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.

XPO Finds "The Missing Link" in Big Box Home Delivery - Game Over?

Last week XPO Logistics (See other entries about XPO here) made what I consider a ground breaking announcement and acquisition: They acquired Optima Service Solutions.  If you remember, a few months ago XPO purchased 3PD which catapulted the company into the a leading position in big box (Think appliances, home exercise equipment, massive TVs etc.) home delivery.  It was a big and bold move to complete the supply chain (They already had services for inbound, redistribution and this gave it "final mile" capability) for XPO.

However, those of us who have been working home delivery (This was a major focus of mine at a major appliance manufacturer) have known for years that the big struggle in this space is in installation and service along with returns.  The biggest reason people shy away from internet purchasing of big items (for this example lets say a refrigerator) is because it is so hard to coordinate installation and, if something goes wrong, who do you call?  The acquisition of Optima by XPO solves that problem for home deliveries made by XPO / 3PD.

XPO will now have the capability to provide a seamless solution.  Before this acquisition the purchase of the refrigerator went something like this:

1. You buy from an internet retailer who may or may not coordinate the delivery (some just give you a phone number to a LTL carrier and basically you are on your own). 
2. The refrigerator is delivered to your curb (many will only do curbside deliveries).
3. The driver may or may not help you unload (many LTL carriers will tell you that you have to unload the refrigerator yourself). 
4. The driver leaves and now you and your wife stare at this new beautiful refrigerator sitting in your garage and your wife says to you, "What the hell are we going to do with that"?

Now think of the "new world" of big box deliveries (again, our fictional refrigerator) with the  integrated and seamless solution XPO will offer: 

1. You choose an internet retailer specifically because they have the XPO / 3PD / Optima team as their delivery agent (Same refrigerator but this retailer is preferred due to the delivery mechanism).
2. When you coordinate the delivery you tell them you want it fully installed and the installation is seamlessly scheduled for you.
3. When the driver shows up to deliver the refrigerator the installation technicians arrive at the same time and they take over. 
4. Your refrigerator is installed, icemaker tested, etc. etc. 
5. You and your wife look at the beautiful new refrigerator where it belongs - installed and ready to be used. 

This is why this acquisition is so important.  The complexities of buying a big box item over the internet are lifted from the consumer and put where they belong - on the delivery agent.  No one has been able to do this better than Optima and now Optima is exclusively part of the XPO / 3PD network.  

Bradley Jacobs has, in one masterful stroke, accomplished two great things for his company.  First, he has given the company the ability to make a seamless end to end solution for home delivery all the way through delivery and service.  Second, and probably as important, he took the leader of this service, Optima, off the market for other home delivery agents.  Now, if you were a local home delivery agent and behind the scenes you were using Optima, you will no longer be able to do to that as Optima is exclusive to 3PD.  

This is the equivalent of a "Pick 6" in football.  Your great defense not only makes a great defensive play but it also scores a touchdown.  

The last frontier for potentially preventing people from buying big box items over the internet is now just returns - and don't bet against XPO in this space - they will figure it out. 

United States Post Office and Amazon - Sunday Delivery in NYC

Sunday delivery was inevitable (USPS and Amazon team up) and I have talked about this a few times.  In an article titled "Home Delivery Lockers at Wal-Mart" I discussed how Amazon might be able to team up with UPS to fight the "Clicks and Mortars" advantage of Wal-Mart.

But buried in that article I said the following:

"Of course, there is still partnering with the Post Office (interestingly UPS has already started doing in the sustainability space) which I think makes a lot of sense."

I also said that the United States Post Office could be the big winner in the fight for immediate home delivery as they already have a 6 day per week infrastructure to make this happen.   I wrote an article over a year ago titled: "Could the Post Office Be The Big Winner in Same Day Delivery?"

It appears they have, at least in NYC, started to win this battle.

XPO Logistics and 3PD - An End Run Around Coyote Logistics?

Back in November of 2012 I reported on XPO Logistics and their "insane" growth pattern.  The company, and its CEO Bradley Jacobs, seem to have no lack of money or desire to expand and acquire. In that post I said you should watch this company and time will tell. 

Today supported my claim I made back in November in a big way.  They have purchased one of the premier home delivery or "final mile" companies in the Country - 3PD.  This puts XPO in an entirely different league than most brokerage houses because it puts them squarely in the middle of a growing trend:  Final Mile Logistics. 

I have reported on FML extensively as well and now it appears there is a marriage made in heaven.  It will be interesting to see if the two can be brought together.  One thing this acquisition does prove is XPO logistics is not just about "dialing for diesels" but rather they want to get into the heavy lifting of logistics.  I think it also shows incredible foresight as the mega trend story for sure is the massive growth of this final mile segment.  Will a broker model win out over an asset based model?  Do they serve the same customer?  Can XPO overcome the inherent high costs of home delivery?  

All of this is yet to be seen and I can say however it appears that if anyone can do this right it will be XPO Logistics. 

Now the question is where does this leave the fast growing upstart, Coyote Logistics and the old guard of brokerage C.H. Robinson?  Coyote has grown rapidly and shown a great skill set in putting new and innovative technologies to use.  However, this move by XPO Logistics appears to be an "end around" around, over, and through Coyote's model.  Does this leave Coyote to be just "another broker" while XPO logistics is now branching out into more innovative services?  The initial reaction would be yes however I do think time will tell.

