Bridging the Gap: The Crucial Role of Middle-Mile Technology in Last-Mile Delivery Success

When the pandemic hit and the supply chain was suddenly thrust into the spotlight, last-mile delivery was the star. Consumers quickly needed everything delivered to their door from toilet paper to toys. And while it still holds immense importance, especially with consumers, it’s also the most expensive part of the supply chain accounting for up to 50% of delivery costs.

I started AxleHire to be able to provide shippers with more efficient and cost-effective last-mile delivery but continuously struggled to improve the margins without being able to tap into the middle mile. It was impossible to make deliveries more cost-effective and get them to consumers on time if the freight injections coming into our last-mile delivery centers were already running at higher costs. Even with the use of electric vehicles, the most technologically advanced routing, and the gig economy – last mile delivery cannot be efficient or cost-effective unless a brand takes into account its middle mile as well. An efficient, technology-forward middle-mile strategy can significantly impact the success and effectiveness of last-mile delivery.

Below are some of the major challenges we faced and how we’re conquering them now with a technology-forward, middle-mile approach. 

Challenge # 1: Lowering the cost to inject into our LMD network, enabling brands to work with smaller parcel networks. 

As a last-mile delivery service, we had no control over what happened to freight before it was injected into our facilities. Even on popular lanes, we could not commingle customers’ parcels to lower their injection cost. That meant that they’d have to bear the cost of a full truckload, even if they were only filling half the truck.

We started WARP to help last-mile companies and shippers alike inject into facilities with commingled loads. By starting with a shared truckload or stopping at a cross-dock to consolidate and rearrange freight headed to the same destination, we’re able to reduce the costs involved with these injections. We also can build better density because we can commingle freight across multiple volume profiles. Even if several pallets are not going to be injected into the same last mile-carrier, but will need to be delivered to a nearby destination, they can still be added to the same truck. With new technology that can better track each parcel and pallet, everything still ends up where it needs to go. 

Let’s walk through an example of where we’ve solved a shipper’s last-mile delivery cost-equation. A meal kit service has six non-perishable pallets needing to be injected into a last-mile delivery center in Florida. The issue is that the freight is coming from New Jersey and this long distance makes it difficult to do cost-effectively, especially because there is not enough to fill a full truckload. Now, we’re able to pick up the pallets from the meal kit’s warehouse in New Jersey, add additional freight destined for a nearby location in Florida from two other companies nearby and stop at one of our cross-dock facilities to add additional volume destined for the same location. This greatly reduces the meal kits injection cost into the last-mile delivery center because they’re no longer needing to pay for space they don’t need. 

Challenge #2: Getting reliable and low-cost transfers from sort centers to last-mile delivery stations.

Last-mile delivery companies are responsible for leasing and managing both sortation centers, where pallets and parcels are sorted, and the last-mile delivery stations themselves where parcels are picked-up to be delivered to the end consumer. One of the biggest challenges is managing transfers between these two locations to make the tight delivery windows so consumer’s receive their products on time.

At AxleHire we were forced to choose to either buy the trucks to make the transfers between sortation centers and last mile delivery stations (and hire the staff to do so) or outsource these loads to local freight carriers. At AxleHire, we didn’t feel like investing in trucks was the smartest choice because volume fluctuations are too high in today’s supply chain. In addition, as a VC-backed business, we believed it wasn’t the best use of capital to add more assets on top of our leases. So we were left outsourcing those transfers and often struggled with timing to make sure parcels were injected in time to be loaded for the final delivery. We felt between a rock and a hard place. 

At WARP, we pick up pallets/floor-loaded volume from shipper’s fulfillment centers and deliver to a mix of last mile carrier sortation centers through a series of multi-drops, again commingling the volume to ensure we’re maximizing the truck space available. In addition, by leveraging WARP co-loading and WARP cross-docks along the route of a pallet or box of multiple parcel shipments, WARP can bypass the expanded zone map (a geographical region to which carriers deliver) and inject parcels into last-mile delivery partners in closer proximity to the final destination. This is known as zone skipping and it benefits customers by getting packages to consumers faster, less parcel carrier touches leading to a lower chance of loss or damage, and full visibility from driver to cross-dock throughout the lifecycle of shipment. 

Challenge #3: Covering enough areas to justify shipper’s splitting off volumes from nationals.

At AxleHire we often felt like we were a little fish in a big pond. National carriers like UPS and FedEx have 100 times more sortation centers and a thousand more last mile delivery stations to be able to cost-effectively cover massive amounts of the country. Drivers that live close to where their local routes are combined with maximized drop density equals a more cost-effective delivery. We lacked the funding sources and couldn’t justify the long payback periods to compete with this physical footprint and cover the costs of popping up sortation center/delivery station leases. 

When building WARP we wanted to make sure that physical assets weren’t going to be a limiting factor on our growth. We built and tested the latest technology to enable third-party warehouses to handle various types of sortation so we could scale quickly and less costly, passing those savings onto our customers. Now with WARP, our costs to use facilities are on a variable basis versus it being fixed at our prior company.

Reflecting on the lessons learned and acknowledging past failures is integral to personal and professional growth. In the entrepreneurial journey, I've gained valuable insights into the importance of adaptability, customer-centricity, and strategic planning. So if you’re starting off again with something fresh, take some time to sit down and write and reflect on what you’ve learned.

Embrace Continuous Learning: Instead of viewing failures as setbacks, consider them as opportunities for growth. Actively seek feedback, analyze the reasons behind past shortcomings, and stay informed about industry trends. This ongoing learning process will empower you to make informed decisions, anticipate challenges, and adapt strategies for future success.

Prioritize Flexibility and Adaptability: Use past failures as a blueprint for fostering adaptability. Develop a mindset that embraces change and values flexibility in business strategies. This could involve implementing agile project management methodologies, staying attuned to market dynamics, and fostering a culture that encourages innovation and the ability to pivot when necessary.

Customer-Centric Approach: Learn from past missteps by placing a heightened focus on understanding and meeting customer needs. Collect and analyze customer feedback, engage in market research, and prioritize customer satisfaction in product or service development. By aligning your business strategies with customer expectations, you can build stronger relationships, enhance brand loyalty, and create a more sustainable and resilient business model.

By
Daniel Sokolovsky
Co-Founder and CEO

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