Supply chain disruptions have had a positive impact on final-mile providers. Shipments that used to go LTL are now going to last-mile carriers. “The delays in the supply chain mean that shippers can’t depend on LTL transportation to get things where they need when the customer needs them. In these cases, they are turning more and more to last-mile delivery partners,” points out Tim Cocchia Chief Operating Officer, Xcel Delivery Services, Phoenix, AZ and Board Member of the Customized Logistics & Delivery Association (CLDA). “Before the disruptions, LTL could get products to their destinations in a timely manner. But with the disruptions that’s no longer the case so they are turning to last-mile providers. We take delivery of the items, store them in our warehouses until they are needed and deliver them when it’s time. We have always done some of these deliveries, but the demand has dramatically increased.”
One industry that’s shifted to this approach is construction. “Builders that need products on specific days have really felt the sting of supply chain disruptions,” points out Cocchia. “Today, they can order kitchen cabinets, and have no idea when they're coming in. So, they are ordering them ahead of time and having members of our industry store them in our warehouses. That way, they know they are there when they need them. They can contact that last-mile carrier, schedule the delivery and we get it there right when they need it. This is fueled by a lack of trust in the supply chain. We heard that from a builder doing a remodel of an apartment complex here in Arizona. They were waiting to schedule the labor to do the installs until they had all the products. They didn't want to start the installs and be missing one piece and have to reschedule all the labor to come back later. They worried that if they released those guys, and they started on other jobs they might not be able to get them back. People have been burned and so now they're being more cautious.”
Supply chain issues have had a dramatic impact on companies that depended heavily on the just-in-time model. “Right now, just-in-time doesn’t work,” says Cocchia. “In the past, just-in-time made economic sense. It worked because those in procurement knew they could wait until the last minute to order what they needed and get it right away. The customer could keep their money in their bank account, order at the last minute possible, and have it show up on the day it was supposed to without redelivery and warehousing fees. Not anymore. Today, companies must order products ahead of time because they’re not sure when they’ll come in. They’ll ship those products to last-mile providers’ warehouses to hold them for as long as needed, and then deliver them exactly when they need them.”
A Change or a Temporary Reaction?
Given that this is an offshoot of what most people think of as a temporary situation, does Cocchia believe it will result in a permanent change in the way companies do business? Will it mean this new business for last-mile providers will disappear in the future? Yes and no. “There may be a small drop in business for these carriers, but it will not go back to pre-COVID, levels, even when the supply chain disruptions settle down,” he says. “I think there's a trust factor there that will take a long time to return. Many businesses had to make huge changes. Some of them really got burned and they will probably never go back to the way it was. It will certainly get better. I just don't know that it will be enough for people to trust in the old way of doing things completely ever again.”
