Travel bans, flight cancellations, lockdowns: it’s hard to forget how the pandemic slowed down supply chains and logistics operations around the world. And the impact was statistically measurable. In a 2021 Deloitte survey, more than 40% of chief financial officers said supply chain bottlenecks or delays increased their company's spending by at least 5%.
Yet the outlook isn’t all gloom and doom. The pandemic coincided with the rise of e-commerce and digital shopping, which elevated the entire logistics industry to unprecedented levels of demand and introduced new business opportunities. As a result, entrepreneurs and startups have set their sights on minimizing the burden on the supply chain, especially in the last mile. By developing and deploying technological innovations such as IoT-enabled devices and artificial intelligence, these innovators have managed to ease the pressure on businesses, reduce costs,and increase efficiency.
Following is a look at the technologies that logistics startups have developed to transform the last mile, as well as a peek into the future of the sector.
While the pandemic initially crippled the entire supply chain, consumer demand for e-commerce and fast delivery has since increased dramatically. In the US, e-commerce sales increased by 50% in 2020 and 14% in 2021. A similar trend developed globally; Asia has observed rapid growth in digital sales, and in Latin America, startups like Rappi and Movile Group have invested heavily in front- and back-end systems to speed up delivery.
As the frequency of orders has changed, so have the demands of customers. A global consumer survey by PwC in June 2021 found that 51% of consumers consider speed and reliability to be among the most important features of e-commerce. In Mexico, 74% of respondents to a PwC survey said lower prices were the most important factor in placing an order. And customer price sensitivity is becoming increasingly visible across the Americas.
To meet the growing demand for fast, affordable and reliable delivery, businesses have boosted upfront investments. Retailers and shops are placing increasing focus on the last mile and, in particular, on warehouse and distribution operations. To help stores overhaul outdated legacy systems, logistics companies have made it their mission to modernize the sector, addressing inventory, fulfillment and routing. The innovative power of these young companies has sparked enthusiasm across the board: The logistics sector raised $27.5 billion from venture capital firms alone in 2021, an increase of 80% over 2020.
Many founded and funded companies are developing alternative concepts such as dark stores, gray stores, or drop shipping to make the delivery process more dynamic. Other solutions, like click-and-collect, are intended to shift part of the delivery weight back to customers. Either way, cutting-edge analytical systems provide retailers and customers with transparency, and allow for smarter decisions when it comes to last-mile delivery. Here are three of the most promising innovations in each area.
New solutions for demand management. The supply cycle for the last mile begins with demand, and this is also where most of the pain points lie. Fluctuations in the market, unsold products rotting on the shelves and manufacturer delays all affect stock levels, resulting in losses of millions of dollars each year.
As a result, many startups are embracing big data and artificial intelligence to gain insights into demand trends, seasonal fluctuations and order sourcing. Inward-looking thinking — “What can we get manufactured, ship and deliver?” — has shifted to a customer-centric approach — “What do the customers want, when, and how can we over-exceed their expectations?”
Particularly for short-term forecasts, demand-sensing technology has expanded the ability of businesses to determine demand in advance. Such predictions are especially beneficial for the food and beverage industry, where more accurate forecasts are indispensable to avoiding waste and disgruntled customers.
AI isn’t the only technology coming in handy today. New sensors and computer visions such as Vimaan help oversee inventory changes. They can track goods, indicate warehouse location, and collect data on order demand or average return rates.
Together these developments will result in massive growth for both businesses and logistic providers. They’ll also increase healthy competition between companies, leading to a push-pull effect. The more accurate demand forecasting becomes, the less forgiving customers will be in the future if stores run out of product. As a result, even small companies can’t just continue using spreadsheets — they’ll need to adopt agile planning and set strategic last-mile goals.
Warehouse optimization for lightning speed. Innovation in warehousing is another space where technology and entrepreneurial thinking have opened the door to improved last-mile logistics. The main innovations that have transformed this space recently are robotics, AI, and augmented reality (AR).
Israel’s BionicHIVE is developing an autonomous robotic product that can adapt to existing shelves and boxes in warehouses. Climbing walls from floors to ceilings, these robots make storage a lot easier for retailers or department stores. On other fronts, startups like Oware in Pakistan rent warehouse spaces for businesses to bring their products closer to customers. Oware handles everything related to delivery, including picking, packing, and shipping, ultimately reducing the need for companies to raise a single finger.
AR is a technology that goes far beyond gaming or digital showrooms. Many logistics innovators are using computer simulations to increase productivity and performance. Among other applications, the technology can help pickers locate, scan and deliver products.
These innovations bring excitement to the sector, but they’re expensive. As a result, most retailers or sellers have to rely on third-party providers if they’re looking to get into robotics. At the same time, many of today's startups are using new pricing models to provide the necessary software to smaller vendors without breaking the bank.
Route planning for saving transportation costs. It isn’t just planning within the warehouse that's critical. Solutions directed at optimizing delivery routes are designed to improve the distribution of warehouses, fulfillment spaces and click-and-collect centers across large cities, so that local retailers can store products as close to customers as possible.
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