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Increasing costs. Evolving consumer expectations. And accelerating disruptions. Today’s supply chain leaders face more challenges than ever before. Hosted by Karl Siebrecht, the Logistics Leadership Podcast features industry interviews, warehousing and transportation deep dives and the unique insights supply chain leaders require to compete and win in today’s environment.
[00:00:00] Narrator: It's the Logistics Leadership Podcast with Karl Siebrecht and Ben Dean.
[00:00:11] Karl Siebrecht: Welcome back to the Logistics Leadership Podcast. I am Karl Siebrecht, your host, and as always, I am joined here by Ben Dean. Ben, good to see you. Great to be with you again.
[00:00:21] Ben Dean: As always, great to be with you, Karl. I'm especially excited for today's episode because we're going to be getting into last mile.
[00:00:28] And beyond having some experience here, I think it's had the most change, most evolution over the last decade or so.
[00:00:35] Karl Siebrecht: Yeah, no doubt. So we've got two guests today, two folks who will help us get a better understanding of both the industry dynamics and, more specifically, the evolving needs of the customers. But before we jump in, maybe let's just take a step back and kind of frame this conversation a little bit.
[00:00:54] Maybe just do a look back into how this industry has evolved over the past, really, couple decades.
[00:01:01] Ben Dean: Yeah. And I'll take my personal experience into this. When I was managing last mile and parcel spend, the way we did that, you know, 10, 15 years ago, was to run an RFP with UPS and FedEx every couple of years. Pit them directly against each other.
[00:01:17] And the winner got all of your parcel business for the next period of time. And I don't think that sounds like much what people are doing today. Why do you think that's changed?
[00:01:27] Karl Siebrecht: Yeah, definitely not. So then, you know, Amazon is born, they start to grow and capture a huge share of the eCommerce business.
[00:01:35] And of course, they quickly became the largest customer of those incumbents; those two plus USPS. And then, of course, started to build their own, right. Wanted to build their own capability and so that created a lot of churn and change in the industry and created a huge impact on the incumbents.
[00:01:55] Ben Dean: Yeah.
[00:01:55] And don't forget about some of the other new breed folks in that space. I don't know if this was Amazon effect or what have you, but around that same time, you're watching the rise of the regional players, from LaserShip and OnTrac to the newer folks we're going to be talking about today. And that's partly driven by the Amazon demand picture, but it's also that the companies I named at the start weren't servicing the regional, the short distance run, in maybe the way that the shipper expected and the new preferences were gone.
[00:02:24] Karl Siebrecht: Right. So then more recently, we've seen great growth in startups. We talked a couple episodes ago about venture investing in the space. A lot of that venture capital and investment capital has gone towards the final mile delivery companies. And then there are some of the large gig economy players like DoorDash, Uber, who are now also entering this space.
[00:02:44] There's a lot going on. The other thing that's worth mentioning is advancements, evolution in both the delivery service companies, but also the orchestration layer, the software layer to help optimize the final mile. So tons going on.
[00:02:58] Ben Dean: And that's specifically the space where my guest is going to come in.
[00:03:03] So I'm talking to Bill Catania, who's the Founder and CEO of OneRail. And this is one of those businesses and startups that's just come along in the last five to six years, specifically in this space. And I think you're going to hear some really interesting thoughts from him on the orchestration side of it.
[00:03:19] Karl Siebrecht: Great. So the first guest we're going to chat with is a renowned parcel industry expert who is the Founder of LPF Spend Management, and also has a long career in parcel, specifically in retail, Nate Skiver.
Nate Skiver: Karl, I appreciate being on the show.
Karl Siebrecht: Well, it's great to have you, Nate. I always find that you have very insightful, interesting, and sometimes even humorous things to say about the industry.
[00:03:47] So I greatly appreciate that and thought that we should share some of that wisdom and perspective with this audience here on the pod. So let's start by just finding out from you a little bit more about just generally who you are and what you do.
[00:04:02] Nate Skiver: Absolutely. Nate Skiver, I'm the Founder of LPF Spend Management, which essentially means I'm an independent consultant and I work a lot with package shippers, often retailers, to help them negotiate better contracts, select the right delivery partners and really develop delivery and shipping strategy.
