In the fast-paced world of retail, supply chains are increasingly being recognized as value-creating differentiators for organizations as opposed to just another operational expense. As digitalization fuels a shift in how a supply chain’s capabilities are perceived, a common question executives ask themselves is ‘what’s next?’ Bastian Kuhn, Strategic Account Executive at Shippeo, and Rob Schuurbiers, CEO at Simacan, share their insights on four key trends that every executive in the retail sector needs to be aware of in 2022.
Trend #1: E-commerce volume acceleration and evolving distribution models
Our customers report that consumer behaviors are changing, with the pandemic accelerating e-commerce sales within the food and non-food FMCG categories. According to a McKinsey study, e-commerce has grown between 2 and 5 times faster than before the pandemic.
We’ve heard figures in this range in talks with customers and prospects from the retail and FMCG sectors, who have often found themselves needing to accelerate the shift from more traditional business models. Plus, the projected change in e-commerce sales from 2021 to 2022 is also remarkable. New distribution centers are also built in record time to accommodate this trend.
It’s also worth noting that, in some cases, the teams implementing and handling these new processes increasingly belong to other business units, instead of the traditional supply chain teams you would have expected. We’re sometimes finding ourselves working with completely different people within our customer organizations compared to who we worked with to set up inbound tracking, for example, in the past.
Another study from Deloitte says that Post-pandemic shoppers say they plan to use click and collect up to 1.5 times more often compared to pre-pandemic levels.
In 2021, start-ups in the food technology industry raised a record €1.8B in funding, a clear signal that there is appetite for innovation in this space and a willingness to invest heavily in it. Companies like Picnic, with offices in Amsterdam and Düsseldorf, are disrupting how customers buy essential daily products. Venture capitalists have invested billions in fast grocery delivery services, such as Germany's Gorillas, in a race to expand across Europe to meet soaring demand triggered by Covid lockdowns.
Another outcome, related to this trend, is the rise in dark stores to help organizations deliver on the promise of quick deliveries. However they face several challenges, relating to not only infrastructure, but also regulation. Cities are increasingly taking action against the rapid spread of dark stores. In January 2022, major cities like Paris decided to introduce a cap on dark store numbers, a trend also gaining momentum across the UK, Benelux and Central European regions. Residents and authorities in residential areas are complaining about the constant disruption and traffic hazards of delivery personnel zipping in and out of these distribution hubs on scooters, as well as replenishment deliveries, at all hours of the day. Amsterdam and Rotterdam have reacted by slapping a one-year freeze on new dark stores.
This is not just the food supply industry being disrupted, like in the Picnic example. This is local delivery in general experiencing pushback, as other companies like Uber did when entering new markets. The trend is introducing new competition for traditional stores and complexifying overall supply chains with a greater number of more fragmented deliveries, with an increasing reliance on smooth collaboration between the first and last mile, which as we’ll discuss later requires shared access to real-time data.
All of these factors strain the capacity of networks to deliver. These capacity shortages have made greater transparency throughout the supply chain, particularly throughout transport and logistics operations, increasingly valuable in helping to ensure customer promises can be met. Transparency is no longer ‘just’ a competitive advantage, it’s now a must-have capability.
Trend #2: Increasing urgency for better collaboration amongst supply chain partners
It’s clear that the importance of collaboration and data exchange between supply chain stakeholders is increasing, including the likes of shippers and carriers. It’s becoming a prerequisite for smoother supply chain operations and transport activities. There’s also a growing awareness that ‘planning’ needs to be more seamlessly connected with actual ‘execution’. For example, retailers are demanding shorter crossover periods between inbound and outbound flows at their distribution centers. The closer alignment required starts within the planning phase of the transport operations. At this stage, a lot of cross company collaboration and data exchange is already required between the retailer/shipper and all carriers involved in the transport operation.
Running tightly scheduled inbound and outbound operations makes collaboration throughout transport execution extremely important. Real-time data exchange between carriers and retailers becomes a key success factor. Only with real-time insights are these partners able to keep each other informed, increase predictability and act in alignment to ensure smoother operations.
