Global Supply Chain Institute report: connectivity and visibility becomes a greater challenge

With “Future Trends Shaping Transportation” the Global Supply Chain Institute scans the future of the transportation industry and offers insights into the challenges facing it, as well as predictions about the road ahead. The research found that leading-edge supply chain companies understand that transportation promotes the competitiveness of a supply chain – now and particularly in the future.

1. Technology will radically alter traditional transportation processes.
2. Global supply chains are under scrutiny, while hyper-local designs flourish.
3. Last-mile focus shifts to the last yard.
4. Tomorrow’s workforce: continually training for transformation.
5. Agility will be the standard operating procedure for transportation activities.

Over the past decade, numerous forces have altered the current business landscape for both shippers and transportation providers. The environment in which companies operate can be characterized as one that is facing more uncertainty and volatility. The combination of the unpredictable nature of markets and the entrance of more competitors makes it difficult to use traditional approaches to today’s operations and much less apply them to supply chain processes and tasks in the future. An abundance of point-of-sale data has not resulted in more accurate demand forecasting, as products and distribution channels continue to proliferate demand uncertainty, and customers expect shorter and shorter lead times for delivery.

It is not surprising that this business environment has resulted in considerable anxiety for supply chain managers, who are held accountable for keeping costs under control while delivering service that often exceeds expectations. The study identified the primary concerns that supply chain managers consistently note as issues for their companies. The top three involve two interrelated matters – the cost to serve and changing customer requirements/demand uncertainty. The third anxiety is the integration (or lack thereof) of supply chain technology and processes.

Focus on the last yard

In last-mile fulfillment, the spotlight is shifting to the last leg of the delivery, otherwise known as the “last yard.” Before and during the COVID-19 pandemic, e-commerce and retail delivery models quickly combined an array of last-yard options, including autonomous contactless delivery at curbside, touchless trunk delivery, and contactless doorstep delivery. The evolution will continue as technology enables B2B and B2C consumers to specify more customized delivery options, with the customization increasingly involving tracking location and condition over the duration of the shipment.

Over the last several years, distribution and transportation patterns have been changing, reflecting a continuous growth in e-commerce versus traditional distribution channels. This shift has led to smaller order sizes and more frequent shipments leading to a costlier distribution approach. Consumers are accustomed to buying items whenever and wherever using various technological platforms. They also expect an array of delivery options, such as ship direct or in-store pickup. E-commerce has placed even more pressure on companies to meet shorter and shorter delivery times in a competitive environment, where many customers have less tolerance for delayed deliveries. The move to e-commerce has put more pressure on forward local stock positions for and reduced reliance on traditional transportation moves that involved DC-to-DC volume loads. It also has altered delivery densities and placed a growing focus on residential deliveries.

While Amazon, Walmart, and other retailers are currently setting records in last-yard delivery, infrastructure development is still in its early stages, with the most progress being made in densely populated areas with shorter delivery distances. The ability to deploy flexible delivery methods is creating a competitive advantage for those companies that can do so. As e-commerce continues to grow, the characteristics of products that are purchased online have also changed over time. Consumers are now ordering items that are heavier, bulkier, and costlier to ship. The shelter and work from home policies experienced during the pandemic accelerated consumer demand for and comfort with ordering new flooring, furniture, and workout equipment.

The last-yard expectations include synching delivery to notification with value-added information like package location, time stamp, and a photo to answer any “what condition?” questions. The last-yard focus will become increasingly important as consumer and customer delivery demands shift from delivery to a home or office to delivery to them wherever they are. We are increasingly comfortable with our digital content being streamed to us wherever we are. Shared resource approaches will allow a better scale for that last yard in the “now” or one-hour delivery.

Hyper-local autonomous transportation

While the consensus was that autonomous transportation, trucking, in particular, is not ready for prime time, companies recognized that smaller, more modular freight movements create an opportunity for both electric and autonomous equipment. Autonomous vehicle delivery will become commonplace at a hyper-local level, as more cities choose to spur innovation and work with industry to reduce regulatory complexity and ambiguity.
Food and merchandise retailers, drug stores, grocery stores, and others will work out the challenges and make contactless and paperless deliveries possible from their local brick-and-mortar stores. As mentioned previously, last-yard delivery is usually the most expensive leg of the journey because it involves labor-intensive transportation. However, using autonomous vehicles radically changes the cost economics for last-yard delivery, thereby creating a totally new value proposition for companies. Kroger, Domino’s Pizza, and CVS have all launched autonomous vehicle curbside delivery tests.

Source: “Future Trends Shaping Transportation” by the Global Supply Chain Institute