Throughout much of the past few years, the shipping and logistics industry has been focused on a cascade of supply chain crises, most notably long lines of ships waiting to dock at major ports and a dearth of trucks and railroad cars to move their cargo. In 2022, the logjams started easing and a railroad strike was averted by an act of Congress, but two issues are proving intransigent. One is a shrinking of the labor force, which has meant an industrywide shortage of truck drivers, warehouse workers and pilots. Another is persistently high inflation.
These two issues — inflation and worker scarcity — aren’t unrelated.
While frontloaded Christmas orders increased utilization of East Coast ports and a slowing economy should continue to de-stress global supply chains — and while autonomous long-haul trucks are getting closer to reality every day — the shipping and logistics industry will continue to be challenged so long as there’s no efficient solution to the last mile delivery issue. Because getting that package from warehouse or fulfillment center to doorstep can cost as much as 50 percent of its total shipping cost, the stakes couldn’t be higher.
Whoever figures out how to cut the last mile cost significantly, without sacrificing speed or customer satisfaction, will have a huge competitive advantage. While we’re not at this point just yet, many are trying through several techniques.
In 2019, Amazon.com began field-testing an autonomous delivery vehicle called “Scout.” Scout was developed internally and boasted six wheels, a cargo space the size of a small cooler, and could, as the company put it, “roll along sidewalks at a walking pace.” Amazon chose a suburb of Seattle for its highly publicized tests, even though Scout was clearly intended to be an urban animal.
Sadly, real-world testing of Amazon’s six-wheeler was paused in November 2022. In 2023, however, Amazon’s closest competitor, Chinese e-commerce giant Alibaba, launched autonomous logistics robots in over 400 universities in China via its logistic subsidiary, Cainiao. The company estimates that it delivered at least 2 million parcels autonomously during its massive Singles Day promotion last November.
Amazon may have given up the sidewalks to Alibaba, but America’s largest e-commerce company is still hoping to rule the skies with its “PrimeAir” unmanned aerial vehicle (aka drone) service. Though the FAA has restricted unmanned flights to non-urban test markets like College Station, Texas, and despite a rather damning Fortune Magazine article on the program’s historic troubles, Amazon has recently shared a slew of positive news with the media, including the development of a smaller, quieter drone that will be ready in 2024.
Revised estimates are that PrimeAir could be making regular deliveries in major cities by the end of the decade — some 12 years later than its Founder/CEO Jeff Bezos famously promised on “60 Minutes” back in 2013. Still, late is better than never.
Meanwhile, UPS, FedEx, Google, and Uber are all developing their own drone programs too, although Amazon’s robust e-commerce business gives it an obvious advantage.
With robots stalled and drones still years away, shippers have embraced a non-hardware solution: the application programming interface (API). APIs are not unique to logistics, but they are uniquely suited to matching millions of shippers with millions of customers.
Gig companies like DoorDash and Uber have demonstrated how quickly food and other items can be delivered by leveraging the gig economy, and last-mile APIs operate on the same principle and via the same kinds of apps. Using a sophisticated, artificial intelligence-enabled API, e-commerce sites can embed efficient and cost-effective last mile delivery programs into their websites, accessing thousands of couriers capable of reaching millions of doorsteps.
In essence, these APIs offer a fully automated dispatch system with little-to-no fixed cost. The downside is that shippers and retailers lose some control, but that may be a small price to pay for a workable last mile delivery solution that’s deployable immediately.