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 * Daily Dive M-F view sample
   
   Topics covered: logistics, freight, operations, procurement, regulation,
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   Topics covered: S&OP, inventory/demand planning, technology integration,
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 * Reading Now Deliveries keep getting faster. Will it last? By: Max Garland
 * Reading Now US Postal Service outlines next steps to becoming ‘the preferred
   delivery provider’ By: Max Garland
 * Reading Now How consumers’ shifting sentiment around delivery creates peak
   margin opportunity By: Pitney Bowes
 * Reading Now Amazon pulls back from UPS as it builds out logistics empire By:
   Max Garland
 * Reading Now FedEx slumps, Amazon slows and more takeaways from a top shipping
   index By: Max Garland
 * Reading Now What drone companies need to do to reach lofty delivery goals By:
   Max Garland
 * Reading Now FedEx and Amazon still haven’t figured out sidewalk delivery
   robots. Will mass adoption ever come? By: Max Garland
 * Reading Now Why delivery robots face a regulatory ‘nightmare’ By: Max Garland



Trendline


LAST-MILE DELIVERY


A robot from Serve Robotics makes a delivery. Courtesy of Serve Robotics

NOTE FROM THE EDITOR

Last-mile delivery services are evolving to better address consumer needs and
competitive pressures.

The time it takes for goods to reach doorsteps has shrunk in recent years, but
slower delivery options have become more popular amid inflationary pressures.
Carriers are also streamlining their networks and adjusting their customer mix
in the face of easing demand.

While legacy providers push for improvement, emerging firms are leveraging
technology to carve out their own niches. Drones and sidewalk-roaming robots
offer upside in terms of speed, cost and sustainability, but various hurdles
complicate their mass adoption.

Take a look at this trendline for a peek into the shakeups happening now — or on
the horizon — in the last-mile delivery space.

Max Garland Senior Reporter
 * Reading Now Deliveries keep getting faster. Will it last? By: Max Garland
   
 * Reading Now US Postal Service outlines next steps to becoming ‘the preferred
   delivery provider’ By: Max Garland
   
 * Sponsored How consumers’ shifting sentiment around delivery creates peak
   margin opportunity Sponsored content by Pitney Bowes
   
 * Reading Now Amazon pulls back from UPS as it builds out logistics empire By:
   Max Garland
   
 * Reading Now FedEx slumps, Amazon slows and more takeaways from a top shipping
   index By: Max Garland
   
 * Reading Now What drone companies need to do to reach lofty delivery goals By:
   Max Garland
   
 * Reading Now FedEx and Amazon still haven’t figured out sidewalk delivery
   robots. Will mass adoption ever come? By: Max Garland
   
 * Reading Now Why delivery robots face a regulatory ‘nightmare’ By: Max Garland
   




DELIVERIES KEEP GETTING FASTER. WILL IT LAST?

Shippers adjusted to pandemic-related disruptions to reach customers faster. But
shifting shopper preferences and cost-cutting efforts may slow things down.

By: Max Garland • Published June 12, 2023

Deliveries continue to get faster, but further improvements will be hard to
realize in an era of shifting consumer preferences and cost mitigation among
shippers.

In April, the time between a customer placing an order and final delivery fell
to an average of four days, according to project44’s “State of Last Mile” report
released in May, compared to 5.6 days in April 2022. The company’s supply chain
visibility platform tracks more than 1 billion shipments annually.

DELIVERY SPEEDS CONTINUE TO IMPROVE

Average number of days between an order being placed and it being delivered, by
week

“Looking farther back on historical delivery times, 2023 is seeing the quickest
delivery times that the Last Mile market has seen in years,” the report said.

Carson Krieg, project44’s head of industry growth and last mile solutions, told
Supply Chain Dive that a “healthy average” for end-to-end fulfillment is between
four to six days. That raises the question of how much more delivery times can
shrink.

“I think there’s going to be some mediation to the norm,” Krieg said.


WHAT’S FUELING FASTER DELIVERIES?

There are many reasons why delivery speeds have improved, according to Krieg.

On the transportation side, parcel carriers no longer have the capacity
constraints that challenged their service levels in the early days of the
pandemic. Shippers have diversified their carrier mix, tapping into speed
advantages new delivery providers may have on certain lanes.

“A two day point for UPS going from Southern California to Northern California
may be a next day point for OnTrac,” Krieg said.

On the fulfillment side, companies have moved inventory closer to end consumers,
most notably Amazon and its shift to a regional network model. Retailers have
been pushing for years to better compete with the delivery speeds offered by
Amazon’s massive warehouse network, said Martin Dresner, professor and chair of
the University of Maryland’s logistics, business and public policy department.
The pandemic accelerated those efforts, particularly for ship-from-store
initiatives.

Other major retailers have also been bolstering their fulfillment investments
and efforts. Walmart’s store-fulfilled delivery sales nearly tripled over a
two-year period, with the company seeing more than $1 billion a month in that
category. Meanwhile, Target announced a $100-million investment earlier this
year to leverage its store footprint for next-day deliveries, building upon its
stores-as-hubs strategy.


Walmart announced the launch of its second store-based fulfillment center in
Bentonville, Arkansas, in May to provide quicker and more accurate online order
fulfillment.
Courtesy of Walmart
 

It’s not just the Amazons and Walmarts of the world speeding up deliveries.
American Eagle and Nordstrom have reported quicker timeframes to reach customers
on recent earnings calls.

“We are delivering better service to our customers through faster delivery, with
overall delivery speed up 9% from last year,” Nordstrom CEO Erik Nordstrom said
on a May 31 earnings call.


COST MITIGATION, CONSUMER WANTS COULD SLOW DELIVERIES

A confluence of factors will likely limit delivery speeds from going much
faster, if not slow them down outright.

Retailers have been cautious in recent months about leveraging higher-cost
shipping services in an inflationary environment that’s biting into their bottom
line. In turn, the demand for express deliveries using air cargo networks has
waned, with many shippers instead calling for more economical ground
transportation.

