The “unparalleled and unprecedented growth” of e-commerce has created a “landscape of continuous change” that is rewriting the transportation playbook, says Henry Maier, CEO of FedEx Ground.
As reported by the Journal of Commerce, Maier and other CEOs on a panel at the NASSTRAC Shipper Conference agreed that the explosion of E-commerce isn’t just changing the way people shop, it’s also changing how shippers set up their distribution networks, sparking real estate booms in certain markets.
For example, online shopping is filling more package trucks, but it is also shortening the average truckload length of haul.
“Think about the way things used to be on the parcel side,” added Jack Holmes, president of UPS Freight. “Our business used to run right up to Christmas and then get very soft for six weeks. Now that (post-holiday) period is one of the most challenging for us.”
For many retailers, the holiday season now lasts almost through Valentine’s Day in February, says Maier.
“Each peak season … retailers try to differentiate themselves, consumer behavior becomes less predictable and procrastinators are enabled. This is an era of customization, personalization and getting me what I want when I really need it.”
But at what cost to the supply chain? Much of the growth in e-commerce is driven by free (to the end consumer) shipping, Maier points out.
“We know free shipping isn’t really free,” he said. “Will it evolve to better reflect true transportation costs? Maybe free shipping becomes an option when a retail order is shipped to a local business location, like a store or dry cleaners, to pick up on your way home.”
The growth in online shopping is tethered to the rapid spread of mobile online shopping via tablets and smart phones, and the increasing use of mobile technology also challenges and benefits transport operators, Judy McReynolds, president and CEO of Arcbest, parent of LTL carrier ABF Freight System. “It really is pervasive,” she said. “… Having the ability to reroute freight right from your smartphone is of increasing interest to customers and becoming increasingly commonplace every day. Shippers are becoming much more sophisticated and raising the baseline for carriers.
Online shopping can have unintended consequences, however, such as reduced miles for long-haul truck drivers. “E-commerce has shortened the truckload length of haul considerably,” Derek Leathers, president and chief operating officer of Werner Enterprises, told NASSTRAC.
The net effect, he said, is a cut in truckload capacity – which is already under pressure from many factors. “We have to have a model that gets products to people quicker, but it creates a little less efficiency on the asset side at a time when the asset values are up 40 percent.”