Every year around this time, carriers, distributors and logistics providers gear up for the coming peak holiday shopping season, on which shippers depend for a large portion of their annual revenue. This year, however, is different, thanks to the coronavirus pandemic and resulting economic freefall. Will shoppers turn out in droves, either in stores or online, or will they curb their purchases due to anxiety about the economy? In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Nick Shroeger, chief network solutions officer with Coyote Logistics, discusses how the logistics industry is preparing for the unknown.
SCB: What do you consider to be the biggest challenge that consumer packaged goods companies are facing in the coming peak season with regard to delivering orders?
Shroeger: The main thing we've seen as a result of this pandemic is how much disruption COVID-19 has caused within the supply chain. With many CPG companies, you have a tremendous amount of inventory imbalance. There are different suppliers that they need to lean on now, to make sure there's enough product to get to the end consumer for peak season. It’s going to be very unpredictable in terms of where products and inventory are going to be, and where CPG companies need to get that product to.
SCB: What’s it going to take for companies to address this challenge?
Shroeger: It’s important to start talking about it now. As a result of COVID-19, you're seeing a large disruption in the marketplace. A tremendous amount of carrier capacity has left the marketplace, with drivers just sitting in their trucks because it’s more favorable to collect unemployment. Rates are increasing due to imbalances in inventory and a lack of capacity to meet those demands.
There was already a trend of people starting to order more online as opposed to shopping in stores. This year, that traffic is going to increase even more, as everyone's working and ordering from home. It will be very interesting to see what that does in terms of overall volumes. Shipments are going to be way more volatile as a result of the pandemic.
SCB: For last-mile delivery, fleets have to become much more flexible. How can companies quickly and efficiently reposition fleets to meet the needs of the moment?
Shroeger: It’s going to be very difficult to achieve that level of flexibility. Pre-pandemic, you could predict shipping patterns. You knew where your inventory was and where it needed to go. It was just a matter of how much volume was increasing in a specific corridor. This year, it's going to be very unpredictable. If you know you have inventory at a particular point of origin, you need to be able to position drivers and capacity there, yet be flexible as to where the shipments are going.
SCB: Given the pandemic and employment issues we’re seeing, will there be enough drivers to get the job done?
Shroeger: I think so. It's just a matter of collaboration across the shipper and carrier community, to make sure we get the best utilization of those drivers. The key is starting the planning process now. Carriers need time to position capacity to meet the demand. Having a driver assigned to one shipment from point A to point B is not going to be the norm. The driver will be assigned to a specific origin, but could be going to various destinations.
SCB: In order to ensure the health and safety of drivers, how can we limit their interaction with customers on one end, and dispatchers on the other?
Shroeger: To ensure safety, we have to start planning different measures. Embracing new technologies is going to be crucial. Having a digital workflow of how a driver checks in and leaves the facility is one way to do it. Another is leveraging outside lots, with a drop-and-hook setup, instead of having the driver pull up to specific dock doors.
SCB: We’re hearing that one of the new strategies that delivery companies might be employing is the positioning of big rigs at the edge of an urban center, then distributing from there with smaller vans and delivery vehicles. Is that an alternative to working from a traditional distribution center?
Shroeger: Yes, and you've seen increased demand for the trailers that are needed to explore that options. Getting your product closer to urban areas is going to be key, with a pool of drivers that can decrease the amount of miles traveled. That goes back to how you improve the utilization of drivers and capacity.
SCB: I'm assuming it's too early in the development of drones, robots and the like for them to be playing a major role in this coming peak season.
Shroeger: Yes. It's a little premature. I do see it as an ongoing trend that will happen in the near future. It’s just a question of meeting safety regulations and making sure there's enough volume to justify their use. The key is going to be figuring out how we become more flexible with the capacity that exists, and how we deploy these different methods to get product to the end consumer.
SCB: Companies are making a big forward investment in drivers, vehicles and distribution centers in anticipation of this peak season, while not knowing how it's going to go. What if the peak season doesn't happen as expected?
Shroeger: That's why planning is so important right now. You’ve got to have a level of confidence based on where you have historically high-density areas. Planning around those, while limiting the amount of investment in places where you have a lot of unpredictability, is going to be key.
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