“We can be in that three to five day click-to-deliver timeline,” said Laura
Ritchey, COO at e-commerce fulfillment provider Radial. “It gets really
expensive to go faster than that.”

Companies shifting to more regional fulfillment models like Amazon could lower
transit times and shipping costs. But it’s a risky venture for companies lacking
the robust infrastructure and forecasting capabilities that Amazon has. If
demand starts to shift, inventory may be stationed in areas where it isn’t as
economical or fast to ship out of, said Vijay Ramachandran, Pitney Bowes’ vice
president of go-to-market enablement and experience.

“The more you segregate your inventory across the country, the more you have to
be really buttoned up with demand planning and have a good idea of where your
demand is going to surface geographically,” Ramachandran said.

Poor forecasting makes it harder to deliver on time, which is likely to lead to
unhappy shoppers, even if transit times are still relatively fast. Sixty-two
percent of consumers say an accurate estimated delivery date is more important
than fast shipping, according to Pitney Bowes BOXpoll market survey data.

But many retailers haven’t slowed down their delivery promises to improve
accuracy. On-time performance dropped from 83.9% to 80.4% YoY in April, per
project44, which attributed much of this decline in its May report to “the
aggressive timeframe that some companies promise to deliver within.”

Retailers will need to strike a balance between cost mitigation and meeting
consumers’ expectations in order to improve their delivery offerings for the
long run, experts say.

“We’re in a post-COVID environment, but it is not the same as where we were
pre-COVID,” Ramachandran said. “That shift requires some new assumptions around
what’s important to consumers.”

Article top image credit: Brandon Bell/Getty Images via Getty Images



US POSTAL SERVICE OUTLINES NEXT STEPS TO BECOMING ‘THE PREFERRED DELIVERY
PROVIDER’

The priorities for the third year of the agency’s transformation plan include
growing revenue via new shipping services and boosting local delivery speeds.

By: Max Garland • Published May 24, 2023

The financially ailing Postal Service wants to draw more commercial shippers
into its network to generate more revenue and counteract declining mail volumes.

Shippers with USPS are slated to receive a lot of attention in the next steps of
the agency’s 10-year transformation plan under Postmaster General Louis DeJoy.

Priorities for year three of the plan include growing revenue through new
shipping services and accelerating local delivery speeds with new facilities,
according to the agency’s two-year progress report released in April.

It’s a big undertaking, considering the agency didn’t achieve the plan’s 2023
break-even prediction and how long its focus has been on handling mail rather
than packages. But DeJoy has expressed confidence that the transformation will
enable the Postal Service to more effectively compete against private delivery
providers like FedEx and UPS in areas including price.

“I believe we can become the preferred delivery provider in the nation,
reclaiming volume we have lost over the years and capturing a significant
portion of the future growth in the marketplace,” DeJoy said in a keynote
address at the National Postal Forum in Charlotte, North Carolina.


NEW, STREAMLINED SERVICES

The Postal Service expects to see $24 billion in net package revenue growth
under its Delivering for America strategy, and its best opportunity to take
share from FedEx and UPS could come from a plan to consolidate existing services
into one offering.

The agency aims to streamline three package shipping options — USPS Retail
Ground, Parcel Select Ground and First-Class Package Service — into a new
product, USPS Ground Advantage. It’s set to launch the service on July 9,
pending review from the Postal Regulatory Commission.

The Postal Service said in a news release that the service provides a more
affordable way to ship packages up to 70 pounds in two-to-five business days.
The agency is proposing for USPS Ground Advantage prices to be 1.4% lower
relative to current Parcel Select Ground and First-Class Package Service
pricing.

Ground Advantage could pose “a significant challenge” to FedEx and UPS even
though the two delivery giants have more customized and flexible shipping
services, Joshua Galbraith, business development manager at ShipMatrix, said in
a LinkedIn post.

“It is likely that with the introduction of the USPS Ground Advantage service,
FedEx and UPS may need to reconsider their pricing strategies to compete with
the significant price advantage of USPS,” Galbraith said.


A U.S. Postal Service worker unpacks packages from a truck on December 2, 2019
in San Francisco, California.
Justin Sullivan via Getty Images
 

Beyond Ground Advantage, the Postal Service expects further package revenue
growth will be driven largely by USPS Connect, a wide-ranging offering that
includes same-day and next-day delivery. The program, launched in 2022, has a
suite of services including Connect Regional and Connect Local.

Connect Regional provides next-day regional delivery by having shippers dropping
off packages at facilities close to the final destination. The service has
brought in $1.1 billion in revenue by offering direct network access to medium
and large-sized shippers, per a Postal Service progress report.

Connect Local, on the other hand, offers same-day and next-day delivery for
local businesses within their communities. The service, which is now available
nationwide, has shippers bring packages or envelopes to a designated local
postal facility for speedy delivery. More than 27,000 customers have registered
for the program, the report said, despite a tepid reception in initial tests of
its document-focused shipping service.

“The potential of the new suite of services will be maximized when we complete
the realignment of our network,” the report said.


FACILITY CONSOLIDATION AIMS TO SPEED UP DELIVERIES

To keep up with growth in its package delivery services, the Postal Service is
overhauling its network for speed and efficiency. The agency has targeted key
markets where it can consolidate delivery units — the final facility parcels go
through before delivery — into fewer and more centrally located Sorting and
Delivery Centers.

“Historically, [delivery units] were opened to meet growing demand, which
ultimately created clusters of facilities close to each other, especially in
busy metro areas,” the agency’s report said, adding that it led to operational
inefficiencies.

The Postal Service opened its first Sorting and Delivery Center in Athens,
Georgia, last fall before launching five additional centers in Florida, New
York, Texas and Massachusetts in February, according to the report.


