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Strategies to Overcome Burdens of Last Mile Delivery in eCommerce Fulfillment 

eCommerce growth has skyrocketed throughout and following the peak of the COVID-19 pandemic. The US retail eCommerce market was roughly $768 billion in 2021, and forecasted to exceed $1.3 trillion by 2025. The growth puts pressure on the consumer products manufacturers – for both new entrants looking to build out their eCommerce platform/direct-to-consumer (DTC) capabilities as well as posing challenges for existing players. The rapid acceleration proved challenging for many businesses that were unprepared for the heightened consumer expectations (e.g., same-day/two-day delivery) and universal challenges around increased parcel costs and labor shortages. However, some organizations are seeking M&A opportunities to better serve their customer base and insulate against the industry risks. This article explores this and other mitigation strategies consumer products manufacturers ought to consider capitalizing on the growing eCommerce trend and the recent logistics challenges around last mile delivery. 

Challenges for Last Mile Delivery in eCommerce Fulfillment

Undoubtably, the supply chain ecosystem as a whole continues to strain under pandemic-induced demand and supply chain-related challenges; labor shortage woes, operational delays, and supply bottlenecks are not new, but are certainly being tested in new ways. The following challenges related to rising parcel costs, USPS’s impact on the private parcel sector, and the growing effects of Amazon emerge as challenges that have not previously been as prominently impactful. Successful consumer products companies evaluate these risks in the context of long- and short-term impact on their DTC strategy. 

Rising costs. Parcel rates are on the rise across the board. FedEx expects shipping rates would go up an average of 5.9% in 2022 across most of its services, the first time in eight years that it or rival UPS has strayed above annual increases of 4.9%. USPS has asked the U.S. Postal Regulatory Commission to approve a temporary rate increase. These price hikes are attributable to many factors, including labor constraints (exacerbated by COVID-19), fuel costs, and in some cases, executing a renewed strategy to drive profitable growth.  

Reliance on USPS. USPS has played a unique role in last mile delivery, namely because of the dynamic created in the marketplace due to its government subsidy and access to rural areas. USPS’s more favorable rates allowed it to serve remote consumers that otherwise would have been difficult or not possible. The recent decline and potential collapse of USPS will significantly shift the market dynamics within the parcel industry, possibly further driving up costs for manufacturers, restricting access for consumers in remote areas where players such as FedEx and UPS are uninterested in serving, and eliminating a reliable last mile delivery partner for 3rd party logistics (3PL) providers. 

Amazon Effect. In addition to being a fierce competitor, equipped with its own ever-growing fleet, Amazon has set the standard for free and fast delivery, creating challenges for consumer products manufacturers and their 3PL partners who lack the infrastructure and capability to execute on the two-day promise.  

Opportunities for Last Mile Delivery in eCommerce Fulfillment

Opportunity #1: Supply chain optimization to elevate consumer experience & insulate against risks 

Amidst these eCommerce fulfillment challenges, maintaining quality and high consumer satisfaction becomes an even more critical strategic imperative. When evaluating 3PL providers, consumer products companies should assess if their 3PL partners have a fully optimized network or supply chain; for example, are their warehouses and fulfillment centers situated in strategic locations– e.g., proximity to ports, interstate highways, and their own manufacturing facilities? A well-designed network will be a key competitive advantage in ensuring on-time delivery and a satisfied consumer base.  

Traditionally, parcel costs are passed through from 3PL to manufacturer. With the industry-wide parcel cost increase, manufacturers’ margins continue to be squeezed. Leading 3PL providers are actively seeking ways to mitigate this challenge; our Clarkston team has worked with 3PLs to devise and execute sales strategies that result in more favorable volume-based parcel pricing with lead carriers, resulting in savings that are passed onto to manufacturers. They also develop relationships and pricing contracts with multiple carriers, including regional ones, to provide broader rate offerings and, to some extent, insulates from the pricing risks. Working with 3PL partners that have a comprehensive sales strategy with a multi-carrier approach tends to lead to lower cost and optimized routing – benefits that are passed onto their customers to remain competitively attractive to their manufacturing partners. 

Opportunity #2: Partnering with 3PL providers with strong operational and technological capabilities  

Beyond an optimized network, consumer products leaders should examine how their 3PL partners leverage technology to hedge against some of risks associated with labor shortages and price increases and operational practices that drive consumer satisfaction. A common theme our Clarkston teams have seen is that successful fulfillment companies invest in a strong warehouse management system; those serving eCommerce customers have particularly strong integration capabilities connecting internal and external systems to reduce manual effort while maintaining operational efficiency. The leading players will have the ability to integrate with top eCommerce applications. There’s a heightened demand for more sophisticated reporting and customer visibility as products traverse the logistics journey. The ability to support reverse logistics in a streamlined manner as well as high-end customization process needs will further distinguish one from the competition.  

For those manufacturers seeking to differentiate through customization, kitting, and other higher value services, partnering with leading eCommerce 3PL providers with a tested and robust portfolio of value-add services will be essential. For example, some fulfillment providers offer the ability to provide custom packaging for high-value products that require special care or the ability to address unique handling requirements. Many larger 3PL providers do not focus on customization from a fulfillment strategy perspective, therefore, careful selection is key to avoid jeopardizing the consumer experience.  

Opportunity #3: M&A activity to transform Direct-to-Consumer operations 

Flurries of DTC acquisition activity in recent years underscore the criticality of consumer products leaders taking a proactive stance in the growing eCommerce market. Many of the M&A ambitions stem from the desire to expand their market access, and others in enhancing their talent strategy, strengthening their operational and technological infrastructure, and thereby, broadening their fulfillment and supply chain capabilities. For example, Unilever’s acquisition of Dollar Shave Club expanded its product offerings while gaining top talent from Target and Nike. 

Depending on the consumer product manufacturers’ DTC strategy and its scale, operating models could range from a full in-house order management and fulfillment capability set to an outsourced operating model where the overall process of placing the order, processing the order, and fulfillment are all managed by a third party. In the balance for control of the consumer experience and scalability, consumer products leaders ought to evaluate, and regularly re-evaluate, their DTC operating model as their organization matures.  

Whether it’s helping merge DTC strategy post-M&A or supporting leading consumer products companies in M&A deal finding and due diligence, Clarkston has helped clients looking toward M&A to expand into new product categories and consumer bases, as well as strengthen their supply chain capabilities and resilience. 


With the proliferation of DTC companies, long-lasting eCommerce consumer behaviors, and expectations of fast, free delivery, DTC remains top of mind for leaders in the consumer products industry. Likewise, the challenges associated with labor constraints, rising parcel costs, and intense competition are not evanescent. These trends and challenges create unique opportunities for players in the consumer products space looking to insulate against these universal risks and expand their market share within eCommerce. 

Explore Clarkston’s eCommerce Consulting solutions to see how we could help.

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Tags: eCommerce, Direct-to-Consumer, Digital Supply Chain