By Daniel P. Bearth

Freight carriers took advantage of the continuing growth in home deliveries to offset a drop in freight from their more traditional customers.

Despite a drop in shipments because of slow economic growth and lagging home sales, firms that specialize in final-mile delivery to homes and businesses say market demand remains strong as consumers buy more goods online and manufacturers ship more products direct to customers from factories and distribution centers.

Fleet operators also are taking steps to expand the range of delivery services offered while adding new customers and seeking ways to operate more efficiently.

Diane Gibson started a business in 1990 to provide packaging for antiques and artwork. Now her company, called Craters and Freighters Inc. in Golden, Colo., handles everything from jet engines to high-end furniture and computer servers, goods that are too big, too heavy or too valuable for traditional shipping companies.

"Many carriers are good at transporting boxed or crated goods, but they are not used to handling anything that is unpackaged," Gibson said in an interview with LIGHT & MEDIUM TRUCK.

"We got a start in art and antiques. Since then, we've gotten into the electronics field," she said. "We've relocated data centers. We've done plant moves. We do a lot of online auction business."

With 67 franchise operators in major cities across the country and revenue of $45 million a year, Craters and Freighters has carved out a niche in a business that includes package carriers, such as UPS Inc.and FedEx Corp., the U.S. Postal Service, private and dedicated home-delivery fleets, household goods movers and an ever-changing mix of local cartage companies, freight carriers and logistics companies.

This is a $19 billion business, said one executive.

Karl Meyer, chairman and CEO of 3PD Inc., Marietta, Ga., said retail-supported residential delivery is a $9 billion-a-year business. Dedicated store delivery fleets account for another $5 billion in spending and about $4 billion is spent on residential delivery by less-than-truckload carriers, freight brokers and forwarders.

Meyer said he sees different factors driving demand for residential and commercial delivery services.

For home delivery, he sees a shift in emphasis from quality to price.

"We've seen more inclusion in [bids] of non-traditional players with assets that are idle," Meyer said. "This will not last. Regional LTL carriers, for instance, will move back to their core business when freight demand picks back up."

To further broaden its services, Meyer said 3PD sells software to companies that want to manage their own delivery fleets better. The potential market for such technology is about $500 million annually, he said.

Patrick Cory, managing partner of Cory Home Delivery in Secaucus, N.J., said he's seen many companies, both large and small, try to enter the home delivery business since founder Joseph Cory, his grandfather, delivered a stove in Brooklyn, N.Y., in 1934.

"Most of them fail over time," Cory said. "The reason is simple. This is a service business. It requires an incredible amount of focus for very little return."

Nonetheless, some freight carriers are targeting home delivery as a source for new business. J.B. Hunt Transport Services Inc., Lowell, Ark., for example, launched a home delivery service in 2009 that company executives said is on pace to generate annual revenue of $120 million this year.

"Carriers are under pressure, and they see delivery as a new revenue source," said David Vieira, president of Exel Direct in Ohio, the nation's largest home delivery firm. "Trucking companies, like J.B. Hunt, carry goods to distribution centers, so why not all the way to the home?"

Home delivery, however, uses a very different business model, Vieira said.

Instead of a solo driver bumping the dock with a load, two-person teams make up to 15 deliveries a day and often provide help with installation and clean up.

"It's not an easy transition," Vieira said.

Even among household goods carriers, home delivery is seen as a distinct service offering.

"It's not a market we're pursuing," said Arthur "Bud" Morrissette IV, president of Interstate Relocation Services in Springfield, Va. "We make commercial deliveries, but we're not doing hot tubs or exercise equipment or 60-inch TVs into residential space because we haven't found a model that is profitable."

Few consumers are willing to pay 15% to 20% of the purchase price to have a $1,000 TV delivered, for instance, he said. A hot tub installation might take three or four people several hours to complete while contending with obstacles such as fences and rigging.

"Our focus is on commercial [deliveries]," Morrissette said. "We've hauled $1 billion worth of computers and electronics equipment for companies like AOL and Hewlett-Packard."

