The Covid-19 pandemic will speed the evolution of the transport and logistics sector and transform how some businesses operate, according to new research.
The crisis has already seen a number of changes that have affected warehousing and distribution operations, including changes in the way that many people have bought goods, with raised demand for online shopping.
As this includes supermarket shopping, it has led to greater pressure on controlled temperature home delivery operations and a degree of uncertainty for supermarkets regarding future demand. Will customers return to shops when they can or is some of the move to home delivery a more permanent development?
This question is important for the distribution networks involved because it could affect how many shops will be needed in the future compared with regional distribution centres. More online shopping would move more in favour of the regional distribution centres where it would be possible to adapt home delivery services more readily, while reducing the need for onward truck distribution to shops. Should customers return to visiting shops as they did before the crisis, then the balance would tip the other way.
Obviously this is different for the companies that only offer on-line shopping because they have already optimised their operations for home delivery.
“This was coming anyway”, says Louisa Hosegood (pictured), digital and strategy director at Bis Henderson Consulting, considering the balance between online and direct shopping. “We’re probably going to be at the level this year where we might have been in five years’ time if we hadn’t had this crisis.”
That said, most of us still use shops, with just 20% being sold online. Even if it grew by a further 10%, 70% of purchases would still be handled through shops, which is not likely to trigger big changes in retail distribution.
Hosegood points to another trend during the Covid crisis, as more of us have used local shops than is usual, raising the question of whether we continue to support them or return to the supermarkets with their lower prices.
Rental and recycling
Another two possible developments that could have large implications for distribution chains and warehousing are the result of people re-considering their values, considering sustainability issues and responding to changes in how we live, with a wider range of models for family living.
These could trigger an expansion of recycling operations for online and retail outlets and the possible development of rental for some retail items.
Recycling of items like domestic appliances and mobile phones already exists but leasing of items instead of purchase is relatively rare. It has been tried with some fashion items, giving customers an opportunity to return items at the end of a season, but Hosegood believes it could be expanded further to include items such as furniture: “If you had that kind of model, you could send as much out as you take back in again and warehouses would end up becoming processing centres with cleaning, or grading, or storing to send back out.”
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Further development in both fashion and electrical goods is where Hosegood sees the potential for development here. Rental demand could exist for electrical items such as portable air conditioning units, which are bulky and only needed for a few days or weeks a year.
Supply and distribution systems could see further changes if there was more joint flexible working between companies. The Freight Transport Association (FTA) launched its #logisticshelpslogistics social media campaign back in March with the aim of addressing staff shortfalls or identifying vehicles with spare capacity via social media.
"There are also different sharing platforms to solve issues to work more efficiently together, or where some companies have less work and others need the work”, says Elizabeth de Jong, FTA director of policy.
Fleet management
With uncertainty about how our markets might change shape following the Covid-19 crisis, she expects transport operators will be looking at more flexible options on how to deploy vehicles.
Hosegood believes that we have the technology with vehicle tracking and fleet management software to understand where vehicles are and what they are doing.
Possible barriers to further collaboration appear to include issues around drivers’ hours and brand related issues about carrying Brand X items in a Brand Y vehicle.
“What’s really going to be the rocket to get them moving on this? It may well take a couple of the big companies to do it to pull everybody along with them. It’s not just the cost, it’s capacity as well as the whole green issue.”
The Covid-19 crisis has demonstrated how quickly some large e-commerce or digitalisation platforms can be delivered when they are needed. De Jong at FTA gives the example of borders: “That’s an area where we have been able to implement quite a lot of electronic versions of paperwork. Without this impetus, those would have taken a lot longer to implement. There have really been very few border delay issues on things getting through. I think that both joint working and how long it takes us to deliver projects and how quickly we can digitise things are going to be two areas of opportunity to build on.”
Final mile
If online deliveries are a growth area, it raises the issue of “final mile”, deliveries – the last link in the chain delivering directly to the consumer. Where will the necessary capacity for this come from?
For lighter packages, possibly medical deliveries, distribution by drone is a possibility but at the moment range is limited. Susan Beardslee, principal analyst, freight transportation & logistics with ABI research in the US suggests that there has been growth across large medical complexes and suburban areas in the US, but the possibilities appear to be restricted for safety, legislative and environmental reasons.
Profitable growth in final mile deliveries is the question that needs to be addressed, believes Hosegood. Just adding vans, drivers and more sorting hubs is not necessarily going to result in a profitable system. Carriers will need to think about how their networks and hubs are structured rather than relying on old retail-based models. Can efficiencies be improved, can scheduling be improved?
Efficiency gains could be made by scheduling deliveries and collections from the same vehicle. Using a location smartphone app such as what3words, which has divided the surface of the planet into one metre squares, each assigned with a three-word address could also help. what3words has claimed around a 30% efficiency improvement in trials for first time location of last mile deliveries, a significant change.
