Ross Gordon, consultant in the Industrial Practice at Odgers Interim, explains what evolving consumer shopping trends mean for the global logistics and transportation industries.
For every $2 (€1.7) spent online in the US, $1 (€0.89) is spent with Amazon” is an oft-quoted figure that is quickly becoming something of an aphorism for organisations whose supply chains involves some form of e-commerce, however remote. Known as the ‘Amazon effect’, it is dictating consumers’ shopping preferences for speed and convenience, and is now the single most significant driver of change in the global postal, packaging and courier services market.
There is a mounting body of research that unsurprisingly points to an expectation for faster delivery times, more consumers choosing products based on shipping preferences and shoppers choosing to return to companies that offered them same-day delivery for their first purchase. Market leaders in the delivery space have already emerged, with Ocado in the UK being the most recent addition to the ‘one-hour delivery club’ led by Amazon Now and other industry disruptors.
Supply chain evolution
Many logistics and transport leaders view this as an anticipated step in the evolution of the delivery supply chain. However the advent of consumer smart devices, in particular smart speakers such as the Amazon Alexa and Google Home, will disrupt the pace of evolution and change the shape of the industry as we know it.
The US alone has 47.3 million smart speaker users; nearly half of these consumers have used their devices to make a full end-to-end purchase. Despite being a nascent technology, forward-thinking brand executives understand that this is now a critical ecommerce channel and are preparing their supply chains to meet the criteria for smart speaker assisted shopping.
For example, if a shopper asks for a personal care product, the smart speaker will suggest items that are packaged to ship well (proven to avoid leaks) and can meet the consumer’s delivery expectations around time and tracking. In the future this will be centred on auto-replenishment and customisation, with smart speakers recommending products that are based on a user’s data profile’ that is, the types of products they have historically purchased, the time-frames they repeatedly specify and whether they have preferences around tracking. This could be anything from a brand of toothpaste to a meal delivery that is based on known factors about the consumer.
More responsive and agile
For the transport and logistics industry, this means transforming supply chains from mass scale to more responsive and agile systems that are able to handle an eco-system of shorter, faster and ultimately very ‘individual’ deliveries. At the same time, these systems will need to incorporate Artificial Intelligence that can predict spikes in demand for the growing market of auto-replenished products that can also be delivered within a one-to-two-hour window.
As a result, we’ll see moves from forward-thinking logistics companies towards smaller and more bespoke ‘local’ production and warehouse facilities, particularly in urban areas. These facilities will need to incorporate IoT sensors and smart packing technologies to achieve auto-replenishment capabilities. Both these technologies will be crucial in meeting Google’s and Amazon’s criteria, enabling companies to monitor and improve upon the transportation conditions of their products so that they have fewer damaged items and subsequently fewer returns.
The truly visionary companies will make ‘no-regrets’ investments to link these IoT and smart networks to fleets of autonomous vehicles to achieve efficiency gains that put them steps ahead of their competitors. Given the growing shortage of drivers in many western countries, these fleets will be a less costly (in the long-term) freight delivery method for parcel and courier transport companies. As many of these are likely to be electric and therefore geared towards shorter journeys, they will be an effective option for the new landscape of postal, packaging and courier services.
This will give rise to a burgeoning market of smaller logistics and transport companies – very much akin to the tech start-up delivery firms we’re seeing challenge Amazon – that are more ‘agile’ and better equipped to meet customer demands. Retailers will look to partner with, and acquire, these smaller companies to facilitate steps to what will be an increasing number of ‘direct-to-consumer’ models. The distribution and supplier centre network will become a critical component of a retailers offering.
First pioneering steps
One of the world’s leading logistics companies has made some first mover steps in anticipation of the ‘Amazon effect’, being the first logistics firm to offer voice-enabled tracking of last-mile deliveries through both Amazon and Google’s smart speakers. It’s a move that will put them firmly on the map in terms of smart speaker assisted shopping and is undoubtedly part of the company’s future scope of consumer centric innovations.
As the transport and logistics landscape changes, so too will the human resourcing needs of the companies in it. Skills requirements will centre on implementing large scale digital transformation programmes around IoT, sensor technologies and artificial intelligence. These technical skillsets will need to be married to a consumer-focused mindset, forcing the industry to look outside of its traditional hunting grounds.
Talent, from the front line to the senior leadership team, will come from less conventional recruitment pools such as retail, ecommerce and the consumer tech industry. Further down the line, we can also expect to see a growing crop of professionals needed to facilitate mergers and acquisitions of these smaller, more ‘agile’ firms. Significant change is on the horizon.
The author of this blog is Ross Gordon, consultant at Odgers Interim