In addition to the inbound-outbound alignment example, the impact of driver shortages can also be reduced with improved collaboration. This isn’t just a challenge for carriers. Given the size and impact of this trend, the only short-term remedy relies on collaboration between shippers and carriers, sharing data and new digital ways for partners to interact.
We believe the single most important prerequisite for successful supply chain collaboration is the willingness to share data. Rather than the technology itself being what defines success, it’s actually the mindset and trust between shippers and carriers. If a belief between partners exists, that digital collaboration in the supply chain (based on real-time data exchange) is of value to resolve the serious challenges that exist today, then technology comes into the picture rather than the other way around.
Providers of digital supply chain tools and platforms have an important responsibility to guarantee data is not mismanaged; that access and sharing rights are carefully designed, implemented and certified in a way that gives confidence that data is being used strictly as agreed. This assurance is an important enabler of wider adoption of not only the technology, but also the ‘network of networks’ approach to digital supply chain design. This is the shift away from data and information silos that have existed for some time in the software space, and towards a more collaborative, partner-focused approach.
Collaborative solution best practices:
Here's how collaborative platforms and solutions can be used to improve supply chain effectiveness. Note that across all of these examples data exchange is required to enable better collaboration and its corresponding benefits.
- In the transport planning phase, shared capacity insights help all stakeholders to proactively deal with unexpected events to find quicker solutions and mitigate impacts.
- While en route, data exchange allows ETAs to be shared, taking into account real-time and predicted traffic, for example. Turnaround times can be reduced by more than 15% thanks to more accurate ETA information received at docks.
- System integration allows paperless document exchange and administration, such as electronic waybills or eCMRs, also improving collaboration. This also applies to check-in information and security requirements, which can both be added electronically. It benefits not only truck drivers and shop employees, but all administration departments within shippers and carriers, saving time/labor of administrative teams while also reducing impact on the environment by avoiding the use of paper. Electronic documents can also help streamline shipment border crossings during customs procedures.
- Retail and FMCG brands can integrate temperature tracking data and attach this to individual transport orders in order to satisfy regulatory requirements.
- Greater flexibility to ramp up or down the ratios between own and hired fleets, to more easily respond to changes in capacity needed (and ensure high levels of customer service are maintained), along with the ability to streamline communication with drivers thanks and real-time tracking of trucks using onboard telematics or GPS tracking via mobile applications.
- A single source of truth with objective data and metrics on operations. Using objective figures for driving hours and kilometers driven streamlining the invoicing process, for example.
- Suppliers, retailers and carriers can forecast more accurately by leveraging shared data and insights, while also optimizing use of scarce resources, to improve overall supply chain efficiency and effectiveness.
Trend #3: Better access to, and leveraging of, real-time and predictive data
Data is the backbone of everything mentioned so far. However, in order to turn data into actionable insights for supply chain stakeholders, it must first be collected. There are 3 main steps related to data:
- Collecting Data: This involves connecting to external and partner data sources, then harmonizing and mapping all of this data so that everyone’s speaking the same language.
- Analyzing & Predicting: This involves supplying clean data to all supply chain partners and analyzing where optimizations can be made. It’s also used ot make predictions, for example ETA calculations to determine when shipments will reach their destination (or phases of shipment) to enable management to focus less on what’s going right and more on what’s going wrong.
- Automating: The third step is automation, where certain notifications or workflows can be automatically triggered based on shipment status or location changes, for example dynamic cross dock slot booking.
We’re also seeing a massive increase in maturity of the IT landscape within supply chains. API integrations are now breaking information silos and reducing integration costs while offering standardization. By comparison, EDI is only used in 8% of data exchanges between shippers and carriers these days. Carriers are constantly increasing their IT maturity level too and GPS tracking and TMS systems are now widely used by carriers. This results in less and less intervention from IT and supply chain teams when new platforms and solutions are implemented, along with limited upfront investment, paving the way for better visibility and collaboration.