[00:04:25] I also advise carriers. I was a customer of carriers for quite a long time in retail for 17 years. And so I help carriers compete in the package delivery market. Before all that, 17 years in retail with companies like Abercrombie and Fitch and Gap Inc. And most of that experience was focused on parcel, helping to build and manage parcel programs, you know, throughout those 17 years.
[00:04:53] So in some way it's been all or nearly all focused on parcel for 20 plus years.
[00:04:59] Karl Siebrecht: Well, we are excited to dig into some of the things you've learned. And again, just get your perspective on what's going on in the last mile, specifically the parcel market. There is a lot going on. So I thought maybe a way to frame this conversation
[00:05:16] would be to talk about it from both the demand side perspective, so both consumer demand and the demands of shippers, the customers here, the enterprise customers, and then talk about the supply side of the industry, those providers in the market, both the legacy providers, some of the newer providers and the dynamics there.
[00:05:36] Does that sound good? Absolutely. Great. So, to tee up the demand side, I want to rattle off a couple of stats here. So the kind of arms race between Walmart and Amazon as they talk about how many same day and next day units they are shipping. So from May of ‘24, Walmart announced that they had shipped
[00:06:01] 4.4 billion units just in the U.S. over the trailing 12 months. So 4.4 billion units in the U.S. in the past year, leading up to May. Then Amazon just at the end of July announced that they had shipped 5 billion units, same day or next day, globally, just in the last seven months. So again, there's this arms race.
[00:06:25] I actually find it fascinating in and of itself that these two big companies kind of on almost a quarterly basis are updating their stats. What do you make of this?
[00:06:36] Nate Skiver: It's interesting the stats that you threw out, because it's kind of a back and forth and it shows where their focus is in serving customers, in growing, you know, revenue with customers.
[00:06:51] And I think those two companies are pretty good examples of driving success in that area. So it can't be by accident that they've collectively delivered, we'll just call it, you know, 10 billion items or so, next day or same day in the last, what, 12 months or probably less. And they'll share statistics
[00:07:16] every once in a while about how much conversion that drives or Amazon will state that when or because of fast delivery, customers shop with them more often and they spend more. And so if that's there, then that just means that they're doing something right, they're driving a lot of consumer expectations in the market.
[00:07:39] And in some way, other companies have to try to compete in however, they can.
[00:07:47] Karl Siebrecht: Right, right. So the implication for consumer demand is there must be demand for this because they're certainly delivering against that expectation more and more. In fact, in that same Amazon post, they announced that this was up 30 percent year over year.
[00:08:04] By the way, the other thing that they have shared is that they intend to double the amount of physical infrastructure they currently have against that same day, next day capability. So clearly this means there is consumer demand for it, or they wouldn't be investing against it. I guess there's a question of, you know, what came first, the chicken or the egg?
[00:08:30] You had mentioned a comment once about that I had read or heard around kind of Amazon almost creating this consumer demand.
[00:08:40] Nate Skiver: Yes. A lot of what you just mentioned of the plan investment, they're one of the, probably the only company that can invest that much and generate that demand. So they're building the infrastructure to obviously serve the demand they have, but generate more.
[00:08:57] And I don't think that's really necessarily an expectation for pretty much any other retailer, perhaps Walmart. And that's what makes Amazon unique. And is a differentiator because if they're creating that demand and expectation, where else is that consumer going to be served that well? Amazon.
[00:09:16] And so they, it's a kind of a really competitive moat that they've at least attempted to create because really no one else save for perhaps Walmart can replicate that level of fast delivery.
[00:09:31] Karl Siebrecht: So staying on the demand side then, let's talk about the demand for evolving last mile or parcel capabilities, fast shipping from other retailers, other shippers, not called Walmart and Amazon.
[00:09:46] What is the implication of what Amazon and Walmart are doing on these other retailers?
[00:09:52] Nate Skiver: It's interesting because I think just from a transportation standpoint, I don't know that there is a need for novel, unique delivery solutions. You still have to have people, trucks, move packages and deliver them. So I think from a service provider standpoint, so seeking out service providers, you know, retailers still,
[00:10:15] you know, expect very high quality service, very reliable. Just so happens right now because overall demand has been interesting. We're talking about UPS, excuse me, Amazon and Walmart, outside of those two, what generates package volume, which is demand in the sense, you know, for retailers, there's not a whole lot of growth there.
