Middle-mile logistics face challenges with increased shipping costs, but there is still high potential for innovation and optimization. eCommerce is boosting demand for less-than-truckload (LTL) shipping, putting strain on freight partners’ availability. While this is causing higher shipping rates, eCommerce indirectly sparks innovation in middle-mile logistics. How can businesses leverage it to adapt and stay competitive?
Shifting Shipping Demand And Availability
In eCommerce, the last mile is often the most critical link in the logistics process. The middle mile is the most crucial for brick-and-mortar businesses. This logistics stage is often overlooked by eCommerce, but its growth has highly impacted it.
The demand freight shipping companies have to balance has changed significantly over the past few years. E-commerce sales increased by over 40% in 2020, starting a major surge in online retail. This boost in sales, alongside the COVID-19 pandemic, created a massive demand for direct-to-consumer shipping. Customers wanted goods fast without going to a brick-and-mortar store.
As a result, demand for LTL shipping increased. This allows eCommerce businesses to get their goods to customers faster and in smaller batches. Typically, LTL shipping would also be more cost-effective since companies only pay for needed shipping space. However, freight partners have struggled to meet demand.
The capacity of shipping space and available drivers do not match the amount of LTL requests trucking companies are getting. As a result, LTL rates are going up, making it an increasingly expensive shipping option. The rate per pound index is estimated to be 66.5% above the 2018 baseline as of 2023. This isn’t just a problem for eCommerce, either.
More trucking companies are shifting their available drivers and vehicles to LTL shipping to meet demand. This means there is less availability for TL routes. It is also an indicator of the strain eCommerce is putting on freight shipping. Middle-mile logistics are increasingly being forced to adapt to the needs of last-mile logistics. Relying on third-party LTL shipping is becoming an increasingly less cost-effective shipping option for the middle mile.
Keeping Brick-And-Mortar Competitive
E-commerce poses serious competition to brick-and-mortar retailers. The convenience of direct-to-consumer shipping is often seen as a major advantage for eCommerce. However, middle-mile logistics can help brick-and-mortar retailers create their competitive edge. Despite the rapid shift to eCommerce in 2020, 66% of shoppers prefer a hybrid experience, combining in-store and online retail.
There is increasing motivation for optimizing the middle mile today since customers shop in-store and online. Even eCommerce retailers can use the middle mile to adapt to the demand for brick-and-mortar options.
One great example of this is online grocery shopping which utilizes in-store pickup. Food and beverage products can pose a particular challenge for eCommerce businesses since they require highly controlled environments. Companies must ensure their distribution partners observe key food safety SOPs, such as the safe handling of allergens and proper pest control practices.
The sensitive nature of food and beverage products makes relying on last-mile delivery challenging. However, middle-mile shipping is already commonplace in this industry. Businesses can rely on that existing infrastructure to get goods most of the way to customers and then use in-store pickup to cover the last mile.
This allows customers to get their groceries at their convenience while reducing last-mile stress for businesses. Plus, people retain the ease of online shopping with the option to order groceries online or in an app. Well-optimized middle-mile logistics allows companies to provide faster in-store order availability than direct-to-consumer shipping. Brick-and-mortar retailers can leverage the convenience of online shopping with the rapid order fulfillment of in-store purchases.
Any business with a storefront can use in-store pickup options, including eCommerce and brick-and-mortar retailers. Strengthening order fulfillment removes the stress of last-mile delivery but requires a greater focus on middle-mile logistics. Demand for middle-mile logistics solutions will likely increase over the coming years as more brick-and-mortar businesses implement order online, pickup in-store.
Greater Emphasis On Middle-Mile Optimization
Over the past few years, much discussion around logistics optimization has been focused on the last mile. That’s starting to change as eCommerce faces new logistics challenges. The last mile can only be optimized so much, but the middle mile holds additional potential for streamlining order fulfillment.
Increasingly high customer expectations in eCommerce motivate businesses to optimize their middle-mile logistics. A more streamlined middle mile can help reduce pressure on the last mile. There are many opportunities for improvement.
For example, the middle mile often repeatedly uses the same or similar routes. They are sometimes even known as “milk runs” since they are used so often. Businesses and logistics providers can optimize these routes to be as fast and fuel-efficient as possible. They may even be prime candidates for automation.
Automated order fulfillment can involve any stage of the logistics process, from automated demand forecasting to robot-operated warehouses. E-commerce has accelerated interest in automated order fulfillment, but the middle mile remains ripe for innovation. In the next 10 years, autonomous vehicles could automate repetitive middle-mile routes.
Developers are already working to make this a reality. For example, in 2021, Walmart announced a driverless last-mile delivery pilot project the retailer had been running in Bentonville, Arkansas. The program has yet to be scaled for widespread adoption, but Walmart did report positive results from the pilot project.
E-commerce is creating more intense competition in the retail space, sparking innovation. Middle-mile optimization is getting more important as businesses work to adapt and find new ways to meet demand. More retailers will likely test automated middle-mile delivery and potentially develop new solutions in the years ahead.
Innovating Middle-Mile Logistics
E-commerce and brick-and-mortar businesses can leverage middle-mile logistics to give their customers a better experience. E-commerce is increasing demand for LTL shipping, straining the capacity freight partners have available and driving up shipping costs.
As a result, businesses are turning to innovation and optimization to make the middle mile more efficient and cost-effective. Optimizing logistics helps reduce strain on the critical last mile for eCommerce businesses. Brick-and-mortar retailers also can use it to stay competitive with direct-to-consumer online retailers, making it a win for all parties.
About The Author
Emily Newton is the Editor-in-Chief of Revolutionized. She regularly explores the impact technology has on the industrial sector.