I read Chris Cunnane’s Logistics Viewpoints Friday news round-up every week. This site is particularly good at highlighting the ongoing revolution in retail supply chains. Without a doubt, the biggest ongoing trend changing supply chain management is the retail convenience revolution. It has never been easier to be a consumer.
1. Amazon is driving the revolution. In April, Amazon did it again. They announced they would roll out one-day shipping for all its Prime members. The company has spent massively to support this, $1.5 billion in the fourth quarter alone.
2. Other retailers had to respond. Large retailers announced buy online/pick up in store, or new locations and partners for returning ecommerce orders, or daily delivery services of their own on an almost weekly basis.
3. In support of the retail revolution, announcements of new ways to improve last mile deliveries were plentiful. Last mile is the most expensive part of the delivery process. Cargo bikes, drones, last mile robots, and autonomous delivery vans are all being trialed.
4. However, many consumers don’t find home deliveries convenient, perhaps because they work in an office or don’t have anywhere safe to receive packages. Partnerships are emerging that allow goods to be purchased from one company but to be picked up at locations owned by other companies. Walmart went even further in their efforts to be convenient while at the same time preventing porch piracy, they will now put groceries right in your fridge.
5. But for retailers to compete on the speed with which they can deliver goods, they also need more warehouses in urban settings. These urban warehouses are often smaller, carrying fewer products. They are often automated, not just to support faster deliveries, but because high density storage allows more products to be fulfilled from small footprint warehouses. Urban land is more expensive.
6. Picking to support online orders is particularly labor intensive. This has been exacerbated by historically low levels of unemployment. Retailers and parcel delivery companies have embraced automation, particularly robotic forms of automation, to mitigate the difficulty companies are having in finding workers. Warehouse automation is improving rapidly. But even the market for traditional forms of warehouse automation is growing rapidly.
8. Millennials have embraced both sustainability and convenience. Unfortunately, these are not currently compatible. But there are efforts to make ecommerce more sustainable. Amazon is pledging to reach 80% renewable energy by 2024 and 100% renewable energy by 2030 on its path to net zero carbon by 2040. While electric fleets, solar powered warehouses, and packaging initiatives can all help retailers and parcel delivery firms more sustainable, in the short-term delivery density is critical. Consumers can help by designating a day of the week on which they would like non-rush items delivered to their house.
Every year ecommerce grows at a double-digit rate, while traditional retail sales are growing at less than the rate of inflation (in real-terms they are shrinking). That is the key driver for the revolution we are seeing in retail supply chains. Technological innovation and experimentation is at the heart of this revolution.