Jake Rheude
For leadership, the most common refrain in the era of COVID-19 is likely “you’re still muted,” while for supply chain professionals, it’s most likely “there’s been a delay.”
The coronavirus pandemic exposed the flaws in modern supply chains and has left many raw, open wounds across the globe. Decades of focus on lean and just-in-time, without balance for capacity issues, have caused increased costs and delays, plus some sellers shutting down for good. It has been a wake-up call, and we’re still learning what it all means, especially in the space of delivery of goods sold.
Delivery in times of COVID19
There is no magic phrase that can right the ship immediately. The mantra of “build resilience” will help, but that resilience requires significant context that is both global and uniquely personal. So, let’s exchange the crystal ball for the magnifying glass and dive deep into the lessons and remaining potential (for good and ill) concerning delivery of goods sold in times of COVID.
Everything Impacts Everything Else
In many parts of the world, there’s an ongoing fight for cargo capacity. The bullwhip effect is showing its strength as major disruptions continue to product availability and consumer selection, with shifting customer demands furthering its impact. Global supply chains are proving more interwoven than thought in the past.
As an industry, we still see real-time shifts and impacts. When capacity opens up, major categories are entering the space. Factories are trying to normalize production, and China is helping many global brands return to normal, slowly.
Some changes may help logistics operations and the delivery of goods sold temporarily. Despite people not flying, the planes are because freight has become one of the few ways the airline industry can protect itself – despite a stark drop in airline freight at the beginning of the pandemic. Virgin Atlantic upped its freight program in May and saw enough success with that project that it is continuing to add more cargo-only flights.
For logistics professionals, all of this means that you need to be consuming news ravenously. Understand what’s available and how the market is shifting, plus keep an eye on those pilot projects and their results. Prioritize balance in your approach, as well. Air can be smart for expediting shipments, though some are finding it useful for standard freight as well. That will likely shift as more people return to air travel. It’s a strange and complex mix.
Keep your supply-chain-expert hat on at every moment and for every decision. Even reading the local paper about your economy or for the markets of your most significant customer base may help you predict declines, swings, or returns to more normal spending.
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Diversity Is a Strength But Challenging to Achieve
Much of the COVID discussion on supply chain diversity focuses on production. Just like past natural disasters have impacted the electronics space, companies realize that if they look up supply chain tiers, there are bottlenecks and single points of failure. When your two suppliers rely on the same company for raw materials, your supply chain is still at risk.
However, there’s another important aspect of diversity in your supply chain: the last mile. COVID is putting immense pressure on everyone and every company. Many still struggle with how to operate safely. A recent report focused on South Korea notes that delivery workers are dying at an alarming rate, with the blame resting on overwork and a lack of worker protections.
Online orders are surging, and deliveries scale right alongside it. Same-day deliveries and other expedited pushes are expected to grow as well. This will put pressure on your staff and any fulfillment partners. Traditional carriers are already seeing delays, and there are countless reports of package backlogs and buildups at different postal service locations.
Your fulfillment map needs to start having more pins | Source
To protect yourself, you’re going to need a more diverse network to offer more delivery options. That should include a mix of standard carriers for your region as well as local delivery options when available. Online stores may want to partner with more fulfillment services to expand their warehouse and distribution centers.
Use every tool at your disposal here. Don’t just Google providers in your area! Review your existing supply chain partners, see what carriers integrate with your software, and browse the app and integration markets in your sales and order tools. Shopify, for example, has created a specific program for local delivery options. Some online brands are being crafty and using local delivery options for their busy warehouses, meeting customers in major markets, and getting guaranteed capacity while avoiding some carrier hiccups.
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Retail Spaces Should Become Multi-Use
Let’s keep building on the diversity focus. If you or a partner have a physical retail space, it’s time to look at how you can transform that into something broader (if you haven’t already). Retail is still struggling under COVID’s grasp, and we do not necessarily see any lift there. Unfortunately, for many businesses, these physical spaces have become a drain on the balance sheet, too.
In the U.S., even holiday shopping isn’t helping brick-and-mortar overcome COVID. Here, retail sales fell 1.1% in November, and even major product categories aren’t safe. Apparel and clothing accessories were down 6.8% from October’s numbers and down more than 16% if compared to November 2019.