[00:10:37] And so retailers are getting some pretty good pricing from these carriers. But in addition to that price, they need service quality, they need reliability and they need to find solutions that align with largely their fulfillment network, which is a, you know, a massive factor to serving the customer and how they've prioritized, they being the retailers, delivery speed. Because it's not realistic, really, for many retailers to say, I'm going to go toe to toe with Amazon or Walmart.
[00:11:09] I think they have to be intentional with what they want to do with delivery speed, but make it to where it's kind of within the framework that they have with fulfillment and delivery, or if it's not, determine what they need to do to improve it.
[00:11:25] Karl Siebrecht: Okay. So let me play back what I think I heard just to confirm.
[00:11:28] So what you're seeing in the parcel market is for, I don't know how to get the adjective right here, but in the traditional parcel market, there is not much increasing demand for units shipped. And so the pricing has been relatively favorable for shippers for that traditional parcel service. Is there more demand from shippers for faster delivery, faster than that traditional parcel service?
[00:12:03] Are you seeing an uptick in demand for that, call it same day or next day service level?
[00:12:08] Nate Skiver: I believe there is. It's not a step change in the market where, you know, all retailers are expecting or trying to speed up delivery and they're seeking, say, alternative cares to help do that. But I think enough retailers are conscious of the need for faster delivery, maybe more flexibility, from a delivery provider than,
[00:12:31] say, UPS or FedEx might provide. So there's enough of those retailers who are being really intentional about how they design their delivery program, what they need from, say, a final mile provider who can flex more with their volume needs. And so there, I would say there's a trend of more retailers being more intentional about evaluating those alternatives because UPS and FedEx can't always meet those needs, say, best in market.
[00:13:00] Karl Siebrecht: Okay, so that's actually a perfect transition point to talking about the supply side of the market. So from your perspective of the service providers, what are the big dynamics? You've already sort of touched on that. Let's start with the traditional carriers. You know, I read things about basically taking capacity offline.
[00:13:21] Is that a big dynamic? Did I get that right? What's going on with the traditional carriers?
[00:13:27] Nate Skiver: Yeah, to an extent, traditional carriers and UPS and FedEx are the ones in the market that drive a lot of, I guess, the supply in the market, they're both trying to improve efficiency within their network. And a lot of that has to do with automation.
[00:13:44] In some cases, FedEx's case, they're actually combining a ground and express separate operating networks. And so they're, just organically, there is a little bit of capacity being taken out of the market, but I would think of it as more kind of right sizing the capacity to the demand, and they're both trying to do that while maintaining or increasing the flexibility, operational flexibility to do so.
[00:14:12] So having more automation, which then lowers your unit costs, and so they're able to do that while taking some capacity out of the network. And they're in that position somewhat because, you know, they're a little bit over capacity from, you know, expanding a few years ago when, you know, we thought demand was just going to keep going up and to the right.
[00:14:37] And that didn't happen. And so now they're kind of rationalizing or right sizing their networks.
[00:14:41] Karl Siebrecht: And given how much volume Amazon is now servicing through its own infrastructure, has that had an impact on kind of effectively pulling package volume off of the traditional carriers networks?
[00:14:55] Nate Skiver: Yes, it definitely has.
[00:14:57] And directly, specifically, more so UPS and the postal service. And so, yes, there's, you know, Amazon has had organic package volume growth, but largely they've consumed a lot of that from a delivery standpoint and delivered it themselves.
[00:15:15] Karl Siebrecht: That's right. Yeah. Got it. So traditional carriers, it's been a focus on efficiency, productivity, profitability, right
[00:15:22] sizing their capacity a little bit. Okay. So then, share your thoughts on the other last mile carriers. What's going on there? It's an ecosystem that seemed to be proliferating. There's a lot of logos that you can cram in on some of those visuals that you've created. What’s going on there? Give us your perspective.
[00:15:43] Nate Skiver: Yeah, it's an interesting time because a lot of those, call them new market entrance or recent market entrance or last mile providers, some of them are almost entirely technology providers who are kind of orchestrating different parts of that transportation, first, middle and last mile. And then there's, I guess, traditional
[00:16:04] regional parcel cares that have been in the market for quite some time. And some of them have gained some traction or are in the market altogether because of the volume, like explosion, really, in 2020 and 2021. And a lot of funding came with that. And then some startups were able to either enter the market or race some rounds to expand.
