Less Than Truckload (LTL) Freight Evolution: How e-commerce impacts the middle mile

With the explosive growth of e-commerce seen as a result of the pandemic keeping people at home and buying goods online, both the middle mile and less than truckload (LTL) ecommerce freight have become key elements for retailers striving to improve the effectiveness of their shipping strategy. Shippers are balancing the hunt for supply chain cost relief and meeting increasing consumer expectations. Middle mile optimization is becoming a “trendier” topic by the day because it can give shippers the best of both worlds.

Shippers are utilizing strategies of LTL consolidation, zone skipping, and cross-docking in a concerted effort to lower costs and increase efficiency in response to customer demands and soaring inflationary costs. The businesses that succeed in optimizing their middle mile are the ones that have more control and more visibility in their delivery process and can gain market share in this competitive landscape.

How e-commerce necessitated the use of LTL for the middle mile

When e-commerce sales exploded in 2020, parcel delivery direct to consumer’s homes’ replaced store commerce almost entirely at first before receding a considerable number. Last mile carrier diversification was the talk of the town because national carriers like FedEx couldn’t keep up with the demand. Service dropped to the 60-70% OTD level. Every shipper looked to turn on regional carriers like Veho, Ontrac and AxleHire as quickly as possible.

The 2020 “regional rush” is what the founders of Warp got to see and manage firsthand, building AxleHire together. Shipments became more fragmented, and as a result, LTL began to grow in tandem with the need for middle mile optimization. But no one could successfully use legacy LTL solutions to meet critical injection times at last mile carrier’s sortation centers. Missing a delivery time by 1-2 hours could mean a customer will get their package a full day later. Will that customer want to come back, or did the shipper lose out on all the CAC spent? The Warp founders watched tons of shippers lose customers because of this.

Today, the direct-to-consumer parcel delivery model is under attack. CAC skyrocketed across all verticals and channels. Facebook ads aren’t the same with the new IOS changes. Last mile costs have only increased. Inflationary costs are testing retention rates in unimagined ways. Not much to optimize on manufacturing, ocean freight, and last mile costs. Relief can come from getting more creative with our middle mile freight networks.

How middle mile optimization offers an alternative to LTL and traditional freight providers in the age of e-commerce

The supply chain continues to change, and retailers need strategies to respond to customer expectations, which have never been higher despite inflationary costs being passed to them. Stores are in-season again. Customers can choose whether their orders are picked up in the store, delivered from the store, or shipped from a warehouse. Before ordering, customers demand inventory visibility—to see where items are located and delivery times — which has become much earlier in the supply chain process than ever before. Customers demand all this on top of “fast and free” and the ability to track their orders with real-time updates.

To handle these demands, retailers need optimization above anything else. Optimization takes our personal feelings about the supply chain and creates shipping answers based on algorithms. Optimization doesn’t stipulate that certain strategies must be part of the solution but makes the best decision mathematically based on rates and service.. It doesn’t require that LTL be used at all. If other answers produce better results, that should be part of the middle mile equation, depending completely on the shipper’s specific situation. It might reallocate inventory between two nearby retail stores, using a last-mile delivery network instead of LTL. What might seem unconventional doesn’t matter if it works to deliver most optimally in terms of money, time, and performance metrics.

The goal is for shippers to employ techniques for optimizing the middle mile and assess those that make the most sense for their specific needs. This is where careful analysis and cost exercises are a good idea to inform decisions.

Optimization evaluations require cross-docking consideration

Cross-docking is one opportunity for optimizing the delivery process. With cross-docking, a bare-bones warehouse with labor and dock space is used to rearrange loads between inbound and outbound trucks at the facility. Each truck arrives with all the goods from one warehouse, intended for multiple delivery destinations. At the cross-dock, the loads are arranged so that each shipment is delivered on the best equipment, based on the cheapest cost and service needs. That might be using a 53-footer, box truck, or smaller type of equipment like a Cargo Van.

It is not a cookie-cutter solution that offers the best optimization. If optimizing for outbound, multi-stop Truckloads might be the best option instead of using traditional LTL. Cross-docking isn’t a replacement for LTL but can help support it. One of the drawbacks to LTL, in general, is the risk of damage and transit delays. Specifically, long-haul LTL shipments get handled multiple times through the traditional hub and spoke LTL networks, which exposes the shipment to a higher chance of being damaged and missing delivery times at the delivery destination.

