June 2006 | Commentary | 3PL Line

Last Mile Logistics: Key to Competing in the Retail Race

Tags: 3PL

For U.S. retailers with broad global supply chain operations, "last mile"—the portion of transit from the final delivery center to the customer's door—is really the last hundreds of miles from the destination port to the store. This crucial part of logistics, which accounts for the majority of a shipment's cost and complexity, is becoming increasingly difficult for retailers to manage.

To a certain degree, retailers are victims of their own success. As global sourcing expands and companies become more proficient at managing inbound supply chains, container trade between Asia and the United States continues to explode. This places a growing burden on the U.S. intermodal transportation infrastructure.

This burden will become more troubling to retailers, according to trade forecasts. Inbound container traffic will continue to grow, congestion at and around ports will pose larger delays, and transporting product—and ultimately, revenue—from the ports to the shelf will be increasingly difficult, particularly during peak season. How well retailers manage the last mile inside the United States plays a critical role in their ability to compete.

As the importance of last mile distribution excellence increases, so does the value of U.S. logistics assets—trucks, distribution centers, land, people, technology, and anything else that helps cargo move smoothly and efficiently.

Just look at what companies are willing to do to buy and protect U.S. logistics assets. The Dubai Ports deal was only the latest example of a foreign company accepting a large price tag for U.S. assets.

Deutsche Post's multi-million-dollar acquisitions of DHL and Airborne Express had UPS and FedEx spending millions on Capitol Hill to protect their U.S. markets. And Netherlands-based APM Terminals, the terminal management division of Maersk, is building a costly new facility in Virginia that will be one of the world's most advanced marine terminals.

Foreign companies realize the importance of last mile logistics control inside the largest consumer market in the world. Why? They know that what occurs after containers are dropped at U.S. ports can make or break a logistics strategy. Retailers that have control over this portion of their supply chain will be market winners.

A responsive last mile 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 last mile visibility, 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 reduce logistics costs as much as possible.

Keep Your Options Open

Three critical factors control inbound last mile logistics today: options, options, and options. Can you feed imports quickly into your distribution network from ports on both coasts? Do you have the right crossdock 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 necessary?

As the importance of last mile logistics control grows, the answers to those questions will continue to have a great impact on retailers' overall competitive position.