The U.S. Postal Service outlines what its new network model will look like once
its transformation plan is implemented.
U.S. Postal Service
 

The agency is preparing for further growth of this network, as it has evaluated
more than 100 potential new locations nationwide. DeJoy told Supply Chain Dive
in 2022 that vacant postal facilities are a prime target to set up new Sorting
and Delivery Centers.

Local communities across the U.S. have griped about Postal Service delivery
delays in recent months, even despite year-over-year improvements in on-time
mail performance overall. The agency says the end result of its buildout will be
faster processing and delivery speeds between local retailers and their
customers, as the centers will be able to quickly reach 200,000 customers in a
local market.

“We must now execute rapidly on our plans to deploy our network,” DeJoy said at
the National Postal Forum. “This is the only way to achieve the service and cost
improvements necessary for us to fulfill our mission to rescue this
organization.”

Article top image credit: Drew Angerer via Getty Images
Sponsored


HOW CONSUMERS’ SHIFTING SENTIMENT AROUND DELIVERY CREATES PEAK MARGIN
OPPORTUNITY


Sponsored content
By Pitney Bowes
By: Vijay Ramachandran, VP of GTM (Go-to-Market) Enablement + Experience, Pitney
Bowes • Published July 1, 2023

Raise your hand if “regression to the mean” was on your 2023 buzzword bingo
card. Many pundits have used the term to describe the current state of ecommerce
adoption and growth, as market data show a significant—albeit not
precipitous—drop in ecommerce sales. However, the latest Pitney Bowes Parcel
Shipping Index, which uses a variety of data sources and a proprietary
forecasting model to triangulate prior year shipments and anticipate how many
direct-to-consumer deliveries will be completed over the next five years, has
found that using the term to forecast the years ahead may be overly simplistic
and even misleading.

A secular shift forward

According to the Index, US consumers received only 2% fewer parcels in 2022
versus the year before. More astonishingly, shipping volumes in 2023 are
expected to clock in a full year and one billion parcels ahead of what the 2019
Index originally forecasted would occur by 2023, well before COVID supercharged
the ecommerce market. Further, the Index’s 5-year outlook calls for shipping
volumes to continue to exceed pre-COVID forecasts moving forward. Even the US
Commerce Department’s revised Q1 ecommerce report shows a nearly 8% increase in
online sales versus 2022Q1, compared to a meager 3.4% increase in overall retail
sales. In fact, 2023Q1 ecommerce exceeded peak 2022(Q4) online sales by 3%.

In other words: the regression has been overhyped. This seemingly permanent
shift in channel preferences validates findings from a companion report, the
Pitney Bowes Order Experience Index, which tracks changes in consumer
expectations and preferences around delivery, tracking, unboxing and returns:
consumers are shifting attitudes in ways that resemble neither 2019 nor any year
since.

Many consumers—especially more affluent information workers—are now working in
hybrid environments and no longer have a set daily or weekly schedule, where
personal errands, kids’ activities, travel and work are all increasingly
intertwined. While they may have the flexibility to be home to receive an
occasional urgent delivery, having every ecommerce site promise a conformant
2-day delivery window has become a nuisance. What’s more, urgent purchases are
once again easy at local stores, so the need for same-day and next-day delivery
has lost significant utility—as evidenced by tumbling express volumes for both
major private carriers—particularly for consumers who are constantly on the move
and are willing to settle for a “good enough” product at a store nearby.

Consumers’ tracking trust issues

These dynamics have shifted online shoppers’ priority from fast delivery to
accurate delivery estimates. In fact, the Pitney Bowes Order Experience Index
revealed that more than half of online shoppers consider early deliveries to be
inconvenient. A package arriving before the estimated date may sit unattended on
a porch or in a mailroom while the shopper isn’t home, raising the risk of theft
or damage.

However, the emphasis on delivery estimate accuracy doesn’t mean consumers have
thumbs hovering over their phones to refresh tracking info. In fact, Pitney
Bowes weekly BOXpoll surveys reveal that consumers are checking tracking less
often now on average than any other time in the past two years. Carrier delays
have become less common and delivery times have gotten faster as carrier
capacity constraints of the past two years have reversed. Combined with stores
satisfying consumers’ more urgent purchases, the trust issues consumers once had
with in-transit delivery accuracy have diminished.



Permission granted by Pitney Bowes
 


Permission granted by Pitney Bowes
 

The peak margin opportunity

If tracking frequency is on the decline and consumers aren’t “appointment
buying” online, what impact will this have on retailers? Two takeaways:

 * Use more affordable ground services for your free/deferred shipping method at
   checkout—you will see significant savings in one of your largest cost
   centers.
 * Set clear delivery date expectations up front and use precise dates where
   possible. The adage “underpromise and overdeliver” doesn’t earn you any
   brownie points with today’s consumer.

As a bonus, our data shows that consumers are even more lenient with delivery
transit times during peak season. Pitney Bowes BOXpoll data reveals that
consumers check tracking less in Q4 than any other time of year. From October to
early December, when consumers are busier than ever but not yet at risk of
missing a gifting occasion, shoppers are far less likely to be sticklers about
specific-date delivery estimates. Given the challenging macro environment,
brands have a narrow window of opportunity to save money with more
non-day-definite shipping options without costing consumer expectations.

Article top image credit:

 

Mihaela Rosu/iStock/Getty Images Plus




AMAZON PULLS BACK FROM UPS AS IT BUILDS OUT LOGISTICS EMPIRE

While UPS’ priorities have shifted, Amazon’s capabilities have transformed. But
both face obstacles that could complicate plans to reduce business with each
other.

By: Max Garland • Published March 3, 2023

UPS plans to further reduce its business with top customer Amazon in 2023, even
as both companies face obstacles that could complicate their mutually agreed
cutback.

Amazon is shifting away from UPS and other carriers as it works to build its own
logistics empire, in part to gain greater control over transit times and the
end-customer’s delivery experience. Meanwhile, UPS has chased growth in segments
outside of e-commerce in order to boost its profit margins.