Optimization gives zone skipping

Your parcel carrier has been making a significant margin on pickups from your facility. If you didn’t already know this, the best team that can attest to this is Warp. The founders of Warp built a parcel carrier doing millions of deliveries a year. Parcel carriers aren’t analyzing your whole network to evaluate a zone skip and save you money. While analyzing your supply chain, you should be talking to carrier-agnostic companies like WARP.

Zone skipping is a middle mile optimization strategy that involves consolidating freight when it can contribute to saving on shipping time and transportation costs. With the country divided into shipping zones that determine rates based on the origin and destination zone, zone skipping allows shippers to get the lower rates of the destination region for the last mile rather than calculating the rate from the origin. This is made possible by consolidating parcels into a larger shipment—LTL or FTL—brought to the intended destination zone. It’s generally cheaper to presort the parcels and cover the cost of the large shipment plus local deliveries for each package than to ship each parcel individually, where it passes through multiple hubs on its journey.

This strategy also benefits from cutting transit time without needing parcels to be processed through each hub. However, for zone skipping to work, it involves consolidation, meaning that if there are not enough parcels going to a zone to form an LTL shipment, the shipment must wait to collect more. Working with a consolidation partner who can bundle your shipments with others can help make the math work easier than just your stand-alone volume.

Visibility is the key

E-Commerce brought many challenges to LTL. One important development was the lack of parcel visibility among LTL shipments.

Traditionally, Shippers spent more time moving pallets to stores. That meant they only tracked the pallets. Today these pallets often contain hundreds of parcels with hundreds of tracking numbers connected to individual customers needing updates on their parcels’ whereabouts. Many shippers’ WMS technologies lack the ability to scan many parcels to one pallet, meaning shippers and end customers receive zero visibility from when it leaves the origin location to reaching the last mile carrier destination.

Fortunately, middle mile consolidation partners like WARP offer end-to-end tracking by parsing the many 100 individual tracking numbers to a truck and pallet in advance, ensuring Shippers and customers have end-to-end tracking.

Unfortunately, unanticipated delays may occur while the shipment is in-transit, impacting on-time delivery and transit times. Even worse, every service provider in logistics beefed up their force majeure clauses when covid hit to assume fewer responsibilities and liabilities. Due to all these unexpected events causing a delay and providers being less “on the hook”, visibility is paramount now more than ever. Visibility allows shippers to get accurate data on their supply chain and identify where changes must be made for improvements. With optimized tracking, shippers can offer their customers a better experience and foster loyalty. Logistics managers can now become a better extension of customer service by enabling customers to know exactly where their goods are or be made aware of any issues or delays as quickly as possible. This way, better communication leads to better customer LTV and smarter network decisions.

The role of technology

Most importantly for the middle mile, technology gives users capabilities and control — to design, analyze, and manage networks like playing a video game. Technology is how shippers determine the best strategies for their needs, whether their plan includes LTL or other shipping methods. It helps shippers ensure they do the most for their organization and customers.

However, WARP’s VP Of Pricing and Network, Chris Reeves, speaks to a thorny problem in shipping technology. Based on his 25 years of experience working directly with shippers, “to this day, still, a majority of shippers in the US have an inadequate tech stack that allows them to compete in the marketplace and utilize logistics efficiency as a competitive advantage.”

When a middle mile solution is in place, it connects shippers, carriers, and different types of facilities, to provide the opportunity for increased optimization. Shippers get complete control to make the best decisions for their delivery process, linking various resources into an optimized network that integrates with their TMS, WMS, and other systems.

Partner with Warp for your middle mile optimization

The LTL shipping mode is one of the most complicated puzzles in the supply chain. Like the transformation of food (Michael Pollen, 2013), LTL has layered complexity upon complexity upon complexity, making it impossible to completely understand how a load is calculated even for the most sophisticated and experienced shippers.

An essential factor in optimizing a middle mile freight network is having all strategies available and the insight to determine which works best and in what scenarios. Warp provides this level of control as a tech-enabled middle mile solution with a network of cross docks and carriers with sprinter vans, box trucks, and 53 footers that perform direct store deliveries, warehouse to warehouse transfers, and direct carrier injections into last mile providers like FedEx, UPS, USPS, and OnTrac. Warp enables retailers to achieve time and money-saving optimization to succeed in the competitive landscape of e-commerce across all pieces of their middle mile supply chain. Connect with Warp today to discover what optimization can do for your business.

WARP is determined to shepherd companies through the complexities of LTL. To do that, we need to spend the time to understand when it works and when it can be optimized and even discarded for an alternative solution. Follow us here.

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