During this episode, Andy, Bill, and Denise discuss the need for new solutions, how logistics networks are facilitating the use of alternative logistics, how their companies are overcoming the challenges associated with reaching their customers, and trends in the logistics space.
Denise started the conversation by asking Bill why Fillogic focuses on finding efficiencies in the middle-mile.
Aggregation is the key to final-mile efficiency, but the big solutions released in the past couple of years haven’t really focused on efficiency, just getting demand. Now, the industry is homing in on how to be more efficient in controlling costs.
“Through aggregation in the middle mile, being able to direct and either zone skip into a region or do deconsolidations and use local market delivery partners, harnessing that technology to make that happen, that's what wins, right? ” said Bill.
Bill made a case for building out local networks rather than building retail models around the big parcel shippers, and it makes sense.
“Realistically, retailers all live and operate their stores in the final mile. Their malls are in the final mile and being able to have a consolidation or deconsolidation point where you can aggregate, that's what wins,” he stated.
When asked what eCommerce retailers should think about when adding carriers this year, Bill stated that integrating with a middle-mile provider allows retailers to tap into a collaborative network. A middle-mile provider like Fillogic, onboards capacity and demand, manages the relationships and works with carrier partners - like Better Trucks - to help everyone grow.
“There are large carriers out there that do a great job, but at the same time, pricing structure - if you're a smaller retailer- it's tough,” said Bill.
The shortfalls of widespread solutions like Amazon FBA have led to a rise in the need for alternative solutions. “The need for an alternative network where it is technology linking together, carriers that not only have the assets, but they also have the connectivity on the technology side of it, that's what we're seeing,” Bill answered.
“Now everyone's starting to think about that 2.0 version, which is: Okay, how can we do middle mile sorts? How can we do those consolidations?” and the idea is, smaller carriers have had a hard time competing on larger scales because it's very expensive and timely, and just from a time perspective for a retailer to build an integration with all of these carriers that are out there.
But if you can build an integration with, let's say, a middle-mile provider, which is part of what we do, it allows them to tap into our network. So, in other words, at Fillogic, we onboard capacity, we onboard demand, we manage the relationship, and we work with our carrier partners and say: “Hey, where are you growing to? Great. How can we basically pass our demand through you?” he finished.
Despite that the Pandemic has subsided, the expectations consumers formed during that time aren’t going anywhere. They want what they want when and where they want it, still. That means that there’s still a lot of room for growth of more efficient middle and last-mile solutions, and investors see that too.
“And that's, I think, the major change that everybody's had, the “Aha” moment, especially in the VC world. They've all come to this point of, if you can't show aggregation, if you can't show good unity economics, because you're able to have multiple partners, once again, going back to that point-to-point, it's a stinker. And that's what's going to differentiate who ends up owning these spaces, or not, in my opinion,” said Bill.
Bill and Andy of Better Trucks both pointed out that retailers can find efficiencies in the power of networks rather than adding a single carrier.
“The idea is that we're able to work with partners and provide them good demand that helps them build their networks because we are taking that little, tiny pipe and making it a great big pipe,” said Bill.
Andy said this about operational considerations: “As large shippers, small shippers think about adding multiple carriers, there are few legitimate physical considerations that they have. It might be dock doors, it might be the placement of their warehouses, so any way that you can kind of spread that coverage out by adding a single carrier that can provide service to a greater coverage area is very valuable.”
It really comes down to working with partners to provide a better customer experience and allowing customers to leverage more services and gain efficiency.
“We see that all the time trying to help and play well with partners. We help with zone skipping as well, where we will take capacity for other carriers and move it through our network for our customers, because we know that's a way that they can use our service a little bit more efficiently,” said Andy.
When Denise asked Andy and Bill about the unforeseen costs their customers face, they both had similar answers: the unforeseen costs often come from the needs customers avoid or forget to mention.
“We don't have a magic carpet. We're trying to solve the same problem as you are, which is to get things from point A to point B as cheaply and as fast as possible. The more information you as a customer share with us, the better we're going to come up with a solution. And hiding details or volume or obfuscating these things makes it more difficult for us to do our job,” said Andy.
“We're an end-to-end supply chain solution, right? So it's not just inbound e-commerce, fulfillment, and store-based fulfillment, but it's returns. It's our delivery marketplace of which Better Trucks is a part of. We're providing all of that, so when we onboard customers, they come to us for one thing, and then, because we've already built integrations, there's the ability to add additional solutions, things that we are doing for other customers that we can configure to match the need of the merchant. But so much of it is really based on what we know during the contract negotiation and what actually happens during implementation,” said Bill.
To break it down, while there may be additional costs, those costs are often attributed to other services the merchant decides to utilize.
Fillogic takes a unique approach to the middle mile, turning underutilized space in shopping malls into middle-mile hubs to serve not only the retailers in the mall itself, but also other customers.
“75% of retail sales are still coming from a physical retail location. But the logistics infrastructure is not up to speed. So we look at ourselves as a logistics company, but we're about value creation, right? By providing the logistics infrastructure and technology and operations to help those retailers in those mall locations, we can make them more efficient,” said Bill.
