COVID-19 continued to dramatically accelerate a number of logistics trends—from first touch to the final mile. E-commerce shifted into overdrive. Factories that have closed or scaled back operations, combined with ports working at limited capacity, continue to wreak havoc with the supply chain. And now we are facing a trucker shortage of epic proportions.
Even as we begin to see hints of a return to normal, demand shows no sign of slowing (even with continuing inflation) and retailers are positioning themselves to capitalize on it. Nearly half of retailers surveyed by BDO planned to undergo a digital transformation post-pandemic, shifting focus from brick-and-mortar stores to e-commerce, including social and mobile shopping. This shift means big money: 2022 will mark the first year that e-commerce sales hit $1 trillion, according to an Adobe report.
The continued growth of online shopping requires us to rethink how to get purchases in the right hands. Here’s a look at five trends that will drive logistics in the coming year and beyond:
Think National, Not Local, for Big and Bulky Items
Consumers can now find the exact right sofa or refrigerator with a quick internet search, rather than spending time at local brick-and-mortar furniture or appliance stores. Order it online and within a few weeks, or even days, the products will be delivered. It doesn’t matter if the retailer is located on the other side of town or the other side of the country.
More frequently, companies are getting orders from regions that were not in their traditional delivery zone thanks to the internet economy and customers moving to new areas who want to continue shopping their favorite brands. Then comes the question: “Can they deliver?”
Instead of losing that sale and harming brand loyalty, companies need to do whatever is necessary to fulfill the order. Since goods are actually in physical warehouses, not on the internet, companies that have been exclusively local or regional in focus must plug into a national distribution network – whether it’s by expanding their own fleets or partnering with other third party logistics (3PL) companies to handle the last mile.
Speed Trumps Price
We’re all used to getting groceries delivered in an hour or even same-day delivery of the most obscure goods from Amazon. Consumers want what they want – and they want it now.
When comparison shopping online, consumers are now more likely to put a premium on fast delivery rather than cost. Imagine you're shopping for a new table, since you’re hosting a holiday party. One e-commerce retailer has what you're looking for, but can't deliver it for three weeks, but you find it online from another site that costs 5% more, but you can have it by Friday. When weighing the choices, price will have little bearing on something you want or need right away.
Speed is going to define the winners and losers in today's marketplace. Retailers need logistics solutions that can help them win the delivery race and keep their customers satisfied.
AI Is the Driving Force Behind the Need for Speed
Early adopters of AI in supply chain management have significantly improved their operations, according to McKinsey & Company. In a study, they found that AI improved logistics costs by 15%, inventory levels by 35%, and service levels by 65% compared to those not leveraging advanced technologies.
Much like football is a game of inches, logistics is a game of minutes. AI is the quarterback of logistics, consuming data, then recognizing the patterns across the supply chain and how they are related to outside influences, such as shift change, break time, experience level of employees, weather, and traffic. When you can effectively analyze all of these factors, accuracy improves and minutes are shaved off delivery times, giving you a competitive edge.
We can expect significant growth of AI in logistics in the coming year. Infoholic Research predicted 42.9% CAGR growth over the next two years, with the market reaching $6.5 billion by 2023, as AI is exploited to drive scale and efficiency of new distribution models and support greater automation.
Middle Mile Is the New Last Mile
Typically the most complex aspect of logistics is that last mile to the customer's door. But with the rise in e-commerce, the middle mile is becoming just as complicated.
Responding to consumer demand for same- or next-day shipping, businesses now resort to less than truckload (LTL) shipping in the middle mile. Demand for LTL and its cost is rising. The U.S Bureau of Labor Statistics data shows that LTL has outpaced long-haul trucking in both metrics during the past two years, and it's likely going to continue to rise along with online shopping.
Experts indicate that LTL will be critical for local fulfillment for companies competing with national brands. Since LTL requires partial loads being dropped at multiple fulfillment centers, businesses should consider applying last mile logistics technology to the middle mile to improve efficiency and reduce costs.
Sustainability Must Become Sustainable
The effects of climate change cannot be denied. More severe wildfires, widespread drought, higher average temperatures, and catastrophic storms are causing hundreds of billions of dollars in damage to our country each year. Now is the time for the retail and supply chain sectors to follow the lead of other industries by undertaking initiatives aimed at reducing carbon emissions and protecting the environment.
This may seem difficult when you consider the amount of resources consumed in shipping – from paper and cardboard packaging supplies to fossil fuels powering delivery trucks. But it seems the move to online shopping may reduce environmental impact. MIT's Real Estate Innovation Labs simulated hundreds of thousands of scenarios comparing in-person with online shopping. The study, published in early 2021, found that online shopping is more sustainable than traditional retail 75% of the time.
A commitment to sustainability must be more than just a lofty goal. To make real change, facilities must be located closer to end users and consider using AI to help create efficient routes and more effectively load trucks to minimize gas usage. Not only will these changes reduce greenhouse gas emissions, they also can lower costs along the supply chain.