Delivery sector reacts to lockdown demand

One fairly predictable consequence of the Coronavirus lockdown has been a marked increase in the amount of online shopping – but how is the delivery and logistics sector dealing with the spike in demand this has caused?

The UK’s second full month under lockdown saw online sales rise to a 12-year high, up 32.7 per cent in May, according to IMRG and Campgemini figures.

Meanwhile, Mintel recently forecast that the online grocery market will grow by a third this year to reach an estimated value to £16.8 billion - up from £12.7 billion in 2019 - with Ocado for one seeing record growth and grocery market share gains.

While this obviously means more business for those companies getting products to their new owners, it also comes at a time where the pandemic has meant many are understaffed and under strain as demand outstrips supply.

We spoke to several UK delivery companies to find out how they have been coping and what technology solutions are being employed to prepare for what might be a ‘new normal’ of e-commerce business.

DPD has leaned-in to crisis demand, recently announcing the creation of 6,000 new UK jobs and £200 million worth of infrastructure investment. It will expand next-day parcel capacity, including £100 million on vehicles, £60 million on 15 new regional depots and the remainder on technology.

The company will also add 2,500 full-time roles across depot, hub and management positions, with 3,500 new drivers being recruited nationwide.

Chief executive Dwain McDonald said: "We are experiencing the biggest boom in online retailing in the UK's history and we are making this unprecedented investment in our infrastructure and people to ensure we can continue to meet the high levels of demand for our services.

"What we have seen in recent months is potentially a much more significant shift in behaviour, and we believe elements of it will be permanent - it looks like there will remain a much greater reliance on e-commerce in the future - that's going to be our ‘new normal’.”

DHL meanwhile, launched a new warehouse robotics platform, as part of a partnership with artificial intelligence-backed fulfilment provider Blue Yonder.

The new platform, built on Microsoft Azure's cloud, will integrate warehouse robotic systems into existing platforms at some of the 2,000 operational sites in the DHL Supply Chain. It said the partnership would significantly reduce integration time and programming efforts to on-board new automation devices into warehouse facilities.

Unprecedented

Carl Lyon, operations director for delivery experience at Hermes, told Retail Systems that there has been no precedent within the logistics industry that could have prepared companies for COVID-19.

“Overnight the company had to radically change every part of its business to ensure the safety of its people and customers, but also to continue to deliver both essential and non-essential items to people daily, including the most vulnerable.

“Despite the unprecedented nature of the lockdown and its impact on the sector, Hermes benefitted from its scalable network - one that is very used to peaks and troughs - dealing with Christmas where volumes usually double,” he continued, adding that unlike the Christmas period there was no preparation time, the industry saw higher levels of teams off with sickness and had to implement social distancing to some processes that invariably took longer with fewer people available.

Hermes provided contact-free delivery and doubled the number of Parcel Lockers to 831, launching pop-up depots at the same time. There was a focussed effort to continue the roll out of the new MyPlaces service, as well as offering support to supermarkets to ensure the flow of vital goods.

“Adding automation in depots has become crucial to increase accuracy,” said Lyon. “Using technology like MyPlaces has improved first time delivery rates, delivering parcels exactly where people want them.

Hermes partnered with what3words in June to give customers the option to pick the exact spot their parcels are delivered. The change was part of MyPlaces, a new initiative designed to make the process entirely contactless, letting people specify a three-metre square coordinate using the app.

Warehouse tech

Andrew Turner, head of development for home and e-fulfilment at Wincanton, explained that the company has set up three new direct-to-consumer e-fulfilment operations since the outbreak began - in one case within 72 hours.

“The flexibility within our Warehouse Management System (WMS) made this possible,” he stated. “Wincanton is right now investing in a cloud-hosted version of our WMS, which will further reduce the effort and cost to deploy advanced warehouse functionality to new clients, or into new locations.”

Prior to the pandemic, Turner said a more modular approach to logistics investment was already emerging; for example, in scalable robotic technology, which can bring increased productivity, flexibility and extended service capability.

“Technology-led processes, which keep inventory nimble and visible across a range of routes to market, a more local micro-fulfilment model and status tracking to keep customers informed, will help to create an outstanding customer experience.”

Turner suggested that there is going to be a lot of innovation in the final mile, with the potential for new partnerships between final mile firms, with software platforms that link different delivery methods together.

“I also think it is very possible that new tech-enabled delivery solutions will be rolled out at greater pace – this could include increased take up of parcel lockers, delivery to car boot and the use of secure locker boxes at home.”

In May, Homebase went live with a new e-fulfilment order delivery service from Wincanton, to help create a more positive customer experience by enabling better communication about items ordered for home delivery.

The service will allow Wincanton to manage over 300,000 customer deliveries from Homebase distribution centres during the first year of operation.

David Ashwell, managing director of AO Logistics - the delivery arm of online electronics retailer AO - said that working from home caused unprecedented demand for certain items in the first weeks of lockdown. “Although no company could be fully prepared for a crisis on this level, we have spent the past 20 years operating online only, and building successful systems and processes to meet sustained demand for products.”

