Forget Last-Mile Delivery, There’s Room for Cost-Cutting in the Middle Mile
There’s a battle raging over last-mile delivery as freight providers look to remain competitive amidst growing eCommerce. But the real battle may be yet to come. Last mile is only one end of the supply chain. Smart companies such as Walmart have started looking at middle-mile logistics as a prime place to get ahead of costs, before they trickle down to the customer.
The lesser-known “middle mile”
If “last mile” is the distance from the last point of the supply chain to the customer, “middle mile” comes just before. It’s the transport of goods from a warehouse or distribution center to brick-and-mortar facilities, where customers will eventually buy them. And though eCommerce expansion is booming, service to brick-and-mortar is still vitally important.
Why focus on middle mile?
Middle mile offers cost-saving opportunities last mile doesn’t. The same company likely owns not only the distribution center but also the brick-and-mortar location, allowing them to control both ends of this segment of the supply chain. This is key in reducing inefficiencies, and many companies have begun exercising their total control to generate savings.
Brick-and-mortar behemoth Walmart has taken a vehicular approach to cost cutting. The company has identified “milk runs” — routes that are the same every time — and begun to utilize unmanned vehicles to transport goods affordably. The retail giant expects to cut middle-mile logistics and delivery costs by half when the rollout of these vehicles is complete.
Walmart isn’t the only example. For companies not large enough to invest heavily in their own middle-mile operations, third-party freight services such as Schneider and J.B. Hunt Transport Services, Inc. have begun providing solutions. These intermodal carriers are bringing more of the supply chain in-house, to gain control over costs. Not only do they offer a stickier, more cohesive service, they’re also able to pass middle-mile cost-savings on to customers.
Perhaps an overlooked benefit of tighter middle-mile logistics is the ability to adapt to change. There’s little room for error in middle mile, which lends itself to consolidation and optimization among companies and their partners. If Walmart owns their middle mile, they have the ability to adapt. The same goes for third-party intermodal companies that control both local drayage and long-haul trucking segments.
eCommerce is driving optimization
eCommerce has disrupted the traditional supply chain. Direct-to-customer sales are the reason for the arms race in last-mile delivery. The shift in dynamic is so powerful it’s even affecting the middle mile.
To maintain competitive pricing and healthy margins in a brick-and-mortar space, companies are tightening their supply chains. Middle mile represents the biggest opportunity. Being able to offer prices comparable to or lower than digital retailers keeps customers coming back to the storefront. Cost-cutting in the middle mile of logistics is often the smartest option. Higher velocity and lower landed costs can be passed directly to the consumer, without eating margin.
Brick-and-mortar retail isn’t dead and is likely to find its own niche in shifting consumer habits. To remain an attractive option, however, companies need to master the middle mile.
Trying to cut costs in your middle-mile delivery strategy? It’s important to look beyond freight rates. Look at everything from logistical optimization to off-peak trucking to keep costs low not just in the middle, but throughout the fulfillment process. Visit our website at nvisionglobal.com to learn more.