Supply Chain News on ATRI Report on the Impact of eCommerce on Trucking Sector

Ecommerce

Supply chain management / Ecommerce 349 Views

It's more than clear that ecommerce is having a huge impact on the trucking sector, but it is not easy to quantify the changes.

That was the mission of Alan Hooper research associate and Dan Murray, vice president of research at the American Transportation Research Institute (ATRI) in Atlanta in a new report on the topic from ATRI.

To get there, Hooper and Murray say it was necessary to merge analyses of distribution models and consumer behavior with data and insight provided by trucking industry experts.

The report notes the well-understood growth of ecommerce, which has been rising from 13-16% annually over the past five years, outpacing the 1-5% annual growth in traditional retail sales observed during the same time period. Ecommerce now represents about 10% of total retail sales, depending on how that share is calculated.

The report notes that while brick-and-mortar stores still remain an essential component of current retail operations, retailers are becoming more flexible in how they reach and transact with consumers by decentralizing their distribution/fulfillment networks to bring inventory closer to consumers.

The interaction between consumers and retailers can now take multiple forms, and this Omnichannel approach provides consumers with different options for order fulfillment, including of course such recent innovations as buy on-line, pick-up in store, delivery to secure lockers, delivery to the inside of cars, home and garages, and more.

The ATRI report references research conducted by real estate firm CBRE that "last mile" delivery routes have indeed been shrinking in distance. In analyzing the 15 largest metropolitan areas, CBRE researchers found that the last leg of order fulfillment averages between six and nine miles, and these distances are expected to shrink further as distribution/fulfillment networks continue to expand near large urban populations.

The report also says the surge in ecommerce is creating new "logistics hubs" across the US, with metro areas such as Cincinnati, Indianapolis, Kansas City and Stockton seeing strong growth in new distribution center space. Key to these hubs is their proximity to big numbers in terms of consumers.

All this is having a number of impacts:

• Retailers/etailers working hard to reduce shipping costs in the face of consumer demand for free shipping

• Continued reduction in delivery need times, and hence the growth of more distributed distribution models, urban warehouses and more.

• Expanded delivery locations, such as those listed previously to fulfillment to where a consumer happens to be at any particular time.

• Rapidly growing new for returns shipping and processing – a growing process headaches and cost center for etailers.

Sometimes these trends go together. For example, pick-up in store offers a new fulfillment option while also reducing retail costs by outsourcing part of the delivery process to customers driving or walking to the store.

The Impact on Trucking

The report notes that the growing decentralization needed for ecommerce has driven a considerable decrease in the average length-of-haul. Frequently, longer inter-regional or national hauls are now being replaced by shorter intra-regional and local hauls, ATRI says.

"These dramatic decreases in trip lengths and odometer readings are being experienced by truckload, LTL, and courier services alike," Hooper and Murray write. In fact, the average length-of-haul for dry van truckloads has declined almost continuously since 2000, falling by 296 miles, or 37%." (See graphic below.)

Source: ATRI

Not surprisingly, while length of haul is falling, vehicle miles travelled (VMT) has been rising rapidly in urban areas, up 17% from 2011 to 2016.

That naturally is also changing trucking industry employment trends. There were 85,000 new jobs at courier and messenger services in 2017 versus 2007. Moreover, a significant portion (74%) of these new jobs were added in 2016 and 2017 alone as ecommerce and omni-channel retailing trends gained momentum, ATRI says.

For traditional trucking, ATRI says its conversation with carriers finds that their volume of shipments requiring a two-day or three-to-four-day delivery window had increased over the past five years. Carriers reported that these faster deliveries have cannibalized deliveries with a five-to-seven-day window.

Local deliveries have pushed way up the number of van type vehicles in service – and led Amazon, FedEx and others to experiment with drone delivery.

One impact of short hauls is that there are reduced concerns relative to reaching hours of service limitations. In fact, ATRI notes that drivers working with a 100-air-mile radius of the hub do not need to report hours logged at all, if they adhere to all other basic hours-of-service rules, including the 10-hour off-duty and 11-hour driving requirements.

ATRI notes that growth of short haul/local driver jobs have and will likely continue to exacerbate the long haul driver shortage, as drivers move to the better lifestyle of local deliveries.

Writing for carriers, ATRI concludes by writing that "Ultimately, trucking operations will need to remain flexible and continue to adapt as the implications of e-commerce and omni-channel retailing shake out," adding that "The industry has largely benefited from this source of growing demand for truck transportation, and is presented with an opportunity to expand into a growing industry segment – the "last mile.""

The full report can be found here: E-Commerce Impacts on the Trucking Industry

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