they use their own trucks and drivers.  I think that ultimately will be the competitive advantage.  While today it may be cheaper to integrate many couriers, I think in the long run service will be the key element and the way to get that service is to own the assets.

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