State of the Industry in 2017

State of the Industry in 2017
How Delivery Businesses Should Examine 2017… So Far
By Andrea Obston

For the customized logistics and delivery industry, 2017 was a good year.

It was the year of customers demanding both fast and free. It was the year of escalating business-to-customer demands complicated by driver shortages. And it was a marathon year to meet the intensifying demands that e-commerce placed on the industry. It was, indeed, quite the year.  

How did carriers balance these demands and where do they forecast the industry going in 2018?  We asked a group of CLDA members to give us their perspectives on a year when the rules were challenged; the expectations were exploded and the pace was wild. The battle-weary, but energized executives included are:

  1. Jon Rydel, CLDA board member and President/CEO, Priority Express
  2. Scott Leveridge, president, USA, and Gerry Mercure, vice president, business development, USA - TForce Final Mile
  3. Scot Dobak, CEO, Dicom Transportation Group

QUESTION: How would you characterize the state of the customized logistics delivery industry in 2017?

Rydel: I believe that 2017 was a great year for the customized logistics delivery industry. A company looking to grow revenue and market share more than likely has begun to, or already has, expanded their dedicated and distribution platforms. With the world demanding the delivery of their goods faster and in most cases free, companies correctly positioned in our industry have seen dramatic growth.

Leveridge & Mercure: The industry’s experienced accelerated growth in small parcel, and business-to-customer shipments have been constrained by limited driver resources. We expect this will result in price increase pressure to offset higher driver costs. We saw such rate increases from FedEx and UPS in Q1 this year. Further consolidation of the industry is likely as businesses look to exit to avoid the effects of further disruption. Businesses with greater scale and capacity will have greater success in penetrating the volatile business-to-customer market. They will be in a better place to respond to those consumer expectations for "fast and free" delivery. There were disruptive influences in 2017, too.  Chief among them were Amazon's emergence as a logistics provider, the expansion of store-to-door services, and new crowdsourcing service providers.

Dobak: Customized logistics continues to be a quickly expanding market due to all of the dynamics around omni-channel distribution. This has emerged as traditional brick-and-mortar retailers worked to meet the new demands of the marketplace. These dynamics are being led by the explosion of Amazon along with new expectations of the retail consumer. Many traditional retailers and suppliers are still developing their go-to market strategies.

QUESTION: What have been the most significant developments affecting those in the industry in 2017 and why are they important?

Rydel: Building an operational structure where our capacity (our fleet of drivers) meets the demand of customers whose needs can change significantly from day to day. Our drivers are the backbone of our organization. Without them we don't have a business! It is our job to partner with them and give them the tools and roadmap to be successful. If that occurs, then the by-product will be a satisfied customer.

Leveridge & Mercure: We see four key developments:
1. The growth of e-commerce.
2. The changes in the political climate, which we believe will lead to de-regulation.
3. The pressure on driver resources.
4. The cost of commercial property in major markets.

These are particularly important challenges that we need to meet. These conflicting influences continue to lead to increased disruption and greater uncertainty in the industry. Logistics businesses will need to be nimble and strategic to thrive.

Dobak: For us, the three significant developments we see as shaping the industry this year were:

1. The growth in business-to-consumer volume.
2. High service expectations coupled with low margin expectations.
3. The lowering of the number of pieces per stop coupled with the growth of residential deliveries. This has put increased pressure on the couriers and parcel carriers. On the other hand, we see it as providing significant new growth opportunities for the carriers who are willing to adapt to this new marketplace and customer demand.

These developments are important because they are high-risk. On the other hand, they provide new growth markets for those who can figure out how to compete and win in them. Those who continue to thrive in this business will need to be creative, flexible, and truly understanding of their customers’ needs and expectations. These attributes have never been more important. Those who adapt will thrive.

QUESTION: What parts of the industry have grown in 2017?

Rydel: Dedicated. Companies are looking for ways to reduce overhead cost and exit the management of their supply chain. And pool distribution. As companies continue to look at ways to get their product to market quicker and in a more cost effective manner, pool distribution can be a great solution.

Leveridge & Mercure:

1. Business-to-consumer small parcel
2. White glove services
3. Same-day
4. Postal infusion

QUESTION: What parts of the industry have shrunk?

Rydel: On-demand. Companies are finding alternative ways to deliver packages to their customers without utilizing on-demand services. For instance, a customer who does both scheduled and on-demand services might decide to utilize an existing route to deliver their packages, rather than calling in an on-demand job that requires an additional driver and higher costs.

Leveridge & Mercure:

1. Banking and financial services
2. Healthcare due to cost pressure.
3. Office supplies

Dobak: Some traditional same-day courier work continues to shrink. This is not a new phenomenon, but one that continues to play out. But this is being replaced by new same-day and, in some regions, same-hour retail deliveries.

QUESTION: When you look back at 2017, what will stand out most in terms of its effect on our industry?

Leveridge & Mercure: We think this peak is going to be very challenging for many logistics providers as they struggle to balance cost and service pressures and scale as needed.

Dobak: The evolution of regional omni-channel. Amazon has changed the rules forever and this will require a new approach to the market place well beyond just this one supplier. The entire market place is evolving at a rapid pace.

QUESTION: What trends do you think will impact the industry in 2018?

Rydel: Technology advances within the dispatch software will continue to help companies improve efficiencies within their own business. Thus, giving our clients more visibility on the work we are preforming for them and reducing the overhead needed to manage it.

Leveridge & Mercure:  We see four big trends impacting our industry next year:

1. More de-regulation as the new administration gets established.
2. Continued growth of e-commerce, including store-to-door and same-day.
3. Greater influence of technology including big data and artificial intelligence.
4. Escalating needs for more efficient logistics models that leverage technology, scale, and customer partnerships.

Dobak: In addition to the trends already discussed, I expect to see continued progress in autonomous vehicles as a development that will play heavily in 2018.  This will be augmented with alternative/non-traditional delivery options designed to optimize companies’ supply chains. All these will lead to greater customer expectations for same-day/same-hour delivery service.

In the end, the panel expected that the drama, disruptions, innovations, and unexpected developments that shaped 2017 will set the stage for a challenging but exciting 2018.

About the Author

Andrea Obston is the Director of Public Relations at the CLDA.