April 26, 2021

Apr 26, 2021

We were joined by our CRO, Dan Byrne, to discuss the stages of building a final mile service, scaling that service, and the dynamic nature of mature final mile programs that give lots of great options to consumers and give our customers even more saving in shipping and inventory costs. 

 

Dan, thanks for joining me today. Can you walk me through the stages of working together with our customers to build and/or scale their final mile program with USPack? 

 

I think that from our experience, we’ve seen and assisted companies in various stages of evolving and growing their final mile delivery programs. 

Probably the first stage of that is to enable a program. “What combination of technology and operational capabilities can you deliver to me to get me into the delivery business and help me to start participating in the delivery economy? 

We find that what’s critical in forming a relationship like that is a partnership that’s based on testing and experimentation. 

Frequently our customers are looking for the right combination of service attributes to get the customer to say yes and convert an order. So that will be some combination of pricevehicle profile, speed, delivery commitment, and customer experience to deliver both operationally and technically a capability that they can sell and bring to market for their customers. We’re very good partners from that standpoint. We’ve had a lot of experience with pilot programs and testing programs. We’re pretty nimble from that perspective and have a lot of experience and can support customers in that stage of the journey. 

Then the next stage and probably the scariest stage is when you get traction. When you’ve set the dials, the customers set the dials, the right way and the customer says yes to whatever combination it is and customer can be almost overwhelmed by the demand that they have. So scaling from a final model delivery perspective at that point in that stage is really about our ability to source drivers and manage the variability of demand. 

Frequently our customers are not going to have a base to forecast against, so there’s going to be a wide amount of variability and volatility in the demand profile. And we are, without a doubt, experts at being able to match capacity with demand and manage with our customers through those peaks associated with hyper growth. 

Being a 100% independent contractor owner operator model is critical to that. It gives us added flexibility and being able to deploy and redeploy drivers to the right market. Being able to source quickly and effectively, I’d say even across the board source drivers and bring them on board to our platform, is critical. 

ICON 2.0, Independent Contractor Onboarding is what ICON stands foris a proprietary technology platform that we developed that automates all aspects of driver sourcing up until a field manager meets with an IC driver candidate to discuss capabilities, look at the vehicle, and negotiate rates. Everything else, from advertising to contract document execution, to direct integration with background screenersmotor vehicle records screening services and drug testing services is completely automated. 

That’s allowed us to average an eightday cycle time from placing an ad to getting a qualified screened driver on board and on the road executing deliveries. That’s been a huge critical competitive advantage for us in the market. 

So, we can keep up with scale and allow customers to capture that demand that they’ve been able to locate. 

And then the last stage of scaling is sort of is when the program matures and then our customers are going to want – they have critical mass – they are going to want to start to manage final mile delivery the way that they manage other transportation modes like truckload and LTL, and that’s going to be metrics driven with a full set of KP’s that are driven by technology and data. 

And again ADDI, our technology suite, ICON is part of is a part of ADDI, but the ADDI technology suite is fully functional and capable of providing and managing against customized sets of KPIs and presenting that information in a dashboard format through the new portal that we have to allow customers to gain visibility and manage a large, mature supply chain program in the final model, the way that they want to based on facts and based on data. 

 

And once we’ve worked with company to help mature their final mile program or when we started working with a customer with an existing mature program, what are some interesting phenomena you’ve seen that make the final mile dynamic even more interesting. 

 

At scale, when we’ve kind of got critical mass in the programs that mature, we sort of see a secondary effect where the consumers demand is more dynamic with respect to these final mile delivery programs. Their order preferences will sort of move between delivered from store, curbside pickup, and pickup inside the store. And these will sort of be kind of at the point of purchase decisions that are made by consumers. 

Soa couple of things that we’ve seen that have happened – that we’ve experienced with our customers as a result of that. 

Kind of a proliferation of programs and the desire to have transportation support for those underneath a single providerAnd you may not think that pick up in store or curbside has a delivery component to it, but that’s the second effective scale. Which is, there’s a tremendous amount of pressure that’s put on inventory costs to support these high-speed delivery programs and what’s important is that a retaileror any business that’s in final mile delivery, gets the maximum out of the inventory that they have in market that’s currently in market that’s currently closest to the customer. 

So in addition to all these direct-to-consumer delivery programs, we’ve increasingly been supporting our customers with deliveries that moved inventory from where it’s dormant to were active demand is – almost on a daily basis. 

Store to store transfers, or supporting a curbside pickup program or delivery program. If I’ve got a certain set of SKUs that have had a product over or across town, but I want to get it to a place where I’ve got a promotion running or I see patterns of active demand for pickupI’ve got to get that inventory there rather than ship it through the supply chain again and double my inventory costs. 

That’s incredibly, incredibly important. 

We also are seeing as the store becomes more of a fulfillment hub in addition to a commerce hub, that there’s a lot of outbound orders that are being filled that are going into multiple other transportation modes. You’ll see a lot of apparel retailers, Targets probably the best example of this, fulfill a large portion of their online orders from stores. They need to inject that volume into parcel carriers. And we’re kind of almost creating a reverse logistics, where the store is the origination point and we bring the consolidation points or somehow transport that locally so another carrier can execute on getting that product across the country for final mile delivery to a consumer. So, it’s really dynamic. 

The rules are being changed, but what’s critical is having a cost-effective transportation solution to move product short distances in small quantities, and that’s a niche that USPack fulfills very, very well. 

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