On the other hand, Donald Martin Jr., president of Clark & Reid Co. in Billerica, Mass., said his company has been making deliveries for a high-end furniture manufacturer, Thos. Moser Cabinetmakers in Auburn, Maine, for the past eight years and finds the business well-suited to the skills of his employees.

"We had the trucks, manpower and skill set," Martin said. "We also found that it provided a nice transition for household goods drivers. It's a little less physically demanding, and it requires more customer service skills."

Martin said 10 of the company's 140 employees handle furniture delivery, which generates about $3 million to $4 million a year in revenue.

3PD's Meyer said he sees many companies moving distribution facilities to be closer to customers and selling more products, such as cabinets and millwork, direct to customers.

Such moves, along with growth in online sales should generate greater demand for delivery services, industry officials said.

The Commerce Department estimated that online expenditures grew to $134.9 billion in 2009 from $25.8 billion in 2000.

"Customer confidence in buying online is growing," said Michael Star, vice president of sales and marketing for Fidelitone Logistics, which is based in Wauconda, Ill., northwest of Chicago. The company provides residential and commercial delivery services.

Star said customers typically come into a store to look at products, then go online to compare prices and make purchases.

"That's why stores offer price-matching," he said.

Stores no longer carry large inventories, and manufacturers have cut back on product offerings to be more efficient.

This trend creates an opportunity for delivery firms to add value by customizing products as part of the installation process in the field, Star said.

"We're also trying to load up on our routes by adding shipments from multiple clients on the same truck," he said. "If we keep our trucks running full, we are able to offer lower rates."

Steve Ochs, director of business development for Nonstop Delivery LLC in Chantilly, Va., said retailers are using delivery services as a way to set themselves apart from the competition.

"Retailers are chasing fewer dollars and customers. They are trying to remove any barrier to a sale and allay any concern about how to get relatively large products into the home," Ochs said.

Free shipping is another marketing ploy that is driving online sales, said Jerry McDonald, senior director of business development for Ozburn-Hessey Logistics, Brentwood, Tenn., which provides distribution services for online retailers and manufacturers.

To keep delivery costs down, McDonald said he expects more lightweight shipments to be handled by companies, such as FedEx's SmartPost and UPS' Mail Innovations, that pick up, consolidate and deliver packages to the U.S. Postal Service for the "last-mile" delivery.

Such arrangements, known as "zone-skipping," cost 20% to 30% less than typical ground delivery by the major parcel carriers, McDonald said.

Two other companies that specialize in zone-skipping arrangements are Newgistics Inc., Austin, Texas, and MailExpress Inc., now known as Streamlite Inc.

Streamlite, Atlanta, has raised $110 million from private investors to expand its services for retail, health care, financial services and other industries.

"Business is growing," said Barbara Wallander, vice president of postal operations and engineering for FedEx SmartPost in New Berlin, Wis., who said the average daily volume of 1 million packages rose 47% in the fiscal year that ended May 31, 2010 and is up 9% in the first quarter of the current fiscal year.

"Nobody has the delivery density of the postal service," Wallander said. "It is really best at first and last mile delivery."

Many retailers are looking for ways to combine the distribution networks used to deliver goods to stores with those used to deliver direct to a customer's home, said Ramsey Monsour, a spokesman for UPS' retail marketing group.

"We're seeing a dynamic shift in the supply chain," Monsour said.

For delivery of larger items, Cory Delivery's Patrick Cory said the biggest challenge is providing consistently good service.

"If UPS and FedEx can't do it, it's a challenge," he said. "Some people who are selling large items on the Internet are

By Daniel P. Bearth

Freight carriers took advantage of the continuing growth in home deliveries to offset a drop in freight from their more traditional customers.

 

Despite a drop in shipments because of slow economic growth and lagging home sales, firms that specialize in final-mile delivery to homes and businesses say market demand remains strong as consumers buy more goods online and manufacturers ship more products direct to customers from factories and distribution centers.

 

Fleet operators also are taking steps to expand the range of delivery services offered while adding new customers and seeking ways to operate more efficiently.