Estimates from MWPVL International, a firm tracking Amazon’s growth,
demonstrates the impact of both companies’ respective evolutions. The number of
Amazon packages UPS handled in 2022 was 1.3 billion, down from 1.41 billion the
year before. 

“We’re just starting to see a slight decline in the absolute package volume,”
Marc Wulfraat, MWPVL president and founder, said. “Prior to that it was always
growing, because the total volume of packages was growing … Now Amazon’s got
such a large scope of coverage that they can do [it] themselves.”


AMAZON-RELATED REVENUE FALLS AS UPS REFOCUSES

UPS’ revenue tied to Amazon fell from 13.3% in 2020 to 11.3% in 2022, according
to a UPS securities filing. Cowen analysts said in a January note that the 2022
percentage would have been lower, barring a $1.3-billion currency impact from a
strong U.S. dollar.

Although Amazon-related revenue jumped in 2020 as the e-commerce giant scrambled
to meet demand at the start of the COVID-19 pandemic, it declined over the
following two years as UPS began to focus on attracting more profitable
deliveries from healthcare companies and smaller shippers.

SHARE OF UPS REVENUE TIED TO AMAZON SHRINKS

Percentage of UPS consolidated revenues represented by Amazon, since 2019

“We look favorably on their ongoing efforts to manage down the percent of low
margin B2C business that they are willing to take,” Cowen analysts said of
UPS’ efforts to reduce its share of Amazon-related revenue.

The decline in Amazon business is affecting more than just revenue. In Q4, UPS’
average daily U.S. domestic volume fell 3.8% YoY, with about half of that drop
coming from Amazon, CFO Brian Newman said on a Jan. 31 earnings call. The
companies planned for that decline through a previously arranged contractual
agreement, he added.

UPS expects the volume decline in its U.S. segment to continue this year, fueled
by Amazon insourcing more of its own deliveries, Newman said. He noted that
growth from other customers will nearly offset the drop.

“We’ll continue on a mutually agreed path to glide that business down in 2023,”
Newman said of Amazon.

A reduction in the amount of business UPS does with Amazon isn’t necessarily a
bad thing for the carrier, since it’s a prepared decline as opposed to an
unexpected drop, LPF Spend Management founder Nate Skiver said in a LinkedIn
post. He added that UPS can recapture lost revenue with fewer packages by
leaning on higher-yielding shipments from smaller businesses.


AMAZON BUILDS A NETWORK TO RIVAL UPS

While UPS’ priorities have shifted, Amazon’s capabilities have transformed.

The e-commerce giant leverages UPS in instances where capacity constraints limit
its ability to move packages itself, Wulfraat said. The company also needs UPS
to deliver in areas where Amazon’s sprawling network of logistics facilities
hasn’t yet reached.

“There’s no fulfillment center or sortation center or delivery station operated
by Amazon anywhere close to Billings, Montana,” Wulfraat said. “So let’s say the
order that you’re placing happens to be coming from the Phoenix fulfillment
center. The only way that Amazon can get that merchandise to the customer in two
days is to leverage the resources of UPS.”

Still, Amazon’s aggressive buildout of sortation centers, delivery stations and
transportation infrastructure has allowed it to deliver significantly more
parcels in-house overall. The company’s market share for U.S. parcel volumes
grew to 22% in 2021, beating out UPS rival FedEx, according to the Pitney Bowes
Parcel Shipping Index.

AMAZON’S MARKET SHARE GROWS TO RIVAL TOP CARRIERS

Market share of U.S. parcel volume, 2014 to 2021

“We took a fulfillment center footprint that we’ve built over 25 years and
doubled it in just a couple of years,” Amazon President and CEO Andy Jassy said
on a Feb. 2 earnings call. “And then we, at the same time, built out a
transportation network for last mile roughly the size of UPS in a couple of
years.”


AMAZON’S PULLBACK, WEAK DEMAND COULD SLOW THE SPLIT

Two factors could complicate Amazon’s planned reduction of UPS business,
according to experts.

Amazon has closed several warehouses and canceled plans for future facilities in
recent months as the company attempts to trim its operating expenses. This
pullback in its logistics buildout could lead Amazon to have an equal or greater
reliance on UPS compared to last year, Wulfraat said.

Possible relief in parcel rates could also weigh on Amazon’s use of UPS. Pricing
power is slowly shifting back in favor of shippers as demand softens, following
years of capacity constraints and added fees.

Pricing has always been at top of mind for Amazon when it comes to
transportation, and the company will pursue the lowest-cost option whether it’s
in-house or through a third party, said Shipium co-founder and CEO Jason Murray,
who was the former vice president of supply chain and retail services at Amazon.
It’s in Amazon’s best interest to maintain its relationship with UPS “and have
them essentially as a backup.”

“If they see softness in UPS’ demand and cost structure, they will jump on that
and bring down their own cost structure by taking advantage of that,” Murray
said of Amazon.

Article top image credit: Stephanie Keith via Getty Images


FEDEX SLUMPS, AMAZON SLOWS AND MORE TAKEAWAYS FROM A TOP SHIPPING INDEX

New U.S. parcel delivery data from Pitney Bowes outlines the extent of top
carriers’ volume declines, and what lies ahead for the sector.

By: Max Garland • Published March 28, 2023

U.S. parcel delivery demand fell back to earth in 2022, leaving top carriers
like FedEx scrambling to cut costs and readjust their networks for an uncertain
future.

Data released March 28 from the Pitney Bowes Parcel Shipping Index outlines the
extent of these volume declines, along with which delivery providers fared the
best in a difficult environment.

Here are five charts based on that data, covering trends such as UPS and
Amazon’s decoupling, the growth of regional carriers and what lies ahead for the
delivery sector.


PARCEL VOLUMES FELL, BUT REVENUES INCREASED

After years of growth, U.S. parcel volumes declined 2.2% from 2021 to 2022,
according to the index. Carriers struggled to beat tough year-over-year
comparisons as e-commerce demand cooled off following a surge from the COVID-19
pandemic.