Unfortunately, recovery is slowing in many markets. Adapt your locations to meet the demands of customers with an eye on fulfillment, not sales. Look at the trends in your area and nationally to see what shoppers are doing. You’ve got a few immediate actions:
- Turn stores into literal warehouses, where you pack and ship online orders. Stores closer to customers than your regular warehouse will offer lower shipping costs and potentially faster delivery.
- Offer a “buy online pick up in store,” or BOPIS, option to allow customers to come to you for fulfillment. It allows you to use inventory at retail locations more efficiently and avoids last-mile delays because you’re focusing on freight to your locations.
- Pair with local partners for delivery to homes in your area. Many ridesharing services are now expanding into parcel delivery.
Existing freight locations and stockrooms can quickly become online distribution centers
One quick note that you might not have realized is that many of the online marketplace delivery drivers you see in your neighborhoods are actually contractors from other companies. Ask these drivers about their company, and you might find some local talent to support your growth.
Big box retailers are already pushing heavily into the BIPOS space because it simplifies last-mile logistics, and customers like it. Even without COVID, it was a growing trend. If you have space, use it to rethink your strategy.
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Returns Will Strain Current Capabilities
Here’s one of the significant risks that sellers face, and no one will be sure what it all means until the pressure is over. Ecommerce is up, but there are differing reports on ecommerce-pandemic returns, creating the potential for pressure and fluctuating reverse logistics demand.
As customers continue to move to more online shopping and the holiday season ends, returns have the potential to spike. With fewer stores to travel to for returns, the common prediction is that local carriers will feel their strain continue into February. Your team will need to be available to respond to these, processing goods and returns, restocking, managing inventory, and more.
The cycle for the delivery of goods sold doesn’t truly end until the customer is happy and keeps the product or a refund is finalized. Returns that involve replacements extend the cycle, and delays in receiving a return plus sending your replacement might mean significantly protracted timeframes.
If you expect returns to grow during 2021, here are a few things to do immediately:
- Review your website and the posted returns policy. Ensure it is easy to read and understand.
- Update email marketing and automated messaging to link to the returns policy and clarify anything here.
- Add bullet points to the top of returns and FAQ pages highlighting both the most important steps and any requirements. You want to minimize complaints and customer service negotiations.
- If you created a prep space in your warehouses to manage increased sales volume, use those shelves and locations for returns processing.
- Train your team on handling returns, including how to communicate when a returned item is or isn’t acceptable.
Demand spikes shift space allocation, and those lessons can support returns
You’ll need to have the processes and people in place and ready because no one can be sure how this will go. Say you have a 30-day window. What if a customer returns something after 21 days, but carrier delays mean it doesn’t get back to you until day 31? What if a warehouse means it arrives on day 28 but you don’t process it until day 35? Train and clarify to minimize customer issues and limit the potential for sales losses.
Remember that your shopping channels may have different rules and requirements, too. Ensure that you meet those while taking some time to review these channels. If one is too onerous without generating enough sales during your busy or holiday seasons, it might be time to shift your sales, marketing, or more.
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Keep Backup Plans Relevant
The final thought to leave you with when it comes to COVID-19 supply chains and delivery of goods sold is that very few people are accurately predicting what comes next. No one can truly know or fully understand, so every company must take its best guess and hope.
The goal is to be as well-informed as possible and read about your market. What fluctuation and changes in the space support your risk-mitigation plans? What trends would make your backup plans less successful? Do you know what impacts are hitting others in your supply chain that haven’t reached you yet?
Interos has a survey that can help you look at the broader supply chain space.
Ask what on this list has impacted your partners but not you directly. | Source
Logistics professionals will need to focus on many mission-critical elements all at once. Backup suppliers and distribution partners in areas impacted by a virus resurgence may harm your safety net. Cargo container capacity crunches or further delays at ports will force larger lead times, but as that levels out, responses must be dynamic to avoid having too much inventory and facing space issues or increased costs with 3PLs and others.
Supply chain resilience must be a top goal for work during COVID and in a post-COVID landscape. Most organizations are now planning to improve, but few have the current capability to withstand another crisis.
Build your plans but keep them dynamic because COVID is not done teaching the industry lessons.