 

Diane Gibson started a business in 1990 to provide packaging for antiques and artwork. Now her company, called Craters and Freighters Inc. in Golden, Colo., handles everything from jet engines to high-end furniture and computer servers, goods that are too big, too heavy or too valuable for traditional shipping companies.

 

"Many carriers are good at transporting boxed or crated goods, but they are not used to handling anything that is unpackaged," Gibson said in an interview with LIGHT & MEDIUM TRUCK.

 

"We got a start in art and antiques. Since then, we've gotten into the electronics field," she said. "We've relocated data centers. We've done plant moves. We do a lot of online auction business."

With 67 franchise operators in major cities across the country and revenue of $45 million a year, Craters and Freighters has carved out a niche in a business that includes package carriers, such as UPS Inc.and FedEx Corp., the U.S. Postal Service, private and dedicated home-delivery fleets, household goods movers and an ever-changing mix of local cartage companies, freight carriers and logistics companies.

This is a $19 billion business, said one executive.

 

Karl Meyer, chairman and CEO of 3PD Inc., Marietta, Ga., said retail-supported residential delivery is a $9 billion-a-year business. Dedicated store delivery fleets account for another $5 billion in spending and about $4 billion is spent on residential delivery by less-than-truckload carriers, freight brokers and forwarders.

 

Meyer said he sees different factors driving demand for residential and commercial delivery services.

For home delivery, he sees a shift in emphasis from quality to price.

 

"We've seen more inclusion in [bids] of non-traditional players with assets that are idle," Meyer said. "This will not last. Regional LTL carriers, for instance, will move back to their core business when freight demand picks back up."

 

To further broaden its services, Meyer said 3PD sells software to companies that want to manage their own delivery fleets better. The potential market for such technology is about $500 million annually, he said.

 

Patrick Cory, managing partner of Cory Home Delivery in Secaucus, N.J., said he's seen many companies, both large and small, try to enter the home delivery business since founder Joseph Cory, his grandfather, delivered a stove in Brooklyn, N.Y., in 1934.

 

"Most of them fail over time," Cory said. "The reason is simple. This is a service business. It requires an incredible amount of focus for very little return."

 

Nonetheless, some freight carriers are targeting home delivery as a source for new business. J.B. Hunt Transport Services Inc., Lowell, Ark., for example, launched a home delivery service in 2009 that company executives said is on pace to generate annual revenue of $120 million this year.

 

"Carriers are under pressure, and they see delivery as a new revenue source," said David Vieira, president of Exel Direct in Ohio, the nation's largest home delivery firm. "Trucking companies, like J.B. Hunt, carry goods to distribution centers, so why not all the way to the home?"

 

Home delivery, however, uses a very different business model, Vieira said.

 

Instead of a solo driver bumping the dock with a load, two-person teams make up to 15 deliveries a day and often provide help with installation and clean up.

 

"It's not an easy transition," Vieira said.

 

Even among household goods carriers, home delivery is seen as a distinct service offering.

 

"It's not a market we're pursuing," said Arthur "Bud" Morrissette IV, president of Interstate Relocation Services in Springfield, Va. "We make commercial deliveries, but we're not doing hot tubs or exercise equipment or 60-inch TVs into residential space because we haven't found a model that is profitable."

Few consumers are willing to pay 15% to 20% of the purchase price to have a $1,000 TV delivered, for instance, he said. A hot tub installation might take three or four people several hours to complete while contending with obstacles such as fences and rigging.

"Our focus is on commercial [deliveries]," Morrissette said. "We've hauled $1 billion worth of computers and electronics equipment for companies like AOL and Hewlett-Packard."

 

On the other hand, Donald Martin Jr., president of Clark & Reid Co. in Billerica, Mass., said his company has been making deliveries for a high-end furniture manufacturer, Thos. Moser Cabinetmakers in Auburn, Maine, for the past eight years and finds the business well-suited to the skills of his employees.

"We had the trucks, manpower and skill set," Martin said. "We also found that it provided a nice transition for household goods drivers. It's a little less physically demanding, and it requires more customer service skills."

 

Martin said 10 of the company's 140 employees handle furniture delivery, which generates about $3 million to $4 million a year in revenue.