Delivery providers’ pricing power remained firm despite lower volumes. U.S.
parcel revenues grew 6.5% YoY, which Pitney Bowes said was driven by inflation
and higher fuel surcharges. Vijay Ramachandran, the company’s vice president of
go-to-market enablement and experience, pointed out additional reasons for the
divergence between volumes and revenues.

Many consumers with high spending power moved from the cities to suburban and
exurban areas, increasing the cost to deliver to them. Additionally, carriers
spent heavily to expand their capacity after many networks were overwhelmed by a
flood of packages when the pandemic first took hold. Now, they’re pushing to
recoup their investment and continue to increase rates.

“I think these additional logistics costs are really paying for the investment
that happened a couple years ago,” Ramachandran said.

CARRIERS BOOST REVENUES DESPITE DECLINING DEMAND

Year-over-year growth in U.S. parcel market volume and revenues


FEDEX SAW THE STEEPEST VOLUME DROP, AMAZON MOMENTUM STOPS

FedEx had the largest percentage jump in U.S. volumes among the top parcel
carriers in 2021, and it followed up that performance in 2022 with the sharpest
overall decline.

This swing underscores the turbulence Raj Subramaniam has encountered in the
beginning of his tenure as FedEx CEO, with plummeting demand driving the company
to slash costs to reduce pressure on its bottom line. UPS and the U.S. Postal
Service also encountered volume declines in 2022 in a softening demand
environment.

Amazon Logistics’ volume remained flat, a pronounced slowdown from the
blistering pace of growth the e-commerce giant’s in-house delivery arm saw the
previous six years. The company has closed and canceled dozens of warehouses to
reduce the burden of fixed costs while better matching capacity to demand.

TOP CARRIERS BORE THE BRUNT OF SOFTENING DELIVERY ACTIVITY

U.S. parcel volumes shipped since 2015, by carrier


UPS CHARTS A SEPARATE PATH FROM TOP CUSTOMER

While UPS fared better than rival FedEx in terms of volume loss last year, it
has ceded the most market share among carriers since 2016, per the index.
Meanwhile, its top customer Amazon has seen its market share by volume grow
significantly during that period.

What changed? The relationship between the two companies, for one.

UPS has prioritized attracting more profitable shipper segments rather than
customers like Amazon, which offer plenty of volume but at low margins.
Meanwhile, Amazon has built up its own logistics capabilities to deliver more of
its customers’ orders in-house, reducing its reliance on third-party carriers.

“We’ll continue on a mutually agreed path to glide that business down in 2023,”
UPS CFO Brian Newman said of Amazon on a Jan. 31 earnings call.

This gradual shift has resulted in many deliveries that would have originally
gone to UPS being completed by Amazon instead.

AMAZON BITES INTO UPS’ SHARE OF PARCEL SECTOR

U.S. parcel market share by volume


SMALLER CARRIERS CONTINUE MOMENTUM

After nearly doubling their package volume in 2021, smaller U.S. parcel carriers
again saw strong growth in 2022 despite a more challenging environment. Volume
and revenue for carriers outside of UPS, FedEx, the Postal Service and Amazon
grew by roughly 25% and 29%, respectively, YoY.

Alternatives to the top carriers have seen strong interest from shippers seeking
lower delivery rates and insurance against capacity constraints. They have also
expanded their coverage areas and leveraged partnerships with software providers
and shipping platforms to boost their customer reach.

These delivery providers — including LaserShip/OnTrac, Lone Star Overnight and
Spee-Dee Delivery — still have a long way to go to rival FedEx and UPS, as they
made up just 2% of market share by volume combined last year. They may also have
trouble attracting customers in a challenging economic climate, as volume
discounts from national carriers become more appealing.

″[Carrier] diversification is a risk-mitigation strategy, but it may not be a
cost-saving strategy,” said Pitney Bowes’ Ramachandran.

DELIVERY ALTERNATIVES SAW FURTHER GROWTH IN 2022

U.S. parcel volumes for carriers outside of UPS, FedEx, the Postal Service and
Amazon


VOLUME GROWTH EXPECTED TO SLOW DOWN

Macroeconomic uncertainty, inflationary pressures and market normalization after
COVID-19 are all poised to weigh on U.S. parcel volume growth going forward,
according to the index. It forecasts a compound annual growth rate of 5% from
2023 to 2028 as the most likely scenario, down from 10.8% CAGR between 2016 and
2022.

This rate would result in roughly 28 billion parcels in the U.S. market in 2028,
although the index projects that volumes could end up being as low as 24 billion
or as high as 32 billion. A key factor in the end result will be e-commerce
activity, which remains strong even amid the current cooldown, said
Ramachandran. Parcel volumes are a full year ahead of the index’s pre-pandemic
forecasts.

“What that means is that there is some staying power to online shopping, online
penetration, direct-to-consumer shipping and delivery, and it hasn’t reverted
back to the mean of where we thought things were going to be,” he said.

A WEAKER GROWTH RATE PROJECTED FOR PARCEL MARKET

U.S. parcel volumes shipped since 2015. Data for 2023-2028 is projected, based
on 5% growth each year
Article top image credit: Spencer Platt/Getty Images via Getty Images



WHAT DRONE COMPANIES NEED TO DO TO REACH LOFTY DELIVERY GOALS

Zipline and Alphabet’s Wing aim to scale up and reach more customers, but it
will take more than their internal capabilities to secure long-term success and
adoption.

By: Max Garland • Published March 29, 2023

Two big names in the drone delivery space — Zipline and Alphabet’s Wing —
unveiled major upgrades to their abilities to service customers in March that
may need some help in order to shake up last mile transportation.

While their respective upgrades differ, both have the same goal in mind: Scale
up and reach more customers. Wing expects its drone delivery network will be
able to handle millions of deliveries by mid-2024, while Zipline aims to operate
more flights annually than most airlines by 2025.

