We've never been so dependent on last mile transportation. The last mile of delivery, the one that connects companies to end consumers, was already expanding and gaining new technological developments before COVID-19. Until then, e-commerce, which rose around 25% worldwide, was the factor that most drove the growth of deliveries to individuals. But now, in a world in a pandemic, the need for deliveries to consumers has changed in dimension. The last mile has become the most essential service for the strategy to mitigate the impact of the virus to work: the strategy of leaving people at home.
Suddenly, unpredicted by any historical planning, demand for home delivery exploded in some sectors and disappeared in others. Retailers, the main point of contact with consumers, found themselves in an unimaginable challenge. The small restaurant, which had never packed meals to go, no longer welcomed customers to its physical locations. On the other hand, the large supermarket chains and home delivery services, such as GPA and iFood, exploded in demand.
While an army of small paper couriers, taxi drivers and Uber drivers saw their transport demand plummet, food and pharmaceutical couriers could no longer keep up with the flood of orders.
To survive, little ones need to reinvent themselves. And to be able to serve everyone, the big ones need to restructure. Is fast.
It is not difficult to imagine the future. Many small ones, unfortunately, will close their doors, and others will remain plugged in and depend on the performance of the large marketplace platforms. The large retailers that operate with essential products, in the short term, will carry out many capacity adjustment actions, including new procedures to avoid contamination of teams, will lose in productivity, reduce their profit margins, but will gain in volume and absorb a large part of the demand not met by the small ones.
There will be a lot of trial and error and adjustments along the way, as the famous expression “changing the tire while the car is moving” is happening now.
The last research carried out by ILOS on last mile transport it was in mid-2019, just before the outbreak of the coronavirus. The survey pointed out that the advance of stocks to areas of high urban concentration could bring about a significant reduction in delivery times: the use of small urban warehouses, the use of physical stores as e-commerce stocking points and the structuring of dark stores are forms of progress of products to be closer to end customers. These formats, which could lead to increased costs in operations, are today one of the most indicated as an option to meet the needs of fast delivery to families.
There are initiatives in Brazil to increase deliveries from stores, as is the case of Lojas Americanas, which began to heavily publicize the same-day delivery service in its virtual channel, with stores starting to take products home of consumers. Mercado Livre also changed procedures in the last mile, such as removing the obligation to subscribe on cell phones, for example, speeding up deliveries and reducing the risk of contamination. The two companies have been reinforcing the incentive for small merchants to plug into their marketplaces. GPA, which is at the forefront of e-commerce demand, as it focuses on essential products, quickly reached its home delivery capacity limit, and had to increase its deadlines until it was able to restructure itself.
Last year, before the coronavirus outbreak, the The biggest problem identified by companies in last mile transport was traffic and the lack of parking for cargo vehicles in urban centers.. Who knew that now this would be the least of the problems? Today, there are some restrictions on the circulation of vehicles on roads and difficulties in moving teams due to government impositions, but in a way that can be circumvented.
But for those who can also think about tomorrow, and not just about today, you have to be careful. People won't stay stuck in their homes forever, so we'll have traffic again. At the same time, many consumers who are experiencing having products delivered to their homes will begin to adopt this new purchase pattern. This means that the last mile is essential now, and will be in the future as well.
If we see China as a foretaste of things to come, we can use that to our advantage. If so, it is possible to see in the graph below that China is moving again (products and people), as the 2020 congestion indices begin to approach the 2019 indices again.
Figure: People and cargo are starting to move again in China. Source: Harvard Business Review (HBR), BCG Center for Macroeconomics
If traffic jams are returning in China, it means that the challenges of the past will reappear in the future, only with much more intensity. Because the world will have more e-commerce and more delivery requirements. And the last mile transport, which will be bigger than in the past, will face more traffic, more parking difficulties, more cargo unloading problems…
What to do? Structure, plan, use technology. Professionals in logistics, planning, IT, robotics, engineers, urban planners… Private companies and governments. The world will need to reorganize itself for a new phase of urban distribution that is about to come.
References:
ILOS Report “Urban Last Mile Challenges and Solutions”
HBR – How Chinese companies have responded to coronavirus
Maria Fernanda Hijjar
https://ilos.com.brExecutive Partner of ILOS, holds a master's degree and a degree in Production Engineering from the Federal University of Rio de Janeiro (UFRJ). With more than 10 years of experience in the field of Logistics and Supply Chain, working on several projects, management and participation in research associated with the subject. She has more than 20 articles in newspapers, magazines, periodicals and congress annals, being co-author of several titles in the COPPEAD Collection by Atlas publishing house and in the Panorama Logístico Collection ILOS and CEL / COPPEAD.