 

3PD's Meyer said he sees many companies moving distribution facilities to be closer to customers and selling more products, such as cabinets and millwork, direct to customers.

 

Such moves, along with growth in online sales should generate greater demand for delivery services, industry officials said.

 

The Commerce Department estimated that online expenditures grew to $134.9 billion in 2009 from $25.8 billion in 2000.

 

"Customer confidence in buying online is growing," said Michael Star, vice president of sales and marketing for Fidelitone Logistics, which is based in Wauconda, Ill., northwest of Chicago. The company provides residential and commercial delivery services.

 

Star said customers typically come into a store to look at products, then go online to compare prices and make purchases.

"That's why stores offer price-matching," he said.

 

Stores no longer carry large inventories, and manufacturers have cut back on product offerings to be more efficient.

 

This trend creates an opportunity for delivery firms to add value by customizing products as part of the installation process in the field, Star said.

 

"We're also trying to load up on our routes by adding shipments from multiple clients on the same truck," he said. "If we keep our trucks running full, we are able to offer lower rates."

Steve Ochs, director of business development for Nonstop Delivery LLC in Chantilly, Va., said retailers are using delivery services as a way to set themselves apart from the competition.

 

"Retailers are chasing fewer dollars and customers. They are trying to remove any barrier to a sale and allay any concern about how to get relatively large products into the home," Ochs said.

Free shipping is another marketing ploy that is driving online sales, said Jerry McDonald, senior director of business development for Ozburn-Hessey Logistics, Brentwood, Tenn., which provides distribution services for online retailers and manufacturers.

 

To keep delivery costs down, McDonald said he expects more lightweight shipments to be handled by companies, such as FedEx's SmartPost and UPS' Mail Innovations, that pick up, consolidate and deliver packages to the U.S. Postal Service for the "last-mile" delivery.

 

Such arrangements, known as "zone-skipping," cost 20% to 30% less than typical ground delivery by the major parcel carriers, McDonald said.

 

Two other companies that specialize in zone-skipping arrangements are Newgistics Inc., Austin, Texas, and MailExpress Inc., now known as Streamlite Inc.

 

Streamlite, Atlanta, has raised $110 million from private investors to expand its services for retail, health care, financial services and other industries.

 

"Business is growing," said Barbara Wallander, vice president of postal operations and engineering for FedEx SmartPost in New Berlin, Wis., who said the average daily volume of 1 million packages rose 47% in the fiscal year that ended May 31, 2010 and is up 9% in the first quarter of the current fiscal year.

 

"Nobody has the delivery density of the postal service," Wallander said. "It is really best at first and last mile delivery."

 

Many retailers are looking for ways to combine the distribution networks used to deliver goods to stores with those used to deliver direct to a customer's home, said Ramsey Monsour, a spokesman for UPS' retail marketing group.

 

"We're seeing a dynamic shift in the supply chain," Monsour said.

 

For delivery of larger items, Cory Delivery's Patrick Cory said the biggest challenge is providing consistently good service.

 

"If UPS and FedEx can't do it, it's a challenge," he said. "Some people who are selling large items on the Internet are a little overzealous. The logistics capability has just not caught up."

 

Return rates for furniture purchased online, for example, are five times the rate for goods purchased in stores, Cory said.

 

Cory recently set up distribution centers in Florida, New Jersey and North Carolina to handle delivery of items sold over the Internet to homes from Miami to Boston.

 

The company also has set up a special unit to take delivery and provide disposal for old furniture and appliances.

 

"We're looking at a charity to take these items. If not, we will properly dispose of the items," Cory said. "It's a kind of a green service."

 

a little overzealous. The logistics capability has just not caught up."

Return rates for furniture purchased online, for example, are five times the rate for goods purchased in stores, Cory said.

Cory recently set up distribution centers in Florida, New Jersey and North Carolina to handle delivery of items sold over the Internet to homes from Miami to Boston.

The company also has set up a special unit to take delivery and provide disposal for old furniture and appliances.

"We're looking at a charity to take these items. If not, we will properly dispose of the items," Cory said. "It's a kind of a green service."