For the two companies to achieve that, it will take more than a sizable
investment to succeed — just ask Amazon, which has reportedly encountered drone
safety challenges and limited delivery activity. They will need to lower
operating costs by maximizing their networks’ efficiency and get regulators and
consumers on their side in order to deliver on the hype of drone technology.

Otherwise, it will take much longer for drones to deliver on the hype and become
as ubiquitous in neighborhoods as delivery vans are, experts say.


INCREASING DENSITY, ADJUSTING REGULATIONS TO LOWER COSTS

Carriers are working to increase density in the last mile delivery space, like
having their couriers make as many deliveries as possible on a single route to
minimize operating costs.

While drones are generally limited to lightweight payloads, a network can create
its own version of density by ensuring its fleet is in constant motion, making
pickups and deliveries as often as they can to sustain the business model.

“The worst thing is to have your vehicle, whether it’s a drone or a truck,
sitting idle,” said James Campbell, a professor of supply chain and analytics at
the University of Missouri-St. Louis. “The way this makes the most sense is if
you can get the huge scale so your drones are flying all the time. You’re
spreading your fixed costs for the facilities over many, many drones and many,
many deliveries.”

Although delivery density is a critical part of the equation, it is only one
avenue to lower operating costs, Eric Peck, CEO of drone logistics platform
Swoop Aero, said in an email. Operators that design faster drones can respond to
demand quicker and provide a more valuable offering to customers, which can
translate into more profitable services. Increased delivery range can help, too,
by unlocking new lines of business for drone companies, such as offshore
maritime logistics.

One pilot monitoring multiple aircraft would also help operators maximize the
return on their network investments, Peck said. A McKinsey report published in
January affirmed this view, saying that with current pilot limitations in place,
drone delivery struggles to be competitive with other last mile transportation
modes in terms of operating costs.

The cost of a single-package drone delivery in which one person is monitoring
the drone is about $13.50, according to the report. If a single drone operator
is able to manage 20 drones simultaneously instead of just one at a time, the
per-delivery cost plummets to around $1.80.

DRONES HAVE MOST TO GAIN FROM EFFICIENT DELIVERY OPERATIONS

Direct operating cost for a five-mile delivery of a 216-cubic inch package, by
transportation method and deliveries per operator.

In the U.S., a waiver is required to operate multiple small drones with only one
remote pilot, and operators also need certification in order to make drone
deliveries beyond the visual line of sight of a pilot or observer.

For DroneUp, which is helping Walmart advance its goal of making 1 million
deliveries a year by drone, being restricted by visual line of sight regulations
has limited the delivery radius of its drones to about two miles. Stretching
that further would have significant upside — DroneUp COO Anthony Vittone noted
that 90% of the country lives within ten miles of a Walmart.

“Every mile that I add to that [drone delivery] radius triples and sometimes
even quadruples the number of homes that have access to DroneUp delivery,” he
said.


CONSUMER BUY-IN, HABITS NEED TO EVOLVE

As delivery activity increases, companies also have to field concerns within the
communities they operate in. Vittone said some potential customers may have a
fear of the unknown with drone delivery, as is common with many new
technologies. To reduce uncertainty, employees field questions from the public
at Walmart stores where they operate and also conduct demonstrations.

Drone firms also have to consider potential disruptions their operations could
create with the public. Wing, for example, has reportedly encountered noise
complaints in Australia. The company said in emailed remarks to Supply Chain
Dive that engaging with communities to answer questions and receive feedback is
a top priority before launching new services.

“The reality is that drone delivery brings significant benefits — reduced
traffic congestion, fewer emissions, expanded opportunities for businesses, and
a greater level of convenience for consumers — and these become apparent once
drone delivery arrives,” Wing said.

If companies can achieve public buy-in, it’s easy to see how drones could shake
up traditional last mile delivery operations. They have speed as a distinct
advantage over other forms of last mile transportation, as they are able to
avoid ground traffic in their route to the customer.

But Campbell questioned what items beyond food and emergency medicine are needed
in 15 to 30 minutes — a shift in consumer behavior may need to take place,
similar to what happened when FedEx first launched express parcel delivery or
when Amazon accelerated delivery speeds for online orders.

For drone delivery companies to reach that lofty, game-changing status, they
will have to significantly expand their reach and capabilities first. With
recent announcements in mind, that may be happening sooner rather than later.

“Things in this space rarely happen before anyone says, but I guess I’m a lot
more optimistic than I used to be that this is finally coming,” Campbell said.

Article top image credit: Courtesy of Walmart press kit DroneUp announcement


FEDEX AND AMAZON STILL HAVEN’T FIGURED OUT SIDEWALK DELIVERY ROBOTS. WILL MASS
ADOPTION EVER COME?

Delivery giants’ tests of autonomous bots fizzled out. But many industry
insiders still believe that the technology can catch on.

By: Max Garland • Published April 12, 2023

For a moment, a prototype FedEx robot made the last-mile delivery process
compelling enough to be featured on late night television.

“This is the future right here,” Jimmy Fallon said in 2019 as the company’s
autonomous bot, later named Roxo, delivered The Tonight Show host a pizza.

But despite the hype, the path to widespread adoption for sidewalk-roaming
robots to deliver goods throughout the U.S. has been anything but
straightforward. FedEx canned Roxo less than four years after its flashy debut,
per an October statement. Amazon, meanwhile, ended field tests for its own
delivery bot after it fell short on meeting customers’ needs.

If logistics behemoths struggle to develop a successful formula for their
delivery bot operations, can a long-term, sustainable business model ever be
realized? Many of the executives, researchers and regulators interviewed by
Supply Chain Dive say yes, and that current labor and inflation challenges could
help the transportation mode get there sooner.

Still, to be truly successful, insiders say the industry still needs to confront
major hurdles around funding, segment diversification and more.