[00:16:31] And so it's good in many cases because it provides, back to the, I guess the demand side, but provides options to package carriers, excuse me, to retailers. But what's happened is you mentioned the word proliferation, I think was pretty accurate, is that there are too many providers in the market
[00:16:57] to be sustained with the amount of demand in the market right now. And so that's part of also then what's driving some of the favorable pricing for package shippers is there are many competitors and UPS and FedEx have to respond to that in some way with price. And so those pricing dynamics are still favorable and have been, to be honest, for probably the last 18 months.
[00:17:24] Karl Siebrecht: Is there a sub segment of those newer entrants, or frankly even the more traditional regional carriers, is there a subset that are focused particularly on that faster delivery promise, that kind of next day speed? Is that true or is that kind of not specifically true?
[00:17:45] Nate Skiver: No, I think there is a segment that are final mile carriers.
[00:17:50] I'll just use an example, maybe like a Veho, that is very much focused on not just fast delivery, it's usually next day delivery, but also that the customer experience. They are positioned as more of a delivery experience provider, and part of that is the service of delivering packages, but fast delivery, local next day in probably 30 markets in the U.S.
[00:18:16] There are providers like that. And there's some that have grown since the COVID volume explosion. And then I guess another example would be OnTrac, where OnTrac is, they're a regional carrier still, but they've really expanded their network. They've connected regional networks on, I guess kind of both coasts and started to fill in the middle part of the U.S.
[00:18:41] But part of their value proposition that they pitch is being faster than UPS and FedEx in many cases. They deliver more on the weekends than UPS. And so they are trying to very specifically target that delivery speed demand with eCommerce delivery.
[00:19:01] Karl Siebrecht: Related, and you touched on this briefly, is it the case that the network that FedEx and UPS has built out over many, many, many decades, it's incredibly robust, expansive.
[00:19:14] Is that not built appropriately for faster delivery, whereas some of the newer competitors can come along with a blank sheet of paper and build a network that is optimized for faster delivery, call at that next day delivery.
[00:19:32] Nate Skiver: I think that's true, but I think the way that the networks of UPS and FedEx were designed a very long time ago was to service commercial business, you know, package customers, and the complexity isn't nearly as much as residential.
[00:19:52] There's a lot of favorable things about delivering to commercial locations. Along the way to your point that UPS and FedEx have really developed a more responsive network, and it has gotten much faster, but the value that they really provide, they being UPS and FedEx, is that comprehensive national network.
[00:20:14] And so shipping from, you know, coast to coast, long distances, that's where, at least for the time being, their value is really, really apparent because their networks aren't as maybe flexible or responsive as some regional carriers or some final mile carriers in that shorter distance. And then that's where, you know, those carriers try to focus on those being the alternatives, because it's a shorter distance, they can service it well, very quickly.
[00:20:48] And I mean, that's where the volume is.
[00:20:51] Karl Siebrecht: And maybe last question on this specific topic is, could you just touch on same day specifically? So same day shipping has this whole other requirement of actually having inventory very, very close to demand centers. Whereas to get there next day, you could do some zone skipping, some injection, these kinds of things.
[00:21:11] What are you seeing in terms of same day? Is the demand for that across retailer shippers, are you seeing them wanting to do more and more same day volume and any kind of meaningful increase in demand or not really or what are you seeing?
[00:21:29] Nate Skiver: Largely, I think same day still is very much kind of product specific or product assortment specific in that, the categories that you would assume would maybe have high demand of kind of like, you know day to day essentials, things like prescriptions, like those are obvious, where there's going to be demand. Say specialty retail, maybe apparel, is probably a good example where I'm not seeing just organic high demand to where a lot of apparel retailers are offering same day broadly and making it a very specific intentional part of their strategy.
[00:22:13] Now, in addition to maybe the demand not being there, practically speaking, apparel’s not the product category that you want to try to distribute to 200, 300 distribution points with the intention of delivering it same day.
[00:22:30] Karl Siebrecht: Right.
[00:22:30] Nate Skiver: So I think in that case, just using the apparel as an example, there are plenty of apparel retailers who offer same day or have recently done that.
[00:22:39] And I think it's more so just to have that as a customer option, not to really move the needle on demand or really the bottom line.
[00:22:51] Karl Siebrecht: Got it. Let's kind of narrow in on your advice for shippers, retailers. If you're a Fortune 1000 retailer, and you are now going to evaluate your parcel capabilities, what advice would you have for somebody who's ready to embark on that effort?
