London, UK: Prior to the coronavirus outbreak there have been all sorts of predictions about changes to last mile deliveries with the internet cited as the key driver.
Last year, the World Economic Forum’s Center for the Fourth Industrial Revolution declared, “there has never been a time of greater change for the last mile”.
Among the predictions were a 20% growth in online retail share by 2023, 10% yearly growth in instant delivery, and mainstream adoption of autonomous vehicles by 2024, according to a report, The Future of the Last-Mile Ecosystem.
The coronavirus pandemic has driven a steam roller through all of that and a return to any approaching normal would be welcome news. Instead we face healthcare systems reeling, rising unemployment and massive slumps in retail sales.
Much has been made of on-lines sales yet despite the lock-down, in the UK, sales have not been that spectacular. Perhaps those making these bold claims have tried using websites and suffered the frustration of not getting slots, lack of stock, delivery delays, and strange substitutions. Walking round the supermarket takes a lot of beating as a shopping experience and there is no evidence that shoppers will desert the store in favour of their computer screen.
Then there is the cost: sSupermarkets will need to do more than add a couple of pounds or less to cover the costs of home delivery. There is also the environmental cost in terms of emissions and noise of all these vans running up and down residential streets.
Consider the numbers. Prior to the outbreak, e-commerce sales accounted for 11% of all US retail sales in 2019, according to the US Census Bureau. In the UK, online sales as a proportion of all retailing increased to 19.2% in October 2019 according to the ONS.
In China there were more online purchases than in Europe or the US with an estimated 37% of Chinese retail sales made online for similar periods.
The big if, is whether US and European retailers will retain these newly gained on-line customers. There is also the question of whether retailers and logistics providers can sustain the high labour costs, already the most expensive component of the last mile, without charging something closer to the actual cost of making home deliveries. And whether consumers will bear this cost.
Technology is now cited as the solution. Back to China where its largest online retailer, JD.com, used autonomous robots in Wuhan, the centre of the Chjinese pandemic, in February. These land-based robots, which have been operating in the cities of Changsha and Hohhot since January 2019, were upgraded to handle larger-size packages for medical and grocery last-mile deliveries. Similarly, UPS announced plans to collaborate with German drone-maker Wingcopter to accelerate the adoption of aerial drones for contact-less delivery.
But there is a raft of regulatory challenge facing robot use so uptake will remain slow for some time. A more immediate lesson is in inventory management where it became apparent early on during the pandemic that shopping patterns were changing too fast for stores to update inventory.
The erratic purchasing behaviour during this crisis with panic buying of seeminbgly random products, shows that forecasting algorithms that rely on historical data provide little help when faced with panic buying where there is no precedent.
The pandemic has accelerated the adoption of technologies in last mile delivery and it will continue to do so in the aftermath, creating a competitive advantage among key players in the industry. Companies have already started to consider brick-and-mortar stores as warehouses in their distribution networks and use artifical intelligence based techniology to digitise inventory data.
Stores using this technology are able to adapt quickly to demand changes, as data is collected in real-time, and at the shelf-level, rather than manually placing daily orders based on historical demand estimates.
Any changes in last mile delivery will probably be in behind the scenes areas such as inventory rather than in the more obvious area such as a mass switches by consumers to the internet and home delivery.