When talking about data, it’s difficult these days not to touch on GDPR and other regional data management regulation. Organizations want to know what happens with their data. European retailers, suppliers and carriers want to know that their data is hosted on servers 100% located in Europe. Shippers don’t want to deal with arranging data privacy agreements between all parties individually, so there is an element of convenience. Carriers especially want to be assured that their data is never sold to third parties. Carriers remain the owners of their data and their data is only used for purposes agreed upon. Carriers also specifically don’t want to be tracked 24/7, but only when necessary, therefore tracking only when related to specific transport orders.
This really is the basis for visibility, because tracking rates can only be good if the data is good, which only works if the collaboration stands on a strong foundation, which in turn requires trust. We can see that ease of use and convenience, as well as concerns about data security are important themes here. So these are all really sensitive considerations, trends you can say, made necessary by the changing landscape. When these factors are handled in a transparent way, the benefits come down to two things. Firstly, improving efficiency, for example in the form of better resource utilization and secondly improving customer satisfaction or NPS.
In summary, it’s interesting to note that the trends so far are all closely connected. Changing customer behaviors, the need for greater collaboration and the data leverage to meet those new demands are all codependent.
Trend #4: Rising sustainability concerns and reducing CO2
In some ways, this could be perceived as the ultimate objective, where everything comes together, because if organizations succeed with their sustainability objectives, then they’re contributing to a healthier, more livable environment for current and future generations. Sustainability as a trend has many crossovers with the trends we already touched on. We already mentioned how data and collaboration can contribute to higher asset utilization and as a result less transport movements for the same amount of goods, or how digitalization could remove paper from supply chains.
Given sustainability is such a large topic, we’ll focus on the context of urbanization and densely populated areas. Sustainability improvements in these areas give direct benefits to the inhabitants of those areas. Both global supply chains and local last mile operations can be examined in the context of urban logistics. For example, a deep sea vessel arrives at the Port of Rotterdam and the shipments, once unloaded, are transferred over the road to the Ruhr area. Knowing how finely meshed the road network is and how high the population density on that corridor is, we are talking about urban logistics to its full extent. In other words: urban logistics is much more than only city center traffic or home deliveries.
End-to-end visibility brings enormous benefits when it comes to reducing environmental impact. It enables partners to work together. For collaboration in urban logistics, communication tools with the richness of end-to-end visibility are fundamental for, for example, reducing the number of unnecessary trips and idle time with container cross docking from ships to trucks thanks to optimized truck loading.
One of Shippeo’s beverage manufacturing customers were dealing with half-empty runs coming from retailers after making their deliveries, instead of picking up return items and empties for the return trip. This was due to a lack of collaboration between the retailer, manufacturer and carriers. Implementing visibility allowed them to better coordinate and reduce CO2 emissions significantly, with resource allocation being another benefit.
Supply chain partners are also increasingly having to comply with government regulation, on top of the level of complexity urban logistics already creates. Disruptions in urban infrastructures are frequent and not always predictable (local roadworks, accidents, temporarily obstructed roads, etc) and the impact is magnified due to increasing governmental restrictions (one-way streets, height/weight restrictions, ZE zones, time restrictions, etc).
Aside from greater restrictions, governments in some parts of the world are also trialing new practices aimed at making things easier for urban logistics. For example, intelligent traffic lights allows trucks to request a green light when approaching a road crossing to avoid stop-and-go traffic. This is being piloted at scale in The Netherlands.
By incorporating both local restrictions and innovative initiatives, such as the intelligent traffic lights, into collaborative platforms, carriers can better plan routes to and from loading sites, in turn reducing their environmental impact. We’re also going to see a shift to clean energy with the use of battery-powered electric trucks for use in urban areas increasing over the coming years. While a very positive development, the challenges will be the need to monitor, in real-time, the status of batteries and charge to ensure deliveries run smoothly.
Conclusion
How do these four trends currently fit within your organization’s context? What role could digital collaborative solutions and improved visibility play in helping you create a more effective, collaborative and sustainable supply chain? A good first step is to identify which supply chain partners you should be collaborating with before even thinking about the technology.
To learn about how a real-time supply chain visibility platform can help your organization improve supply chain performance, environmental footprint and customer satisfaction, get in touch with one of our experts today.
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