Supply chains are not static, and e-commerce is profoundly altering the logistics landscape.
From 1999-2017, e-commerce sales increased from less than 1% of total U.S. retail sales to more than 9%. Online sales growth is outpacing brick and mortar retail. Increasingly, retailers are proving many channels for customers from online sales to in-store pickup to hybrid options. Stores are no longer just stores. They are becoming mini fulfillment centers in some cases.
Traditional retail is not going away any time soon. But it certainly is changing. The American Transportation Research Institute (ATRI) recently developed a report that analyzes the impact on transportation requirements by emerging e-commerce trends. Two primary developments are the growth of more regionalized retail supply chains and the proliferation of urban “last-mile” deliveries. You can download a copy of this report at https://truckingresearch.org.
The ATRI report found that retailers are becoming more flexible in how they transact with consumers by decentralizing their distribution/fulfillment networks to bring inventory closer to consumers. Department stores are closing, and last-mile fulfillment centers and courier services are popping up to bring goods to consumers.
The types of trucks are changing too. Registrations for single-unit trucks increased by 7.8% between 2007 and 2016 compared to 4.4% growth in combination truck registrations.
The number of intra-regional and last-mile truck trips has increased while the average length of haul has declined. Average trip lengths have decreased 37% since 2000, while urban vehicle miles traveled have increased for much of this time period.
The focus has changed to speed and direct-to-customer delivery. Convenience and selection are important as people are using the Internet to find exactly what they want.
Interestingly, even while e-commerce has boomed, demand for pallets has continued to steadily grow. Cardboard boxes have not completely done away with the need for pallets. In this issue, a feature article on Amazon’s logistics explains how the online retail giant has impacted the pallet sector. Amazon is open to a wide variety of pallet types as long as the pallet does the job. Most goods are sent to Amazon on pallets. It is simply the distribution center to store part of the supply chain that is bypassed in the Amazon model. Those shipments are made mostly in corrugated boxes now direct to the consumer.
In the store fulfillment model, nothing much changes. So, if you buy from Walmart.com and pick up in the store or have it delivered from a store, the pallet demand doesn’t really change that much. A key thing to watch is how much major retailers supply customers from stores versus distribution centers. That will have an impact on total palletization in the fast-moving consumer goods supply chain.
E-commerce is driving automation and innovation to reduce labor and increase order accuracy. Greater automation in distribution centers requires suppliers to ship on higher quality pallets. This could increase demand for new pallets as well as rental or at least high-quality recycled pallets.
What will the e-commerce revolution mean in the end? There is a lot that we just don’t know. One thing is clear – you can’t stop the changes that are coming. All you can do is be ready to take advantage of them with better pallet solutions, better technology and more responsive customer service.
