Shippers turn on logistics

Earlier this year, Walmart and Home Depot made headlines with their decisions to charter ships to ensure they would get their imports from Asia to their distribution centres in time to avoid stockouts and lost sales. Since then, the ongoing supply chain disruptions have caused other companies to build up their own logistics capabilities or collaborate with other firms to utilize trucks and facilities.

The shortage of trucking capacity, aggravated by volume caps that some carriers have implemented and by soaring rates, has prompted some shippers to consider having their own trucks, reversing the trend to outsource transportation. However, such ambitions are running into serious obstacles. To begin with, trucks are in short supply and manufacturers are backlogged, hamstrung by component shortages. As a result, trucks are expensive, and competition for them is aggressive.

Moreover, firms would face an uphill struggle recruiting drivers to man those trucks. According to the American Trucking Association (ATA), the driver shortage in the industry has climbed to over 80,000 vacant positions. Trucking firms are paying premiums to attract and retain drivers.

Some shippers that have kept proprietary fleets have spotted an opportunity. In August Johnsonville, a large sausage producer, moved to offer capacity on its trucks to other shippers of frozen food. To that end, the company launched Johnsonville Transport & Logistics, an offshoot that markets the capacity of its own fleet plus a network of carrier partners.

Home Depot, one of the top five retail player in the United States, has moved in the same direction. It is offering capacity on its fleet of flatbed trucks to other shippers. Home Depot teamed up with digital freight broker Loadsmart; together, they launched an automated platform called Flatbed Messenger which matches space on a flatbed truck at a specified price with a shipper looking for a trucker.

Essentially this approach reverses the traditional truck brokerage model, where shippers post loads that truckers can bid for.

Home Depot has invited truckers that move its loads to join the platform, and Loadsmart is asking its trucker clientele to come on board to form a broader network with more capacity and routes.

For Home Depot, this is first and foremost a way to utilize the empty capacity on the backhaul from deliveries, cutting back empty miles and reducing backhaul costs. Shippers gain capacity at lower prices than in the open market, and the truckers that join the scheme can boost their utilization and revenues.

For some of its domestic deliveries, Home Depot now uses the capacity of another large retailer – Walmart. It was the first large customer to sign on to Walmart’s GoLocal third-party delivery service, which was launched in August, offering same-day and next-day local delivery to other retailers and online merchants on the back of the giant retailer’s delivery network.

Like Walmart and Amazon, Home Depot has the declared intention of building a delivery network where consumers can choose between same-day and next-day, “no matter the product or project.”

However, Home Depot shoppers cannot get drywall or lumber through the GoLocal service, which is performed by gig drivers who are already in its Spark Driver programme for Walmart’s own grocery delivery service. Only Home Depot merchandise that fits readily into a car, such as paint or tools, is eligible.

Clothing retailer American Eagle Outfitters has been looking for more than trucking capabilities. In early November it announced the acquisition of third-party logistics firm Quiet Logistics for US$350 million so it could take the next step in an “ongoing supply chain transformation.”

As a wholly owned subsidiary, the 3PL will continue to run its business independently while supporting American Eagle’s growth.

This followed the retailer’s takeover of another 3PL, Airterra, in September. At the time, American Eagle management stated that it would use the logistics firm to leverage its network of stores and distribution centres to offer delivery services at comparable speeds to Walmart and Amazon.

“An important pillar of our strategy is transforming our supply chain to create greater agility, speed and diversification. Our vision is to create an on-demand, hyper-scaled operations platform that enables brand success,” American Eagle CEO Jay Schottenstein said at the time.

Ian Putzger