Logistics Must Change to Meet Holiday Retail Needs

Logistics companies and retail supply chains will need to adapt to meet high delivery volumes expected this holiday season due to very strong e-commerce sales.  But How?

Like most other industries, transportation and logistics (T&L) is currently confronting immense change; and like all change, this brings both risk and opportunity. There are many ways the sector could evolve to meet these challenges, some evolutionary, others more revolutionary.

Expectations surrounding e-commerce sales have changed and are now part of the logistic equation.  

“It wasn’t too long ago, relatively speaking, that free delivery and returns felt like a special added-bonus,” says Andrew Schmahl, principal, PwC’s Strategy &. “Now, 60% of retailers surveyed say they will offer both this holiday season. Likewise, while same-day delivery is a commonplace option in large urban areas, it isn’t always feasible nationally, despite the increasing prevalence of regional and local distribution hubs. So, now, savvy consumers are working the system. Opting for curbside pickup or alternative drop-off locations can shave a few days off of delivery and save on shipping fees, especially since orders are ready for pickup in 24 hours almost 90% of the time.”

These realities along with some systemic changes are discussed in In PwC’s latest report, the “Future of the Logistics Industry.”

Individual and businesses expect to get goods faster, and more flexibly and at low or no cost delivery. Manufacturing is becoming more and more customized, which is good for customers but hard work for the logistics industry.  It can only hope to do this by making maximum and intelligent use of technology, from data analytics to automation to the 'Physical Internet. This promises lower costs, improved efficiency and the opportunity to make genuine breakthroughs in the way the industry works. But 'digital fitness" is a challenge for the sector, which is currently lagging many of its customers in this respect.

The report offers predictions as to what the logistics marketplace will look like in 5 to 10 years.  Here are some trends:

 -- Sharing the PI(e) -- The dominant theme in this scenario is the growth of collaborative working, which allows the current market leaders to retain their dominance. This could for example see a great use of the Physical Internet (PI) solutions, based on a move towards more standardized shipment size, labeling and systems.

--Start-up, shake up: In this scenario new entrants in the form of start-ups make a bigger impact. The most challenging and costly last mile of delivery will become more fragmented, exploiting new technologies like platform and crowd-sharing solutions. Theses start-ups collaborate with incumbents and complement their service offers.

--Complex competition: Here the competitive set evolves in a different direction, as large industrial or retail customers and suppliers become players in the logistics market themselves, not just managing their own logistics but turning that expertise into a profitable business model.

--Scale matters: The current market leaders compete for a dominant market position by acquiring smaller players, achieving scale through consolidation and innovation through the acquisition of smaller entrepreneurial start-ups.

Source: PWC