WHY DELIVERY BOTS COULD GAIN POST-PANDEMIC MOMENTUM

Although FedEx and Amazon have taken their leave, the delivery bot sector still
has seasoned and growing players. Leaders at these tech companies say using
their robots to bring goods to consumers — versus a human courier using a
vehicle — can offer advantages that have become more evident in recent years.

Chief among them is the potential to lower costs within the final mile of
delivery, considered the most expensive step in the shipping process. With
autonomous or remotely operated capabilities, delivery bots are insulated from
climbing courier wages that standard providers pass on to the end customer.
Additionally, they aren’t as exposed to jumps in gas prices that took a toll on
carriers — and then their shippers — last year.

“After COVID, you had challenges with labor,” said Ali Kashani, co-founder and
CEO of delivery bot developer and operator Serve Robotics. “Then you had
inflation and the cost of labor going up, and then you have the cost of gas
going up. Every one of these things that has happened has become a tailwind for
us.”

DELIVERY WORKERS SEE GROWTH IN PAY

Median usual weekly nominal earnings for driver/sales workers and delivery truck
drivers 16 years and older, not seasonally adjusted

And while bots roaming the sidewalks don’t have the range or capacity of
gas-powered vehicles, they are well-suited to quickly respond to on-demand
deliveries of small payloads originating from nearby businesses.

This has led many bot companies to grow their businesses by focusing on food and
convenience deliveries. Serve’s robots have completed orders on Uber Eats’
platform for Los Angeles customers, and 7-Eleven recently partnered with the
company for testing in West Hollywood, California. Plenty of food delivery
operations are also taking place at colleges, with Grubhub rolling out
partnerships with tech companies Kiwibot and Cartken to serve on-campus demand.

The question is if that is a large enough sandbox for these businesses to mature
into self-sustaining operations.

For Coco, whose bots make restaurant deliveries in Los Angeles, food makes sense
as the initial order category to focus on, said co-founder and CEO Zach Rash.
It’s a high-frequency order category with strong local demand and a need to be
delivered quickly. However, he noted that over time there will be a need to
diversify into other categories in order to maximize the use of its robots.

“You need a lot of scale and you need a lot of density,” Rash said of the
formula for long-term success in the delivery bot space. “Food is the best way
for us to build up to that while making sure that we can maintain profitability
on the way there.”



Courtesy of Coco
 

Although bots won’t become a one-size-fits-all approach to last mile delivery,
there are other areas executives say the transportation method could see
increased adoption in. Starship Technologies has robots delivering spare parts,
testing supplies and samples in industrial campuses mostly in Germany, for
example. And one day, industry players could be working directly with parcel
vans and trucks to make deliveries, CEO Alastair Westgarth said.

“We’re adding a new modality to delivery, not taking over the entire world of
delivery,” he said.


COMPLEX CHALLENGES CLASH WITH IMMEDIATE NEEDS

The amount of deliveries completed by automated vehicles is still “barely
measurable” today, acknowledged Cartken CEO Christian Bersch. To gain share from
traditional transportation methods, companies operating robots will need funding
to expand their service coverage, improve upon their existing technology and
ultimately offer lower costs than competitors.

But economic uncertainty has thinned the pool of funds available from venture
capital and private equity firms, company executives say. Starship, a major
player in the robotics space, cut back its staff and service areas in 2022 in a
more difficult environment to secure funding.

“We wanted to make sure that we adjusted to that dynamic and focused on making
sure our company’s viable forever, so to speak,” Westgarth said, adding that
Starship prioritized further improving its unit economics.



Permission granted by Starship Technologies
 

Although larger, diversified companies may have the financial muscle to scale up
their own bot programs, success in the space requires patience as hurdles
related to adoption, infrastructure and regulations loom large. This includes
current range limitations for these bots, which means reaching new customers in
suburban and exurban areas will be difficult. Starship’s Westgarth said cities
and universities dominate the company’s business, with 90% of its focus being in
those two categories.

Long-term challenges can clash with near-term needs, as was the case with FedEx.
The company said in its October statement that it canceled Roxo to “prioritize
several nearer term opportunities” as overall demand for its services was
slowing.

Companies exclusively focused on deliveries via bot can’t simply cut the cord,
and they still need to grow at a pace that meets investors’ expectations. Many
executives say they remain cautious about ramping up too aggressively and
without enough community buy-in, fearing a backlash similar to what e-scooters
saw years ago. 

Bern Grush, executive director of the Urban Robotics Foundation, doesn’t buy it.

“You want to tell your investor, ‘We don’t want to have 20,000 robots’?” said
Grush, whose foundation aims to help member municipalities coordinate
robot-related policies. “You want to tell your investor, ‘We’re happy with 12
robots’?...This whole industry needs to deliver a million things an hour.”

Article top image credit: Courtesy of FedEx



WHY DELIVERY ROBOTS FACE A REGULATORY ‘NIGHTMARE’

Laws for sidewalk-roaming bots have taken hold across states. But variances in
each bill complicate the industry’s expansion plans.

By: Max Garland • Published April 26, 2023

States can’t seem to agree on how to handle sidewalk delivery robots.

Bots as heavy as 500 pounds can roam as fast as 4 miles per hour on Georgia
sidewalks under state laws. In New Hampshire, robots can travel up to 10 miles
per hour on sidewalks, but they can’t weigh more than 80 pounds. 

At 2022’s end, at least 23 states had some type of law governing how these
delivery robots can ferry goods within their borders, according to data from the
Pedestrian and Bicycle Information Center and Supply Chain Dive research.

SIDEWALK-NAVIGATING DELIVERY BOT BILLS SPREAD ACROSS THE NATION

State legislation on personal delivery devices signed into law since 2017

The proliferation of state laws around the deployment of delivery bots has been
somewhat of a double-edged sword for tech developers. While companies can have
more of a say in crafting legislation at the ground floor, the patchwork nature
of these laws has also complicated national expansion.

“It is going to be a nightmare to get all the states on the same page — there is
massive variation,” said Ritukar Vijay, CEO and co-founder of delivery bot
company Ottonomy.


