 The Last Mile
Francis Walsh III
Executive Vice President
National Retail Systems, Inc.
In the small package industry, they say the "last mile" - the portion of transit from the final delivery center to the customer's door - accounts for the majority of cost and complexity. In the broader global supply chain operations of major retailers, the "last mile" is the "last hundreds of miles" from the destination port to the store.
That "last mile" for U.S. retailers is becoming increasingly difficult to manage. To a certain degree, retailers are victims of their own success. As global sourcing has expanded and companies have become more proficient at managing inbound supply chains, container trade has exploded between Asia and the United States. That trade growth has placed a growing burden on the U.S. intermodal transportation infrastructure.
Looking at trade forecasts, that burden will get costlier. Container traffic into the United States will continue to grow. Congestion at and around ports will pose larger delays. Getting revenue from the ports to the shelf will be increasingly difficult, particularly in the peak season sales periods around the year-end holidays.
How well retailers manage the "last mile" inside the U.S. from the port to the store will play a critical role in the competitive make-up of their companies - with significant effect on the logistics provider market. As the importance of distribution excellence inside the U.S. increases, so does the value of U.S. logistics assets - all of the trucks, distribution centers, land, experienced people, technology and anything else that makes cargo move smoothly and efficiently from California to Chicago to New York and vice versa.
This trend is an interesting reversal from last decade when the non-asset based business model ruled and received much praise on Wall Street. A shift has taken place. Logistics assets are back in vogue.
That's no secret either. Just look at what companies are willing to do to buy and protect U.S. logistics assets. The Dubai Ports humdrum is just the latest example of a non-U.S. company looking to pay a big price tag for U.S. assets. Deutsche Post's multi-million dollar acquisitions of DHL and then Airborne Express had UPS and FedEx spending millions on Capitol Hill to protect their U.S. markets. APM Terminals, the terminal management division of Maersk, is building a new facility in Virginia that will be one of the most advanced marine terminals in the world, costing hundreds of millions of dollars.
Non-U.S. companies realize the importance of logistics control inside the largest consumer market in the world.
Why? The inland portion of the supply chain accounts for almost all the cost of any international ocean shipment. What happens after the container is dropped at port in the U.S. makes or breaks a logistics strategy. Those companies that have control over this portion of their supply chain will be the market winners.
A responsive inbound supply chain allows retailers to meet demand, manage seasonal peaks and drive hot merchandise to the shelf quickly and efficiently. Information technology is essential for providing visibility and the opportunity for control and flexibility. But technology by itself is only a tool. People and effective business processes drive results. To get those results, retailers need real-time control of various assets on the ground to maximize sales and keep logistics costs as low as possible.
We tell our customers that there are three critical factors in inbound supply chain management today: options, options and options. Can you feed imports quickly into your distribution network from ports on both coasts? Do you have the right cross-dock and consolidation facilities in the right places to build cost-effective truckloads? Do you use pool distribution to streamline store delivery? Can you bypass your DCs and go right to the store to move hot merchandise if needed?
The answers to those questions will have a greater impact on the overall competitive position of U.S. retailers in coming years as the importance of logistics control inside the U.S. grows.
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