[00:23:14] Nate Skiver: I'll start with something kind of vague and obvious, but it's to define an intentional strategy around parcel and package delivery. I say that because I don't know that, definitely not all, retailers or some retailers really do that and that's because years ago it was very common just to have, I'm going to work with one primary national carrier. They can meet almost all my needs pretty well, and I don't really need to do anything more than that. That's not the case anymore.
[00:23:47] And so what really the requirement is, is to define it or build it from the ground up and say, what role does delivery speed play in my strategy? What are the cost and service goals that I need to set that also aligns with, you know, delivery speed and other factors? Then go look and see how are you performing against those now?
[00:24:10] Are your carriers, if you only have, say, one or two, actually meeting those goals? Assuming they're not, then let's go source those carriers that meet specific delivery speed needs, whether it's same day or it's local next day. Just developing that with intention and not, for lack of a better term, keeping it simple and taking the easy way out of just saying UPS and FedEx or one of them do a solid job, and I'm just going to stay with them.
[00:24:40] Karl Siebrecht: This foots with, again, sort of general trends that I've read about where it seems like, or at least I've heard or read, that on average, retailers or shippers are adding more carriers to their portfolio. They're expanding from that kind of more legacy approach of having one to having a few others to basically provide that kind of flexibility that you've referred to a few times.
[00:25:06] Nate Skiver: Yes. And carrier diversification is really what that is. And that's not a new concept, but it's definitely something I think, you know, partially because of maybe the market conditions around 2020 and the volume surge really brought about a necessity to add carriers, evaluate alternatives because of capacity needs, things like that.
[00:25:30] And so I think since then, the awareness and need of a diverse carrier base has persisted. And that then coupled with, I mean, there's better shipping technology in the market than there has been in the past. We've already talked about the more than enough delivery providers, as well. And so you combine those things, I think is what's driving a higher number of carriers that many retailers partner with.
[00:25:58] Karl Siebrecht: Got it. Super helpful. We'll shift gears here for a second and talk about what you see happening down the road. Very generally first, what is your big prediction or a couple of predictions for major things that are likely to happen in logistics three years from now?
[00:26:18] Nate Skiver: I don't know if this would be considered a big prediction or not.
[00:26:21] It might just be a math problem that plays out. But I see Amazon delivering more packages than UPS and FedEx combined. And now I don't think it's going to be this disruptive thing where Amazon has 30 percent of the package delivery market outside of their own volume. But more so, again, this is the math part, of just their organic package volume growth
[00:26:49] and as they, being Amazon, continue to deliver a higher percentage of that, their volume is going to grow quite a bit. And if package volume outside of Amazon in the market doesn't necessarily grow that much, or at least at the same rate, UPS and FedEx are competing with, at least right now, dozens of other carriers for that volume.
[00:27:12] And so that continues to have, you know, an effect on the market of, again, Amazon driving growth but not really making it available, I guess, necessarily externally. One other, I think, just along with that, that part of the impact, this is not just Amazon specific, but just market dynamics of continued competition is, I think UPS and FedEx
[00:27:38] will really have to diversify their business more than they are now, in addition to package delivery. Not exactly sure where that will reside, but UPS is, I think, probably a little bit ahead of FedEx in that regard. But package delivery from a pricing standpoint and capabilities continues to be more competitive.
[00:28:00] And in three years time, I think we'll see UPS and FedEx, their market share decline, not drop off a cliff, and they'll need other ways, I think, to generate revenue and provide value to retailers.
[00:28:17] Karl Siebrecht: That’s a good one. Next question. Would love your thoughts on AI.
[00:28:21] Obviously, even well outside of logistics, it's a huge topic. Is it going to change the world? Is it overblown? Where do you see AI having a near term impact in logistics, if anywhere?
[00:28:35] Nate Skiver: Yeah, I mean, I think we're starting to see that and I'll focus mostly on parcel, but it surfaced now in a few different areas.
[00:28:44] One is that some carriers, delivery providers, are using AI in some way to be more precise on delivery times. There's certain technology providers that orchestrate their delivery partners, and they can dynamically, based on current conditions, weather and some other things, select the right delivery partner that is going to deliver the fastest and provide a very specific estimated delivery date back to the customer.