This model works because there’s plenty of space in malls, from truck tunnels to empty hallways, that goes unused, and there’s demand due to large numbers of retailers concentrated in one space. Malls are centrally located by nature and not open 24/7, making them an ideal location.
“We see the opportunity for the Fillogic network to also be part of our network. So there's a lot of overlap. We look forward to the day when every Fillogic node is also a node in our network. So, either our packages feeding through the Fillogic network or our packages using those as sortation centers to ultimately deliver packages, our drivers picking up from those facilities, which is what we're doing in a couple of markets right now,” said Andy.
The flexibility displayed by this model and Fillogic and Better Trucks alike will be a hallmark for innovative, growing logistics operations. When customers are looking to get the things they want fast and cheap, a break from the status quo will be necessary.
When asked about network expansion and how that expansion benefits customers of middle and final mile providers like Better Trucks and Fillogic, Bill noted that networks like Fillogic’s benefit everyone.
“Enterprise retailers get the benefit of the network, and as we continue to expand and add additional carriers, you're building additional network opportunities,” said Bill.
“Well, we're not a freight rate shopper, right? We're an aggregator. So we go look for where we have gaps in zip code density and look to find the carriers to fill that, or go to our existing carrier partners and say I've got demand coming in this, can we work together to expand your network?” said Bill.
To overcome the hurdles that accompany the big national parcel carriers having held sway over the market for decades, new players like Fillogic and Better Truck are leveraging partnerships and building strong logistics networks to offer customers fast, efficient, and cost-effective service.
“We have a lot of mutual customers and also mutual respect. I think it definitely works both ways. We help in a niche, a key component of their business, and obviously, we continue to grow with them. It's a very symbiotic relationship,” said Andy.
“We've known each other, but now it's like we've built the integration, it's tested, it works, it's solid. Now we are partners,” said Bill on the relationship between Fillogic and Better Trucks.
“Shippers have to know what their numbers are,” said Bill. They need to understand their volume so logistics service providers can use their knowledge, technology, and networks to provide the expected services.
“As we built integrations with Better Trucks, we wanted to make sure we had enough volume going to those zip codes. And so as we add additional customers that we operate within our hub network, we also take into account to say: “Great, where are those customers?” because we also need to know if we're going to put it in our delivery marketplace network. We have to make sure that the carriers have the capacity,” said Bill.
When the topic of reverse logistics came about, Bill and Andy agreed that managing those costs begins with providing a good customer experience in the first place to prevent some of those returns from happening.
“Unfortunately, in today's supply chain technology infrastructure, returns is a big gap,” said Bill. “That's (returns are) a margin killer. If you have full-priced inventory you can't make available for sale, that's a huge problem.”
Fillogic and Better Trucks are working to make getting inbound returns to sorting centers easier, faster, and more efficient.
“It's the age-old issue of deadhead miles. If you're sending somebody out to drop off a package, and if somebody says: “Hey, I got a package and you can pick it up”, and we, through the technology, have the ability to scan it and pick it up and see if it's a valid return, that's really good stuff,” said Bill.
"We’re (Better Trucks) working with a large, outdoor retailer that has a large physical footprint and they've done a lot of innovation around their store fulfillment, and not just in-store fulfillment for local markets, but they're leveraging us for in-store fulfillment broadly across our network. So it could come from a store in one market and end up in a customer's home in another market. But we are doing pickups at large retailers every day that are outbound, and we envision being a channel back to those facilities for the return, right? So being at the customer's door and ending up back at the retailer almost every day gives us the ability to be a good path for that,” said Andy.
When Denise asked about customer trends, both Andy and Bill brought up a willingness to embrace innovations, but customers still don’t like to step too far out of their box.
“Because of what happened with Covid, retailers are much more open to working with newer players, additional players,” said Bill.
“They (customers) would love to use alternative methods and new kinds of creative solutions, but they also have their own infrastructure that has been built and carved in stone over decades. You can't walk in there and say: “Hey, I've got this great new software, and that's the only thing that matters. You should use this.” There's the reality of the physical world. And so I think that's where we look and feel like a traditional carrier, right? We integrate like a modern platform business. But at the same time, how we interact physically is very much similar to a FedEx or UPS or one of the large players. So, that is very much an advantage for us and we see that. So while the customers say they want alternatives, they aren't willing to change their processes usually, and you want to meet them where they operate,” said Andy.
Denise noted that visibility and just exposing to the industry that options exist besides the duopoly, will go a long way towards change.
“If we can get not only future customers but other people in the industry thinking about this middle and last mile and how two different people are doing it, that addresses the trends that are happening in this industry,” said Denise.
Andy pointed out that partnerships like the one between Fillogic and Better Trucks are revolutionizing the industry, bringing niche players together so that customers can utilize an end-to-end supply chain without contracting out each individual service provider involved. This helps open customers’ eyes to new solutions.
“They don't care if it's a Fillogic sort facility that we use or vice versa, right? And that's what the customers are. They want a good brand experience. They want a good tech integration experience. They want communication back to their customers, and they ultimately want the physical, operational integration to be consistent with what they've done in the past. If you can do all those things, then you’ve got a solution that can win" said Bill.
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