By Ed Pierce, Contributing Editor
Although Merchants Fleet has recently announced a spate of electric vehicle-related announcements, Senior Vice President of Mobility, John Cail, explains that the news is the result of the company’s ongoing electric vehicle initiative. “We’ve been building our electric vehicle strategy for some time, including electrified vehicle fleet management services, charging, OEM relationships, and more.
“Merchants is developing and implementing EV strategies because we foresee that’s where our clients are migrating,” he adds. “We are building out our ecosystem of partners and are ahead of the curve and will remain out in front in order to offer our clients the best possible outcomes.”
Market Segments Positioned for EV Migration
Segments of the fleet industry that Merchants sees as well positioned to lead the EV migration are government, logistics, last-mile delivery, utility and energy.
“Government is in good stead because of the mandates of the current administration, which will push agency fleets to adopt that EV sustainability play,” John notes.
“On the logistics side, achieving the best TCO of assets is a high priority, and EVs are proving to have payback in that three- or four-year timeframe, John adds. “TCO will really improve upon time for last-mile and logistics applications, including long-haul and Class 6 box trucks.
“When you’re in the energy business and you’re in the green space of production of renewable energy, it makes total sense to adopt the electric vehicle segment of assets.”
Obstacles Remain
John recognizes that there are obstacles to overcome in the EV migration movement, particularly asset class availability and infrastructure: “I think these are challenges that everybody’s going to have to overcome. Another obstacle is the geography. The U.S. is more spread out than our European friends, who are more condensed and have the availability and infrastructure build out to service many, many more people in a geographic area.”
He points to an important reason why EV migration is speeding up despite the challenges: “Ultimately, this decision isn’t as simple as the asset anymore. Today, the decision to move to EVs goes all the way up to the boardroom where the company is making a decision to support sustainability.”
Last-Mile Delivery
In the past year during the pandemic, e-commerce has exploded and driven a surge in home delivery services. Now that most consumers have tried it and grown to like it, products and services are being delivered to the home. “We expect this trend to continue climbing in 2021 with outsourcing to independent contractors and gig workers, “says John.
SCI Partnership
“Our partnership with SCI is a perfect example of how we can meet the fleet needs of tens of thousands of independent contractors. As an aggregator, SCI allows us to take a consortium-based approach to businesses that wouldn’t necessarily have access to the financing and service we provide.”
John notes that here, too, there are problems that need to be addressed in growing the segment. “On the obstacle side, I think asset availability for the independent contractors is still a real deterrent in growing their business. The assets are not being produced from the OEMs at a level that meets the demand of the growing e-commerce business. Driver availability is another area of concern to e-commerce logistics companies. Even if a company has the assets, it’s difficult to hire enough drivers. These two obstacles will determine how fast e-commerce continues to grow.
The Never-ending Peak Season
Another change brought on by the pandemic and the rise of last-mile delivery is the disruption of the traditional truck “peak season” for the few months leading up to the December holiday season.
“We are in the midst of a never-ending peak season,” explains John. “COVID gave it a shot in the arm and really drove many brands to become e-commerce providers. Subsequently, more and more logistics companies were born.
“Orders from 2019 to 2020 more than doubled for us. We expect 20 to 30% growth again because there are so many more logistics companies getting in business to do delivery, whether it be middle mile, last mile, or long haul.
“We see a continuing steady climb. Looking back year-over-year, comparing last year’s first quarter and this year’s first quarter, we’re up 108% in terms of volume. Again, asset availability is still an important qualifier, and flexibility is a key factor, too. A lot of the startups don’t necessarily have the funding offset in place to grow at five, 10, 20, or 30%. We will continue to make our product available and flexible to serve this market.”
The Vaccine Effect
One interesting, related trend, according to John, ties to vaccine availability: “With the availability of the vaccine, there’s a feeling that retail stores will take away from e-commerce,” notes John. “But the opportunity to go online and order items has reset customer expectations. I think the US consumer is really loving the fact that they can have products and services brought to them. So, I expect this peak season will be 20 to 40% larger than the last peak season.”
‘Pro to Know’ Award and ‘Ready-Fleet’
John recently was named a 2021 ‘Pros to Know’ award winner from Supply & Demand Chain Executive, the publication covering the entire global supply chain, recognizing his team’s accomplishments in leveraging the supply chain for competitive advantage.
“I look at the ‘Pro to Know’ award as recognition of innovation by the entire Mobility team, who built out a transportation network that allowed us to deliver and pick up assets to multiple clients in all 50 states. This year, we set up 165 additional transport vendors for us across the country, just to cover that on-demand need that we saw. The team came up with a unique concept. Instead of having assets ready to go after the client needs them, they started a concept called ‘Ready Fleet’.
“We basically pre-ordered 2,000 to 3,000 assets to be staged around the country. Sure enough, as those phone calls came in, we had a true differentiated solution. Instead of the usual two-, three-, or four-month lead time, we were able to deliver assets to our client’s hands in two weeks.
“We really want to build programs that meet the needs we hear in the market. In this case it was faster nationwide delivery. Or we heard ‘I don’t want to renew a new contract every month from a rental location.’
“The latter customer’s concern resulted in Merchants Fleet’s ‘first in the industry’ offering, taking rentals out two or three months, or whatever the customer needs. If the customer decides to keep the asset, we’ll convert it to a long-term lease at a favorable rate and equity credit back from the rental – something no one else does in the industry. We are one company that can handle both a short-term need as well as your long-term fleet management need. I’m really proud of that, and our company has been built on that kind of innovation.
Fostering Innovation and Teamwork
“Our corporate culture fostering innovation has contributed to a leadership style that I have adopted. It begins with a clear vision and alignment with the team. Our leaders have the autonomy to run their own departments. We then collaborate as a team, reviewing ideas, uncovering innovations, and coming up with final decisions as a group. For me, it comes from competitive athletics that have been part of the equation throughout my life. These are all my teammates. And whether you’re a power-hitting third basemen or a reliable stopper on the mound, the team needs all of the contributing pieces to succeed.”