A resident takes out his order from a Starship Technologies delivery robot on
April 8, 2020 in the Chevy Chase neighborhood of Washington, DC.
Alex Wong via Getty Images
 


DELIVERY BOTS INVADE STATEHOUSES

While no states outright ban delivery bots, tech developers have decided to take
a cautious approach to expansion rather than flood the market with robots and
risk backlash.

“We don’t do the ‘ask for forgiveness rather than permission’ approach,” said
Serve Robotics CEO and co-founder Ali Kashani, noting how rapid expansion of
e-scooters eventually soured public sentiment.

Legislation has often been developed with the guiding hand of delivery bot
operators. Starship Technologies, which has a partnership with Grubhub to roll
out sidewalk bots to college campuses, worked with lawmakers to advance bills in
Virginia, Idaho, Wisconsin and other states.

State legislatures don’t always side with business interests, requiring bot
developers to be actively engaged in the political process. Starship CEO
Alastair Westgarth said the company has seen proposed bills that, despite
intentions to provide a safe rollout, would have ultimately hindered delivery
service.

Ultimately, companies have to strike a balance between meeting their business
objectives while addressing concerns over safety. That approach has helped
Starship create value for both customers and the communities its bots operate
in, Westgarth added.

Political engagement also gives businesses a leg-up in ensuring their designs
can be deployed smoothly. Variance in state laws often depends on which bot
operator led the charge to pass a particular bill, said Carl Hansen, vice
president and head of government relations of delivery bot company Coco.

Starship’s work to pass legislation in 2017 and 2018, for example, was geared
toward the particular characteristics of its robot, which can hold around 20
pounds of goods. Then, Amazon and FedEx pushed for legislation in 2019 and 2020
that catered to the different use cases for their particular bots, Hansen said.
FedEx’s Roxo bot, which the company canceled to prioritize nearer-term goals,
had 100 pounds of capacity.

But in some state legislatures, companies have had to contend with more stiff
resistance. Kansas Gov. Laura Kelly vetoed a 2022 bill that would have
established rules for delivery bots to operate on sidewalks. She said in an
explanation of the veto that lawmakers still had to address safety concerns like
clarifying minimum liability provisions and who would oversee enforcement. There
was no motion to reconsider the bill, which also generated concerns related to
courier job security.

Despite some opposition, legislation for sidewalk-traveling delivery bots have
had clear momentum across statehouses. The push to regulate bot deployment is
also somewhat recent — all of the bills signed into law were introduced in 2017
or later.

“They’ll keep popping up,” Tom Holland, a Kansas state senator who opposed the
bill in his legislature, said of new delivery bot legislation.


The Kiwibot delivery bot on display during Vox Media’s 2022 Code Conference on
September 6, 2022 in Beverly Hills, California.
Jerod Harris via Getty Images
 


A TOUGH TRANSITION FROM STATEHOUSES TO SIDEWALKS

Regulatory approval doesn’t guarantee a smooth rollout. Operators and regulators
have received some hard — but necessary — lessons through various tests, some
conducted after laws were enacted.

Pennsylvania signed delivery bot legislation into law in 2020, and the state’s
transportation department authorized Kiwibot to make deliveries in 2021. The
company made deliveries in Pittsburgh between September and December of that
year as part of the Urbanism Next Center’s Knight Autonomous Vehicle Initiative,
a $5.25-million effort to help cities develop a people-centered approach to the
technology.

Through the pilot program, the bots could make deliveries for a food truck, a
pharmacy and a library in Pittsburgh’s Bloomfield neighborhood, per a report
from the center. But the robots quickly ran into issues, unable to overcome
cracked sidewalks or obstructions like overgrown trees.

In total, Kiwibot completed four deliveries to customers and 972 simulated
deliveries through the pilot. The company ultimately decided against a rollout
in the neighborhood due to “infrastructure challenges,” the report said.

In Detroit, where Kiwibot also tested out robot delivery in partnership with the
Knight AV initiative, a local restaurant had issues getting their staff trained
on using the technology, said Tim Slusser, director of mobility innovation for
the city.

By the time restaurant employees were familiar with the delivery bots, the
business encountered staffing challenges and returned to their standard systems
to minimize disruptions. The pilot then moved to a second local restaurant, but
that presented its own issues — namely a lack of customer engagement.

“Candidly, I believe it was just a little bit [of] a lack of awareness from the
consumers that this was even an option,” Slusser said. “So what we ended up
doing is working with the Kiwibot team to help them simulate as many runs as
possible from different places that those restaurants typically have it
delivered to.”

Kiwibot only made 12 customer deliveries as part of the test in Detroit, but
Slusser said the city has since become better prepared for new bot initiatives,
such as Starship’s deployment on Wayne State University’s campus.

Experts say more pilot programs like what occurred in Pittsburgh and Detroit
will be necessary to weed out potential implementation issues.

“It’s not a technology issue in many ways,” said Karen Lightman, executive
director of Metro21 at Carnegie Mellon University, a research and implementation
lab for smart cities. “It’s often the application, the human side and the policy
side where it gets complicated and a little messy.”

News Graphics Developer Jasmine Ye Han and Visuals Editor Shaun Lucas also
contributed to this story.

Article top image credit:

Carlos Osorio/AP






HOW LAST MILE DELIVERY IS EVOLVING

Last-mile delivery services are evolving to better address consumer needs and
competitive pressures. While legacy providers push for improvement, emerging
firms are leveraging technology to carve out their own niches.

INCLUDED IN THIS TRENDLINE

 * Amazon pulls back from UPS as it builds out logistics empire
 * Deliveries keep getting faster. Will it last?
 * Why delivery robots face a regulatory ‘nightmare’

Our Trendlines go deep on the biggest trends. These special reports, produced by
our team of award-winning journalists, help business leaders understand how
their industries are changing.
Davide Savenije Editor-in-Chief at Industry Dive.

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