[00:29:18] So that's where we're seeing that now. Also pricing, parcel pricing, UPS has been a little bit more, I guess, public about that. In some way using AI to, dynamic pricing, this is probably not the right word because in my opinion, dynamic is literally, you know, in the moment, but of being much more precise with aligning pricing to cost at a very, very granular level, that's kind of dynamically changing to an extent by customer, by time that they provide a pricing proposal. Different than in the past of, give me all your data and I'll provide a proposal here in two weeks.
[00:30:00] They're using, it's not all just AI, but that is part of it, to really increase the velocity on being able to provide pricing. Those are two areas. I mean, another one, which Karl, you probably know more about this than I do, but the ability to predict demand. And then also place inventory. That's a topic that probably deserves its own conversation, but a big impact on package delivery for sure reduces the delivery, you know, time, delivery distance, presumably cost.
[00:30:33] So I think that's probably the other big area, too.
[00:30:35] Karl Siebrecht: Right. Yeah, those are great. Those are great. And on that third one, we do spend a lot of time on that. And one of the insights we've come across is actually less about being more precise in your forecast. Of course, everybody wants to and should try as hard as they can to be precise, but actually being aware of where your uncertainty is greater.
[00:30:55] Where does the uncertainty lie and what am I going to do about that? That's probably as valuable, if not, I think in many cases, more valuable than trying to be precisely correct. Conversation for a different day. But that's great, those are three things where you're seeing impact from AI and they all resonate and are kind of near and dear to what we're seeing, as well.
[00:31:19] Very good. Alright, well Nate Skiver, it's been a real pleasure talking with you today. Thank you for your time and sharing your insights with us. We really appreciate it.
[00:31:29] Nate Skiver: I really enjoyed it Karl, thanks.
[00:31:34] Ben Dean: Karl, another great convo, another great guest in Nate there. If I had to distill it, it is increasing complexity is the need for shippers to solve today. Is that what you got out of it?
[00:31:45] Karl Siebrecht: Yeah, for sure. You know, it's kind of going back to the evolution. The good news is there are a lot of additional providers in the space.
[00:31:54] That comes with a challenge, which is how do you manage that increased complexity of options and the orchestration for when to use which provider? Again, another great problem to be solved in many ways by software.
[00:32:12] Ben Dean: Yeah, and by companies running that software. So that's my opportunity to talk a little bit more about Bill Catania, my interview guest here, because what I find really interesting is that this business was built
[00:32:24] and created to solve a problem and a very personal one for Bill. It's important to note here, this is not a career logistician like many of us. He got into this space noting that the current orchestration and delivery platforms weren't, frankly, delivering for him as a consumer. So let's take a listen.
[00:32:42] Bill Catania: Well, like anybody, you have a bad customer experience and it causes you to start thinking about how you can maybe have a better customer experience.
[00:32:49] So, never spent a day of my life in supply chain or logistics. I've had two startups before this, the last one really pioneered the digital coupon space. It was acquired by Inmar back in 2011, and then we sold Inmar. So I don't know, a couple of years after that, I'm buying a refrigerator. Visit a home improvement store,
[00:33:08] not to be named. And I was told it would take 10 days to get that refrigerator and it was in the store. It wasn't like we were waiting on it, you know, to come from the factory. So I instantly started searching for Uber for moving, Uber for delivery. Didn't really find anything at that time. And that set me down a path to build what we launched in 2018, which
[00:33:32] is an on demand moving and delivery company. So we started out a lot like some of the platforms that you see out there today, Bungii, GoShare. Probably more like Dolly, actually, cause we did a lot of home moving, in addition to delivery. And after doing that really for a couple of years, I started to lean in a little bit into my last experience in building retail enterprise software.
[00:33:55] And I realized this solution needs, not the solution, but the entire ecosystem of last mile delivery, needs to have an operating system. So it was a pivot moment for us. And some entrepreneurs are scared to say the P word. I love it because it means you recognize you have a problem.
[00:34:15] You are being critical of your solution and you're doing what you think is right, you know, to maximize the upside where you can actually make an impact. So I realized there's a lot of great solutions out there like Bungii and GoShare and Roadie at the time, Deliv was out there.
[00:34:31] I don't need to build another one of those. And what I really need to build is an operating system. I need to build and become a network of networks. And work with those couriers that are out there, but not just them, work with parcel carriers, work with RPCs, work with mom and pops that might have five or 10 trucks in a market and really orchestrate all that capacity. And our pivot was, ironically, it was pretty much this week, back in 2019.
