As with any major societal crisis, COVID-19 has already brought significant changes to the way we work and live. Masks, social distancing, online meetings have all become a way of life for a large portion of the U.S. population. So, too, has online shopping experienced changes — routine package and food deliveries are a frequent occurrence, accelerating an ecommerce trend that was already responsible for displacing big box department stores and vacating shopping malls across the country.
In a wide-ranging interview with Merchants Fleet CEO Brendan P. Keegan, we discussed how this shift to eCommerce and last-mile deliveries has impacted fleets, how they should be handling the surge in demand, and what the future of fleet operations look like as the surge in deliveries is heading to a holiday “ship-aggedon.”
Q: Last-mile delivery has experienced significant growth. Can you talk a little bit about this growth, and why we’re seeing such an explosion?
Brendan P. Keegan: Without a doubt COVID-19 accelerated the growth of both eCommerce and the demand for last mile deliveries. Just a year ago, only 10.7% of all goods were purchased online. Today, eCommerce sales have grown by over 30% in the U.S.—directly in response to the pandemic.
But it’s more than just COVID-19. The shift was already occurring. Consumers increasingly want the convenience of having goods shipped directly to them, and that’s given rise to a new movement in the world of shipping—which at Merchants Fleet we call B2Me, reflecting this really personal, individualized delivery process. To put into perspective the scale of this consumer shift, 2 million packages per day will be delivered in vehicles managed by Merchants Fleet this holiday season.
The combination of what was already occurring and the increased demand brought on by COVID-19, with the expected seasonal influx in demand due to the holidays, are all lining up to create a period of intensely high demand — which has been nicknamed “ship-aggedon.”
Q: What does this shift in consumer preferences mean for fleets?
Keegan: It’s clearly revealing how fleets need to shift or focus their operational priorities. I’ll give you a few examples of areas that I’d advise fleets to focus on.
First, work on attracting and retaining drivers. Pre-COVID-19, the industry was already experiencing a driver shortage, which was expected to balloon to a need for 1.1 million drivers over the next decade. It’s not just finding the drivers—holding onto them is maybe even tougher. Examine systems you have in place to hold onto these valuable employees—bonuses, time off, nicer vehicles—listen to what motivates them and get creative.
Second, optimize your operations — and your bottom line. A study by Capgemini found that last-mile deliveries cost businesses an average of $10.10 per customer, but customers — on average — only pay $8.08. That’s certainly not an economic recipe for viability. That being said, demand for quick deliveries will only increase — particularly as the pandemic continues and we head into the holidays — which means minimizing operational costs is critical for retailers.
Finally, I’d recommend revisiting the vehicles you’re relying on to make deliveries. While vehicles like box trucks will still be needed for large parcel deliveries, vans, SUVs, and even sedans can be used effectively to make small parcel deliveries. Using smaller size vehicles whenever you are able could simplify operations from a personnel perspective, eliminating the need to hire drivers with commercial licenses or training. It also allows you to save the small capacity and large capacity cargo vans and box trucks for the larger deliveries.
Q: What steps can fleets take now to prepare for your prediction of a “ship-aggedon”?
Keegan: “Now” is really the operative word. I’d advise getting assets in place now, including rentals, which will allow you to scale up quickly to meet demand. And, going back to my last comments, get your drivers in place now.
More importantly, though, use fleet data to identify usage patterns, so you can plan for regular maintenance and identify opportunities to reduce downtime.
If your fleet is managed by a fleet management company, work with them closely to help you fleet up when the time comes.
Q: What do fleets need to watch for as last-mile demand continues to increase and the industry evolves?
Keegan: Fundamentally, technology is driving the future of last-mile delivery, making it easier and more cost effective for retailers to deliver customer orders.
For me, the two biggest technological developments related to last-mile delivery vehicles are electric vehicles (EVs) and connected automated vehicles (CAVs).
The prices of EVs have come down — due to significant battery cost reduction — and this trend is expected to continue, with Carnegie Mellon University forecasting that some EVs will reach the same sticker price as their internal combustion engine equivalents by 2025. This is really exciting news from an operational perspective because EVs have much lower maintenance costs, averaging a visit to the shop only once or twice a year for routine tire maintenance and inspection. From a fueling or power cost perspective, EVs provide 10 more miles for the same price per gallon of gasoline.
An emerging trend is the move from telematics to CAVs. This will deliver significant operational efficiency for businesses, including improved vehicle communications, which will result in more real-time information exchanged with drivers. CAV technology also allows drivers to safely optimize routes, increasing pick-up and delivery efficiency — making inroads into the costs we were talking about earlier — and it allows for detailed fleet movement analytics.
If you don’t have CAVs in your fleet at the moment, you can still use third-party telematics devices to get useful driver behavior and location data now.
To learn more about how Merchants Fleet can help you meet the surging demands of last-mile deliveries, contact Merchants Fleet online, call 866.653.2737, or email leasecontact [at] merchantsfleet [dot] com.