Recent infrastructure investment meant the company has a wholly-owned logistics fleet and recycling plant, while the Coronavirus push led to the opening of a third distribution warehouse in Crewe.

The new warehouse is aimed at helping AO to grow its third-party logistics business, which has seen meaningful increased demand over the last two years.

Voice-picking technology has recently been introduced in the warehouses, with 120 such devices used across the logistics operation.

“We believe that we have seen five years of change in customer behaviour accelerate into the first five weeks of lockdown,” commented Ashwell. “It takes 66 days to form a habit and we believe that a lot of behavioural shopping changes will stick.”

In April, AO also partnered with location company what3words so that customers across the UK provide a specific address for their desired delivery place. The partnership will shortly be rolled out nationwide, with all drivers having access to the app and all customers able to share their what3words address.

Supply chain digitisation

Gianfranco Sgro, member of the management board of Kuehne+Nagel International, responsible for contract logistics, suggested that no company could have been prepared for the last few months of change.

“At the same time, we have had a good business continuity plans in place – we are very proud about how our teams reacted, it was a well-coordinated move of all our functions, from IT that allowed 45.000 people to work remotely in a couple of days, to HR and operations that delivered a secure environment where to work and sustain the supply chain for essential goods, and our commercial teams that published daily updates to our customers, ensuring proper communication.”

Kuehne+Nagel was already working on the digitisation of fulfilment centres, the most immediate and visible change being a growing use of automation systems – ranging from complex sorters to digital storage systems. Less visible, but equally important, are the digital platforms for warehouse management and dynamic simulations using artificial intelligence, explained Sgro.

“We can expect a reshaping of the e-commerce supply chain to a channel-independent logistics system where stores and customers are supplied with products from various stock holding points - online and offline,” he commented.

“While inventory was traditionally considered a cost, this perception is changing and having the right inventory in the right location - balancing cost and service and addressing the customer’s lead time expectation - is a chance to make revenue.”

Sgro predicted that there will be a move to more macro-regional supply chains in the future and new parameters like robustness, resilience and redundancy will get more relevant in every management decision.

“I believe that the combination of the elements already present in the pre-Coronavirus supply chain development, together with the new needs that our customers have expressing over these last months, can create a new supply chain scenario where additional skills, technical and human capabilities will make the difference,” he added.

Process change

Charlie Shiels, chief executive at two-man delivery company ArrowXL, said the Coronavirus has led to changing, altering and amending “an awful lot of our processes”.

To keep up with increased demand, the business recruited a large number of new colleagues, while the customer relationship management system was upgraded to complement existing warehouse management and productivity software.

“It only takes one error, mistake or poor experience and we get held to account, often in the gaze of social media, which is the new reality and we understand and accept this,” said Shiels. “The modern home delivery consumer is demanding, knows what great looks like, expects amazing as the norm and will not settle for less.

He added that the impact of sustained volume growth will felt most in terms of capacity. “It will require investment not just in bricks and mortar, but people, training and more advanced technology.”

Over at UPS, a $2 billion network enhancement programme across Europe has paid off, with new automated superhubs in London, Paris and Eindhoven giving the flexibility to swiftly adapt to changing supply chain models.

A spokesperson explained that operating procedures have been modified to maintain social distance. “Signatures are no longer required for most UPS deliveries, and in cases where one is required, drivers can leave the delivery with the customer after verifying their identity at an appropriate social distance, and customers who prefer that packages not be delivered to a particular location can use existing delivery change options including UPS My Choice to redirect their deliveries.”

Jon Nicholson, director of parcel sales at Royal Mail, commented that with one of the most advanced e-commerce markets in the world, the UK retail and delivery industries have a good track record in developing services to meet the demands of the UK online shoppers.

“I think that this will all come down to the delivery companies that have done the most to earn consumers’ trust during this unprecedented time,” he continued, pointing out that the postal service is developing products and services to meet the needs of retailers and shoppers to maintain the trust they have in postmen and women.

New normal

Andy Mulcahy, strategy and insight director at IMRG, told Retail Systems that the main problem for most delivery companies has been around social distancing, with some warehouses lending themselves to that requirement better than others.

“Usually during a peak, couriers would take on additional drivers and warehouse staff to cope with it, but this time had to do with a skeleton crew,” he explained. “If social distancing is now the norm for the long-term, warehouse layouts might need to be rethought a bit to make it as efficient as possible while protecting staff.”

The online retail industry body’s latest figures showed that during the first week of shop reopening from 15 June, online sales growth was still up 41.3 per cent year-on-year – the second strongest growth for any week since lockdown measures were put in place.

“It seems that all the fanfare around high streets opening again did spur an increase in sales activity, as people perhaps start to feel things are returning to something a bit closer to ‘normal’, but what that normal is going to be received some clarity,” stated Mulcahy.

“The bulk of that activity remains focused online, with shoppers visiting stores in much lower numbers, but with an intention to complete a purchase, as opposed to just browsing – it’s early days and the two metre rule is set to be reduced to one metre soon, but this is perhaps a revealing indication of how shopper behaviour is now structured.”

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