Why Returning to Office Spaces Could Compound Troubles For Last-Mile Delivery
Flexible work options, robust online shopping trends, and delivery delays might end up being a perfect recipe for disaster
A hearty welcome to the 19th edition of The Logistics Rundown, a weekly digest that aims to put some perspective on what’s brewing within the logistics industry. This is a space where we religiously dissect market trends, chat with industry thought leaders, highlight supply chain innovation, celebrate startups, and share news nuggets.
The phrase ‘new normal’ has been thrown around quite too often over the last year. And it might be finally here. With about 60% of all eligible Americans being vaccinated, it is time for most people to head back to their office cubicles after working from home for over a year. But it’s not just about workspaces through—schools and universities would also see students flocking back to classes for their summer term.
As with any major transition, the en masse shift of people from staying put indoors to going out for work will have an overarching impact on supply chains, especially the last mile.
This has a lot to do with how e-commerce rose up to fill the gap left by physical retail at the onset of the pandemic. With cities shut down and people quarantining at home, e-commerce served as a proverbial lifeline, allowing people to order anything under the sun and get it delivered to their doorstep. Hundreds of thousands of people came online to purchase for the first time over the pandemic, some of whom would be less likely to return to patronizing brick-and-mortar storefronts.
Hundreds of thousands of people came online to purchase for the first time over the pandemic, some of whom would be less likely to return to patronizing brick-and-mortar storefronts.
The convenience e-commerce brought about quickly turned addictive. Consumer trends show that physical retail is on a slow but terminal decline. Head to a nearby mall, and the rows of empty outlets paint a gloomy picture of what awaits physical retail. The convenience meant people started ordering more than just merchandise over the internet, with food and grocery delivery being one of the biggest gainers during the pandemic.
Cut to the chase, we have people who are captivated with the idea of buying off the internet and are breaking a year-long routine of working from home to getting back to their office spaces. However, many of these office returnees are not planning to get back to the pre-pandemic normalcy, but choose flexible options by working a few days from home and commuting a few days to work.
How would this change in behavior impact e-commerce and its associated last-mile patterns? TLR continued its discussion from last week with Krish Iyer, head of industry relations & strategic partnerships at ShipStation, to understand where things might not go as well as planned.
Pre-pandemic, a lot of people had their deliveries done at their workplace. This could be due to several reasons—they weren’t at home to collect it during the day or were afraid of porch pirates to swoop it away.
“Consider a situation where a person heads to work the first three days of the week and then works from home on Thursday and Friday. Let’s say he orders something on Monday, expecting delivery on Tuesday or Wednesday to the office,” said Iyer. “But then it gets delivered on Thursday or Friday. What happens then? The package is going to sit there a few days before the person comes and picks it up on Monday.”
Now multiply this by the sheer number of workers returning to the office, and we have a problem. While the idea hinges on the prospect of late deliveries, the logistics environment isn’t improving just yet. Port congestion at the West Coast is ballooning again, freight prices are still at historical highs, and finding capacity is still irksome to shippers.
Port congestion at the West Coast is ballooning again, freight prices are still at historical highs, and finding capacity is still irksome to shippers.
While packages sitting in the office over a weekend don’t sound too bad, the situation quickly deteriorates if the deliveries are groceries and consumables with a short-shelf life or in need of refrigeration—like meal kits. Late deliveries and flexible work options might spell disaster if it results in rotting packages over a weekend.
“Companies could make a heavy-handed rule of saying no more package deliveries at the workplace. But then, with labor shortage being an issue, that’s one extra perk that if you eliminate it is not going to look good. It remains to be seen how we’re going to tackle this situation,” said Iyer.
Meanwhile, late deliveries could be a problem for different reasons. For one, consumer expectations over delivery promptness have a definite impact on brand loyalty. While this is true in the general context, people working from home during the pandemic tend to overlook deliveries that are late by a day or two, as staying at home blurs the urgency of having packages delivered on time and within a specific time window.
People working from home during the pandemic tend to overlook deliveries that are late by a day or two, as staying at home blurs the urgency of having packages delivered on time and within a specific time window.
Let’s say a person orders a pair of shoes on Amazon, and it comes with a promise of one-day delivery. However, prevailing supply chain bottlenecks could mean the shoes get delivered a day late. For someone who works from home and orders several items off the internet in any given week, shoes that get delivered a day late would be a trivial issue as the said person would be home to receive them nonetheless.
But shift the same person to a workplace setup, and late deliveries would make a mark. Iyer also pointed out that the US is on pace for a record shopping season, translating to more tightness in available freight capacity. With China and much of Asia struggling under a new wave of COVID-19, the situation could get a whole lot worse.
“Shippers are already feeling the strain,” said Iyer. “The Chinese lockdown and the lingering effects of the Suez canal crisis will have a ripple effect on prices, demand, and availability, and you will see a much lower level of discounting to entice customers to buy.” With inventory levels not close to what shippers would like them to be, the fall season shopping spree would be interesting to watch.
The Weekly Roundup
✈️ DHL Express has bought 12 electric aircraft from electric aircraft manufacturer Eviation, which is expected to be delivered by 2024. This is part of DHL’s push towards zero-emission logistics. DHL will be using these aircraft across regional routes in the US, primarily in the Southeast and West Coast. Considering how polluting air freight could get, consumers and environmental activists continue to call for curbs in this mode of transport—making sustainable aviation all the more critical to the future of air freight.
📦 With finding freight capacity a problem across trans-pacific routes, North American businesses are increasingly reshoring their sourcing by replacing foreign vendors with domestic alternatives. A report by supply chain solutions provider Thomas stated that its survey of N.American manufacturers found that 83% of the respondents were highly likely to reshoring sourcing, a 54% jump from March 2020.
🏬 Walmart has announced special bonuses to its warehouse employees in an attempt to reduce churn rates as the country heads towards the holiday shopping season. This year has been especially hard for warehouses, as a tight labor market has made it challenging to recruit and keep their employees. Walmart workers have reportedly been offered $1,000 over four weeks if they had not skipped any scheduled shifts during the second half of the summer.
🚢 Freight benchmarking company Xeneta found a 28.1% rise in long-term contracted container shipping rates in July—the largest such month-on-month increase since Xeneta started recording them via its index. The combination of high demand, under capacity, and supply chain disruption are all causes for freight rates to soar over this year. Spot container prices also saw a massive increase of 49.1% in July, with no signs of a price ceiling in sight.
...said who?
“Retailers are so scared of not having availability that they have been bringing in orders in June.”
- Walter Kemmsies, ports and industrial real-estate consultant, commenting on shippers filling up inventories for the holiday shopping season much earlier due to issues with finding capacity
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