Since its emergence, Coronavirus has obviously had a huge impact on supply chain management, causing massive disruption in global shipping. Ports must now screen incoming shipments more carefully, creating delays. For fear of contagion, wooden pallets from China are destroyed rather than reused, triggering an increase in demand. And with online retailers shipping more goods directly to customers, businesses are expanding infrastructures for trucking, warehousing, parcel delivery, fulfilment centres and security.
At Logistyx, we’ve had the opportunity to speak with customers in retail, eCommerce, manufacturing, health sciences and third-party logistics to understand the repercussions of the COVID-19 outbreak and how they are responding.
Needless to say, consumers are looking online for many purchases, with bricks-and-mortar retailers experiencing a surge in eCommerce orders for essential categories such as groceries, cleaning products and alcohol. One big brand retailer told us it’s expecting eCommerce to expand from 10-15 per cent of total revenue to 20-25 per cent this year.
Demand for non-essential items that support our lives in lockdown is also accelerating. With people working from home, entertaining and home-schooling kids, running, walking, cycling, reading, gardening, and doing more DIY projects, several brands selling non-essential items have, rather surprisingly, experienced record-breaking sales in recent weeks.
Many warehouses and distribution centres are planning for increased fulfilment volumes beyond the quarantines, as shippers prepare for peak season on a compressed timeframe. These warehouses are not only remaining open, they’re increasing manpower. Another global retailer told us it plans to increase its distribution centre workforce five-fold to prepare for the relaxation of lockdown mandates in certain countries.
Reaction response varies
The focus for most essential businesses has been on reacting to the outbreak and executing order fulfilment as they try to maintain supply. Faced with swift inventory turns as goods sell faster, these businesses are adjusting fulfilment, on-boarding new carriers and experimenting with new delivery modes while also implementing staffing measures such as social distancing, strict hygiene protocol and workforce reductions in warehouses and stores.
Non-essential businesses in historically high-demand eCommerce verticals are also reacting to this unique environment. Those that are closed or have fewer orders are in cost-control mode, conserving cash so they can be up and running quickly when recovery finally comes. Some are even using the slow-down to discuss prevention – absorbing key learnings so they are prepared when the next crisis hits.
In addition, supply chain trends such as ship-from-store have been fast-tracked by the crisis. For example, non-essential retailers in smaller suburbs are keeping stores closed but allowing a skeleton workforce to process online orders for parcel deliveries, placing shipments for carrier or courier pick-up at the back door.
One global fashion retailer is now utilising 21 per cent of its stores as makeshift fulfilment centres and expects this to increase. Having trained their staff on ship-from-store, it will be interesting to see how many retailers will continue once the crisis has passed. In many cases, it is cheaper and faster to ship goods to customers from local stores than it is to use regional distribution centres.
Notably, the $541.6 billion global couriers and messengers market has also increased, as restaurants, grocery businesses and pharmacies use this delivery mode to service local communities.
eCommerce supply chains more active this peak season
As countries start relaxing lockdowns in May and June, major challenges will be created by a condensed peak season.
The usual planning cycles are no longer in motion. Currently, there is a 6 to 8 month lead time for goods from China and most companies haven’t placed orders due to economic uncertainties. Even if businesses place orders now –and are willing to pay extra for airfreight– can suppliers cope given that their own supply chains have also been disrupted?
Most likely we’re going to see a very different peak, with businesses revving marketing engines to promote whatever goods they can get their hands on, even re-inventing unsold spring and summer trends as the new must-haves for autumn and winter.
And what about consumers’ appetite for in-store shopping during peak? Safety and social distancing protocols will remain for the foreseeable future, likely with limits on the number of customers allowed in a store at a given time. Its fathomable brands will eliminate big in-store sales to avoid overcrowding and retailers will reduce changing room capacity to enforce social distancing. These shifts in the in-store buying experience, when combined with concerns about the virus, could mean stores of all sizes will experience significant reductions in foot traffic.
With these insights top of mind, retailers should consider how they can attract the most shoppers during peak season and provide them with a satisfactory buying experience. A key ingredient will be on-time order fulfilment, and smart retailers will make sure eCommerce capabilities are scalable, and that their end-to-end supply chains can support different order fulfilment processes to satisfy the customer from product discovery to delight.
By Ken Fleming, president of Logistyx Technologies