Optimizing the Middle Mile for Increased Operational Efficiency
In the transportation, logistics and retail industries, maximizing operational efficiency is key to staying competitive. The middle mile is an integral, yet often overlooked, part of this process.
In the transportation, logistics and retail industries, maximizing operational efficiency is key to staying competitive. The middle mile is an integral, yet often overlooked, part of this process. It has the potential to be a major source of savings and improved efficiency – if you have the right partner.
By better understanding how to optimize the middle mile, transportation, logistics, supply chain, and retail decision-makers can take advantage of significant opportunities for cost savings and increased efficiency.
Bill Thayer, CEO of Fillogic, recently sat down with Andy Whiting, CEO of Better Trucks, and Denise McCann, founder of Renegade Logistics, to discuss the importance of focusing on the middle mile. Here’s a clip from that chat and a little more information on why companies need to optimize their middle mile.
The Focus on Middle Mile Optimization
More and more companies are looking for ways to cut costs and increase operational efficiency. Many of those companies often look at the last mile, but the middle mile should not be ignored as it has more cost-saving opportunities, especially for retailers.
In order to optimize the middle mile and save on cost while creating efficiencies, there are several strategies to implement:
- Consolidation/deconsolidation: Consolidation and deconsolidation are two key elements in optimizing the middle mile. By consolidating multiple shipments into one shipment or deconsolidating one large shipment into smaller shipments at strategic points along its route, companies can reduce costs associated with loading/unloading while still ensuring timely delivery of goods to their final destination.
“US retail networks have been built around the parcel networks, the big players, but realistically, retailers all live, they operate, their stores are in the final mile,” Thayer said. “And being able to have a consolidation or deconsolidation point that you can aggregate [near those malls], that's what wins. So … aggregation is what makes this efficient for everyone [and why we chose to focus there].”
- Point-to-point versus aggregation: Point-to-point shipping may seem like it would save time and money by skipping over unnecessary consolidation steps, but oftentimes, this strategy fails when trying to maximize operational efficiency due to higher handling costs associated with smaller shipments. Aggregation is better because it allows you to consolidate multiple shipments into one larger shipment, which then reduces overall handling costs while still getting goods delivered quickly and efficiently to their final destination.
“Historically, last mile, point to point delivery, is a stinker,” said Thayer. “One package, one driver – that’s not going to make anybody any money. If you look at the growth over the last few years, it's all been these big solutions about getting demand, but realistically, that point to point, it's just a loser. However, through aggregation in the middle mile, being able to 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.”
- Technology utilization: As Thayer noted, technology plays an important role in optimizing middle mile operations as well. Technology is needed to track vehicles, schedule deliveries, and determine the capabilities of the truckers and fulfillment centers, but it can also automate processes and ensure everything runs smoothly without any delays or issues along the way. Oftentimes for retailers, building their own middle mile network and technology access is cost prohibitive, but that’s where a provider, like Fillogic, comes into play.
“For a retailer to build an integration with all of these carriers that are out there, [it is costly in price and time],” Thayer noted. “But if you can build an integration with a middle mile provider, which is part of what we do, it allows them to tap into our network. So, in other words, we onboard capacity, we onboard demand, we manage the relationship, and we work with our carrier partners and say, ‘Hey, how can we basically pass our demand through you?’ And it takes this collaborative approach where we're able to grow together and create what we're calling an alternative network.”
Increase Profits through the Middle Mile
Optimizing operations in the middle mile can have a significant impact on a retailer’s bottom line by helping reduce costs while still ensuring timely delivery of goods to their final destination. By taking advantage of consolidation/deconsolidation techniques, aggregation strategies, and utilizing technology for process automation and carrier network and capacity access, retailers can maximize operational efficiency during this key stage of the supply chain management process. With these strategies in place, retailers will position themselves ahead of the competition while improving their overall profitability at the same time.