Overcoming Challenges Facing Legacy Logistics Companies



Adam Bryant is the current CEO of AxleHire, an expedited urban last-mile delivery service, providing same and next day delivery experience.

We’re all aware of the capacity issues legacy logistics carriers faced over the past holiday season, with carriers placing limits on capacity and turning away business. Those issues are symptomatic of deeper challenges legacy carriers face as they bump up against increased demand, growing consumer expectations and increased competition from insurgent last-mile carriers.

Consumer Expectations

Consumers used to be OK with ordering something online and having it arrive in three to five days. Consumers were even OK with paying for that level of service. Then Amazon came along with “free” next-day delivery, and very quickly, consumer expectations changed.

Today’s consumers want their stuff today if they can get it and tomorrow if they can’t. They expect personalized service, the ability to change delivery parameters on the fly (i.e., leave it with the rental office instead of at their door) and a delivery window that is much more specific than “sometime tomorrow.” Meeting these expectations will require innovation on several fronts, including direct engagement in real-time between carriers and consumers.

Overcoming Inertia

Legacy companies are legacy companies because they’ve found a level of success doing what they’re doing. Existing practices are proven, safe and have paid the bills up to this point.

Every successful company has a core—the thing that is generating revenue and profit—and that core is what gets most of the focus and resources. Organizational inertia makes it hard to steer the ship in a new direction, even by a few degrees, because there is so much invested in the core revenue machine that is currently driving the business.

Change introduces risk, and it can be hard to justify risking current revenue streams when you’re already making money. But resisting change also introduces risk, opening the door for new competitors with new business models to begin chipping away at market share. By using shared resources to pilot new, innovative programs within an organization at a small scale, companies can gain critical insights before committing to any core business model shifts.

Fixed Assets

Legacy logistics companies are bound to a large degree by their legacy investments in physical infrastructure. They own trucks, warehouses and asset-heavy distribution networks. That infrastructure was put in place to support a centralized hub and distribution strategy that was developed 10 to 20 years ago or more.

The world is changing. Demand is growing almost exponentially. The speed component of delivery is much more important today than it was even a few years ago. Inventory is moving closer to the consumer, supporting a more localized approach.

But it’s hard to justify going against those past investments and decisions, even when they are no longer as applicable as they once were. The presence of those fixed assets and sunk costs can constrain how you think about the future—how you solve for speed, capacity and consumer expectations. It becomes harder to pivot to the new reality. Evaluating current assets on how they serve the ever-evolving demands of the end customer can help companies determine what the best way to move forward is.

Technology

Legacy companies have core processes and technology in place that were designed to support a strategy that is 10 to 20 years old. Those processes are probably not optimal for current market conditions, but at the moment, they work, and that’s how things are done.

Contrast that with the newer players in last-mile delivery who have started with a clean sheet and built technology and processes to solve for current and anticipated future expectations from consumers and shippers. The solution for legacy carriers is to look at how to change the fundamentals behind what they’re doing—including technology—to solve for the future without damaging the existing core.

Talent

Many people are rethinking their careers, and what was important pre-Covid might not be as important now. Workers value flexibility, mobility and the opportunity to do something new and exciting while working with the latest technology. Attracting fresh talent requires a new mindset about how an employee can remain productive, even if that means not being in the office every day. There’s a disconnect between that vision and most legacy companies. That’s true in all industries, not just logistics.

In the current labor market, employees have their choice of where, how and when they will work. For many, the best idea or the coolest and most interesting company will win, and that’s typically not the legacy company.

Meeting the changing needs of e-commerce and the logistics marketplace comes with challenges for legacy carriers. Where they meet those challenges, they will continue to flourish, but you can also expect that they will lag in some areas, opening the door a little wider for a new generation of last-mile carriers.


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