[00:35:01] So we've really been the, what you see is OneRail today. Five years, right? That's about it. So that pivot happened. With the pivot, we picked up an immediate customer and then we were kind of off to the races.
[00:35:17] Ben Dean: Obviously that was an interesting personal story there, Karl, from Bill on how they came about with this idea for OneRail, but I'm more interested in that pivot
[00:35:26] you spoke to at the end, Karl, because that's tied to your conversation with Nate about the need for this new type of orchestration business. So let's take another listen as Bill goes a little deeper on the need for this type of business.
[00:35:41] Bill Catania: First of all, for Lowe's, they had a really successful next day program for a long time.
[00:35:46] They've had their own fleet in place and it's worked quite well. For same day it's a lot more complicated because you essentially have to match supply and demand simultaneously, because if demand, meaning, you know, Lowe's, shipping volume outpaces the ability to get couriers, you have a gap and you're going to have upset customers. If you outpace
[00:36:09] and have too many couriers without enough demand, the couriers have better things to do, too. So at the end of the day, there has to be this ratcheting up of supply and demand and that's what we do. We crowdsource demand from all of our shippers, Advance Auto Parts, Pepsi, Tractor Supply, Lowe's. And then we match it with supply
[00:36:28] where we've aggregated couriers and we actually are the carrier. So we're responsible for that delivery. We're responsible for meeting the rate card. And we're also responsible for the SLA. So with that, you know, that's really how we're serving our customers. They don't have to build out a huge team to go procure couriers.
[00:36:47] The other thing they don't have to do is they don't have to staff an exception management team. We can reduce the number of phone calls to the store simply by providing visibility and a good customer experience and by meeting our SLAs, but even so, we have 70 people that are overseeing exceptions for our customers.
[00:37:05] And that's a very small percentage of their deliveries, but it's missing items, et cetera., wrong address, you have a new house build and the address isn't on the map yet. There's all kinds of things that happen. So all that said, what we're doing is we're taking the friction away from the internal scale and change management that they need to go through.
[00:37:24] We're actually bearing some of that burden of change management to enable them to seamlessly execute last mile.
[00:37:31] Ben Dean: You know, I gave UPS and FedEx, Karl, a bit of a hard time in terms of their inability to service what the regional and the gig drivers do. But Nate also had great points in your convo about what UPS, FedEx, Amazon do well.
[00:37:45] So we talked a bunch about the dichotomy between the old breed of FedEx and UPS and the new gig providers, gig or otherwise. And I think Bill has a really great statement here about how to look at them because both should be a part of your diversification strategy.
[00:38:01] Bill Catania: So what I've found, you know, sample size of Bill here, but what I've found is if there's like an eCommerce use case
[00:38:11] where the shipper only has maybe 10 nodes they're shipping from, I think it's a lot easier to solve for, because you can, there's a lot of solutions out there, where you can get sort of an aggregated parcel capacity. So you're not just depending on UPS or FedEx. There's so many solutions that can do that.
[00:38:29] But when you start getting into localized delivery, you start talking about 1,000 stores, 5,000 stores, et cetera, 400 warehouses and you're delivering within concentric circles around those locations, then there's a need to unlock local capacity. And that's where it gets complex. So I think there's a lot off the shelf that you can use to aggregate parcel.
[00:38:55] There's a lot less off the shelf if you want to truly multimodal or orchestrate multimodally.
[00:39:01] Ben Dean: The funniest part about this, Karl, is we have not yet talked about Q4, peak or Black Friday, and we're talking about parcel and last mile. And that, for most shippers in the space, is that critical moment where the delivery expectations of the customer is so tightened and that most of the business for a lot of companies is happening in this quarter.
[00:39:21] So Bill's got this great piece of advice for shippers, specifically, on how to look at peak and how to manage both the supply and demand piece of that.
[00:39:31] Bill Catania: This is a highly inefficient market, meaning supply and demand is not aligned. And if you think about supply, if you can rationalize that supply is being consumed in silos with no visibility across those silos, that's why they’re silos, then you could assume that it's not being orchestrated efficiently.