As far as C.H.Robinson is concerned, I think they will continue to be the "broker to the stars" - meaning a big brokerage house for huge industrial shippers.  I am not sure they will compete in this space with XPO Logistics or even want to.  

Finally, I must say the reaction of the market is ludicrous.  If I were a gambling man I would short the hell out of this stock.  Right now we are talking about a company (XPO) that is losing money and losing a lot of it.  Even with this purchase and even if 3PD is wildly profitable it does not change the fact that the base business is losing money.  Further, there is a real question if there are any core synergies between a truck brokerage company and 3PD beyond the fact that they do not own assets.  I just cannot in my wildest dreams comprehend how this purchase could or should add 15% to the value of the company.  

But, again, as I am fond of saying... we shall see. 

Amazon Fresh - Amazon Groceries to a Door Near You

A fascinating discovery occurred the other day on my way to Chicago from Michigan.  As I was driving down I-94 I saw a delivery truck coming the other direction.  It looked a lot like the size / model of a UPS truck except it was somewhat lime green.  On the side of the delivery truck was a logo that said "Amazon Fresh".  It had the distinctive Amazon "arrow" logo and I thought to myself - OK, here it comes.

When I arrived at my location I immediately googled Amazon Fresh and was taken to their website and found it fascinating that it said " They offered limited delivery to Seattle neighborhoods" yet I had just seen an Amazon Fresh delivery truck in Southwestern Michigan! I had heard of this even as far back as 2007 and 2008 however I was shocked to see the truck in my area.

Then today Twitter and other news services lit up with the news Amazon is going to dramatically expand its grocery delivery service.  Those of us who were around in the late '90s remember webvan, Peapod and an entire host of these that ended really badly.  However, Amazon has been able to execute extremely well those things others could never figure out.  I would not count Amazon out at all and I would never discount their ability to make this work.

Along with a massive expansion of DCs, a push into same day delivery and now Amazonfresh going nationwide (or at least expanding) I would be very careful if I were a bricks and mortar retailer.  These guys are for real and it looks like they will be a force to be reckoned with in grocery delivery. 

Note:  I have written fairly extensively about the "delivery wars" including the idea of crowd sourcing for home delivery.  It is worth reading through all of this as you will see a pattern developing and a true "war" about to take place. 

Crowd Sourcing Logistics Comes to Wal-Mart

We have heard of crowd sourcing when it comes to many areas and specifically, mostly, in IT work.  Essentially you allow the "crowd" to do the work for you and a lot of times it is free.  Think "open-source" type work.  Everyone donates, everyone helps and everyone can become a worker for your entity.

Another big area where this is popular is in crowd source funding where just about everyone can be a mini bank and provide micro loans to entrepreneurs.  While this has been a niche area in logistics, Wal-Mart now announces they will test this for home delivery. 

Remember what I have written about which is the last mile / final mile / home delivery is the most expensive part of the logistics chain getting products from production to a consumer.  One reason why stores exist is because it allows a company to aggregate the product and you, the consumer, essentially handle the final mile to your home.

Now imagine you are checking out at Wal-mart and the following interaction occurs:

• YOU:  I am checking out and paying for my product..just as I am about to leave the cashier turns to me
• CASHIER:  I see you live on Smith Drive in Springfield.  I have a customer who just ordered some items and their house is only 1/2 mile from your house.  Would you mind delivering the product for me?
• YOU:  [GULP!]  Huh?
• CASHIER:  Yes, it is only this small bag and I will give you $10 off your purchase if you do this for me.
• YOU: [Still thinking this is odd yet intriguing] - Really?
• CASHIER: Yes, really (channeling Austin Powers).
• YOU: [As odd as it seems you think what the heck] OK, sure.

Wal-Mart gives you a $10.00 discount and off you go to deliver your product, get your $10 off and the home shopper gets very low cost home delivery.

Of course, there are all sorts of security concerns and other issues (What stops you from taking the product and never delivering it) but this is such an interesting idea I think it is worth investigating and perhaps this is the beginning of a huge trend in "Crowd-Source Logistics".  

There is a company which has a very interesting model called Zipments.  This is a fascinating idea which I must apologize I had not seen before.  Zipments matches required shipments with approved and screened couriers in big cities.  This is a little different as it is probably closer to independent contractor courier services than true crowd sourcing however it does appear this model is going to be very disruptive, in some form, to the normal delivery method. 

I could actually think about this going one step further in a Wal-Mart or Target.  I could see them having your credit card number and using the chance of a penalty charge ensuring you make the delivery and also a "load board" on the wall so even non customers could come in, see deliveries needed, and taking them.  

Everyone has a smartphone so getting a signature and passing that signature back to the company is easy.  I could even see, rather than a load board, a live APP existing where you could see what is being offered at multiple stores, bidding on the delivery, and building efficient routes all within a simple APP. 

Everyone can be a final mile delivery person!  Watch out Amazon.. Something like this will work.  

The Math Behind Tracking Packages - Marketplace, NPR

NPR does a very good podcast on the "math behind the packages".  A very fascinating quick story on how the "quants" are taking over logistics as well as finance.  Being able to develop mathematical algorithms is critical to UPS' mapping success.  Their mapping success is critical to the efficient routing of drivers.

Have a listen and enjoy: