Companies Addressing Last-Mile Delivery Challenges Amid the E-Commerce Boom
An unsurprising beneficiary of the explosive growth in e-commerce (which generated some $431.6 billion domestically in 2020, according to market research provider Statista) is the last mile delivery sector. In transportation logistics, the last mile – a term coined by the telecommunications industry in the early days of the Internet when service providers experienced challenges connecting individual homes to main telecom hubs – refers to the last leg in transporting packages to their final destinations.
The last mile segment, expected to grow to approximately $51 billion by 2022 as deliveries grow from e-commerce companies like Amazon.com Inc. (Tii:AMZN) and Walmart Inc. (Tii:WMT), is a challenging and complex one in which to operate. Consumers look for fast delivery, precise order tracking, security and insurance and convenience, while the shipping companies that outsource last-mile logistics look at costs, efficiency and transparency. Technology needs to play a vital role throughout to ensure both sets are satisfied.
As consumers increasingly turn to e-commerce for all their shopping needs, fast, efficient last-mile services have become mandatory, with companies vying to meet those requirements. Here is a look at a few of them.
As the North American leader in specialty vehicle manufacturing, assembly, and upfit for the commercial, retail, and service specialty vehicle markets, The Shyft Group, Inc. (Tii:SHYF) manufactures a robust lineup of vehicles for last-mile delivery companies and other markets. Its portfolio of brands includes Utilimaster, Royal Truck Body, DuraMag, Magnum, Strobes-R-Us, Spartan RV Chassis, and Builtmore Contract Manufacturing. For the first quarter of 2021, Shyft reported that sales increased 11.8% to $197.9 million on solid performances from its parcel delivery and luxury motor coach segments. For full-year 2021, the company anticipates reporting net income of $51-$58 million on revenues of $850 to $900 million. The anticipated results mark an increase from adjusted net income of $48.2 million and sales of $676 million in 2020.
FedEx Corp. (Tii:FDX) is another beneficiary of the e-commerce boom. Company revenue for the fiscal year ended May 31, 2021, increased nearly 30%, primarily due to volume growth. The multinational delivery services company serves more than 220 countries and territories and oversees a diverse portfolio of transportation, e-commerce, and business solutions. Its network reaches more than 99% of the world’s GDP. Citing the exponential growth of e-commerce accelerating demand for reliable, autonomous solutions, FedEx partnered with robotics manufacturer Nuro to test next-generation autonomous delivery vehicles within FedEx operations. The Nuro pilot is the latest addition to the FedEx portfolio of autonomous same-day and specialty delivery devices to advance last-mile logistics.
A 14.3% year-over-year increase in average daily volume resulted in a 27% rise in first-quarter consolidated revenue for United Parcel Service, Inc. (Tii:UPS). The shipping/receiving and supply chain management giant, which delivers more than 24 million packages daily, expects strong volume to continue going forward. The company, which was launched in 1907 by two teenage entrepreneurs with a $100 loan, now projects 2021 consolidated year-end revenue to range from approximately $98 billion to $102 billion compared with $84.6 billion for full-year 2020. UPS and CVS Health Corporation (Tii:CVS) are jointly exploring the use of drone delivery to tackle last-mile issues related to prescription drugs for those who are unable to travel to pharmacies. Amid the pandemic last year, the company’s UPS Flight Forward subsidiary used drones to deliver prescription medicines from a CVS pharmacy to The Villages, a Florida retirement community of more than 135,000 residents.
Plagued by a lack of control over its deliveries and rising shipping costs, e-commerce behemoth Amazon.com, Inc. (Tii:AMZN) invested heavily to take matters into its own hands by establishing Amazon Logistics to handle its last-mile delivery efforts. Amazon Logistics' fleet now includes electric-powered delivery vans, drones, sidewalk robots, and through a host of partnerships with third parties, addresses rapid delivery demands from its e-commerce site and Whole Foods subsidiary. Amazon’s CFO Brian Olsavsky disclosed that the company increased its logistics capacity by 50% year over year and now handles more than half of its own deliveries, becoming less dependent on external carriers. The global e-retailer is showing no signs of slowing down its last-mile efforts. Earlier this year, the company ordered 100,000 custom electric delivery vehicles from electric vehicle maker Rivian.
Last year’s stay-at-home orders influenced buying behavior in ways that are likely to become a permanent fixture. Massive capital expenditures by logistics companies and technological advances in the space underscore the importance of delivering products fast, accurately and affordably.