Ready for delivery: The next wave of innovation opportunities for third-party logistics service providers
25/11/20
Since the onset of COVID-19, Purolator’s overall delivery stops are up 40% and packages are up almost 25%—and residential deliveries have increased approximately 50%
We’ve all noticed the increase in delivery truck activity on our local streets—and the piles of cardboard growing in our recycling or composting bins. It’s not an overstatement to say COVID-19 has had a massive impact on Canadian e-commerce and on the third-party logistics service providers responsible for getting packages to consumers’ doors. In fact, John Ferguson, President and CEO of Purolator, notes that “since the onset of COVID-19, Purolator’s overall delivery stops are up 40% and packages are up almost 25%—and residential deliveries have increased approximately 50%.”
But as we head into the holiday season and beyond, we know more people than ever will be shopping online—and they’ll expect to get their purchases in a timely fashion, regardless of purchase date.
Are logistics service providers ready for what will likely be an unprecedented onslaught of demand, even by current standards?
While the industry was, in many ways, caught off-guard by the initial increase in volume we saw early in 2020, there’s been a marked improvement in the last two to three months in terms of delivery time for end customers. So how have logistics providers achieved the gains they’ve made so far?
We’ve seen some long-standing industry norms shattered, as many providers have taken advantage of new automation and sorting technologies and digital strategies. And we’ve also seen last-mile providers using technology in innovative ways, for example, by snapping photos of delivered items to facilitate more safe drops and fewer customer trips to depots. Another tactic many logistics providers have used is increasing their labour pool. In the first few months of the pandemic, many providers brought in contract staff to help support existing staff, but they quickly realized demand is continuing to grow as new users are being added every week. So the minimum workforce has now grown at many locations.
But will all of this be enough?
It’s time for logistics providers to look at the next wave of innovation opportunities to help them meet soaring demand and customer expectations—and get ahead of competitors.
The future of logistics will include increased attention to both sustainability and environmental, social and corporate governance (ESG) measures. As we mentioned above, we’re now seeing increasing numbers of delivery trucks moving around our neighbourhoods—many at the same time, raising concerns about increased greenhouse gas emissions. And we’re also seeing massive amounts of packaging, an issue that will ultimately need to be addressed.
Procurement and sustainability are becoming increasingly intertwined for many forward-thinking logistics service providers. As companies work to better manage their spending, many are realizing they need to build sustainable procurement and governance into their internal processes. ESG is quickly becoming a hot topic that’s getting board-level attention, and it won’t be long before many CEOs in this industry will have developed metrics around how to evaluate and report on ESG measures.
Purolator, for example, is working towards reaching net-zero emissions by 2050. Ferguson explains that “to meet this goal, we will introduce new types of vehicles to our fleet, with advanced technology to improve delivery performance and safety and to reduce our overall greenhouse gas emissions.”
Another big opportunity for logistics service providers is greenfield expansion. As e-commerce grows, we expect to see more fully automated greenfield and sorting facilities come up across the country in the near future. The new facilities are being designed to handle increased parcel volumes and, with the right automation, will be able to service projected e-commerce growth for the next five years.
Leading logistics service providers are building digital operations and workforce productivity optimization measures into these facilities from the ground up, and this will give them a huge competitive advantage. Last year, Purolator launched a $1bn growth and innovation plan, which Ferguson notes “includes significant investment in job creation, long-term operational scale, like our new National Super Hub, and sustainability advancements, such as rolling out e-cargo bikes.”
But it’s not too late—many of these measures can also be built into existing facilities to help optimize operations and prepare employees for the future.
And this leads us to another area of opportunity: upskilling. As the industry moves towards more automation and digitization, there will be a greater need for digital upskilling of the existing workforce across the supply chain. While many logistics service providers are bringing in new people to help meet demand, in the long term, as new technologies continue to be adopted at scale, that won’t be enough. Existing staff will also need to be trained to use technologies, such as new sortation techniques and machinery, as they’re implemented to make sure providers get the most out of these investments.
It’s a pivotal time for the third-party logistics industry, and opportunities abound.
As we enter the holiday season, we can’t recommend strongly enough that providers investigate how they can best use new processes and technologies to stay ahead of skyrocketing demand. And for consumers, as always, our best advice is to place holiday orders sooner rather than later.
Interested in learning more about the future of logistics and how to keep up with the pace of change we’re seeing in the market? Start a conversation with us now.
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