[00:39:53] So what we really obsess with is making sure that we have a necessary amount of couriers in our markets to handle almost any load. Supply and demand need to be orchestrated. You know, being an on demand courier myself, I realized I'm just one little spoke here in somebody's bigger wheel, but the question is, how do you defrag that and get all you can out of it?
[00:40:19] And that's really, that's the secret sauce. It's layering capacity upon capacity, but then having an algorithm to rank it so that you're getting the best capacity, which is a big part of what we're doing is ranking based on loss runs, on-time rates, customer ratings, et cetera, average pickup time, not just delivery time.
[00:40:40] Ben Dean: We've talked diversification in general, and we've talked shipper strategies in general, but Bill has a really strong point when it comes to retailers and how they should look at a multi carrier strategy. I do want to take one more moment to talk diversification here. Let's take a listen.
[00:40:58] Bill Catania: If I'm a retailer, specifically, which is, you know, downstream, they're getting the last impact from this, versus the wholesale channel.
[00:41:07] I need to have a multi carrier strategy. I think the biggest mistake that retailers and shippers in general have made are pigeonholing their capacity into one or two couriers or carriers. That's the problem. If I were to give you a million dollars, would you go buy one stock or would it be a
[00:41:28] mutual fund or some type of risk diversified investment? And that's kind of the way shippers are tending to think now. And it took, I think, some pain and suffering during COVID and even post COVID to realize how important that was.
[00:41:44] Karl Siebrecht: That was great, Ben. Thanks for leading that conversation with Bill. Super interesting guy to learn from.
[00:41:50] Ben Dean: Yeah. And they're learning, as well. This company is obviously growing and evolving with the space. So I'm excited to follow it. I want to get back to something you said at the very start about this being in service customer and the shippers. I think Bill put a real bow on this for us. And I wanted to save this last clip until the end to really talk about what it means to put customers first in the last mile space, specifically.
[00:42:14] Bill Catania: You have to meet the customer where they are. And what that means is, you have to be architected to do a 30 minute delivery or three day delivery. And to do that, you have to have the tools. You have to have the technology, you have to have flexible supply in your courier network, and you have to have the ability to architect the SLAs around who your customer is.
[00:42:36] And if you think about, you know, Advance Auto Parts, we're doing many, many, 30 minute deliveries every day, tens of thousands of 30 minute deliveries every day. Those are deliveries that give them competitive advantage within their Pro set, within their Pro customers, the customers like repair shops. They need those parts because the car's on the lift and they need to get the customer turned around.
[00:43:00] Now, if you talk about somebody who's buying a patio set, they may not even be ready for the patio set today. So I think early on there was a false sense of speed. The speed, you know, was everything. It's not everything. Believe me, I love speed. There's half of a race car hanging behind me. But speed is not everything.
[00:43:21] What's everything is having a flexible shipping solution that lets your customer have what they want when they want it.
[00:43:28] Ben Dean: I mean, there's a reason I put that clip at the end there. Obviously really well said by Bill, couldn’t have said it better myself. And this has been one of my favorite episodes. I think it's the most visible to a lot of our listeners who aren't necessarily in supply chain day in, day out in terms of how the goods get to the doorstep.
[00:43:46] And it's changing so rapidly, both from a technology perspective, in terms of customer expectations. I'd love to do an episode on this almost every year.
[00:43:56] Karl Siebrecht: Yeah, well, you know, there's a lot of change yet to come. You just think about the state of play, both on the technology side and again, with a lot of these newer entrants, this is definitely not the last word on the last mile.
[00:44:08] Ben Dean: I just want to jump in here, Karl, and say one last big thank you to our guests. Nate Skiver, Bill Catania, great conversations. Hope to have you back for another one.
[00:44:17] Karl Siebrecht: Yeah, and thanks also to our listeners. Of course, we always really appreciate you being here with us. A lot more to come in the world of logistics.
[00:44:25] So let's keep this conversation going.
[00:44:29] Narrator: You've been listening to the Logistics Leadership Podcast presented by Flexe. The opinions of the guests aren't necessarily the views of their company. If you'd like to learn more about the podcast or join the Logistics Leadership community, check out this episode's show notes and visit flexe.com/logisticsleadershippodcast. Keep the conversation going. Email us at leadershippodcast@flexe.com. The Logistics Leadership Podcast features original music by Dyaphonic. The show is produced by Robert Haskitt with Jeff Sullivan, Ben Dean, and Karl Siebrecht. Thanks for joining us.