Meanwhile, retailers and consumers must contend with higher shipping costs. Surcharges have been implemented ahead of the peak shipping season such as in the month of October. New sorting technology has been introduced and lease more storage space in preparation for peak season.
Bonuses have to pay to drivers to fulfill orders for major retailers because fulfilling those orders was no longer profitable for them, said a multinational management consulting firm. Those higher shipping costs, in turn, made it more expensive to deliver goods directly to consumers’ homes.
But high worker bonuses and increased shipping costs overall won’t be sustainable in the long term and will soon be due for a market correction.
The State of Logistics report from Kearney and the Annual Council of Supply Chain Management Professionals noted that some retailers are considering shrinking their dedicated fleets because they want to divert some of their resources from transportation to distributed inventory. At this point, retailers’ size and shifting demands could determine whether they continue investing in dedicated fleets. For smaller retailers without their own delivery fleet, they may move away from relying on dedicated third-party fleets because it’s not guaranteed that they’ll have the product demand to pay for them.
To combat supply shortages, some major retailers have chartered ships to bring in the inventory they need because the company wanted to meet increased consumer demand during peak season and did not want to be hindered by a lack of capacity in the ocean shipping market.
The coronavirus pandemic also further complicated retailer’s last-mile struggles. As parcel delivery face a “capacity crunch” and begin turning down volumes of packaging, retailers may turn to gig economy companies.
A lot of retailers are actually activating these partnerships already, just in case they have to use them in Q4. And we may end up seeing that not because the customer said, ‘but because retailers actually did not have the regular parcel providers, and now they’re gonna send it from the store with the last mile with the gig economy provider.”
However, such partnerships aren’t perfect. While traditional carriers have had years to perfect their delivery processes, gig companies’ delivery networks are set up completely differently. Though gig economy companies’ software and routing systems can execute deliveries, legacy parcel delivery companies have a national reach and have honed in ways to deliver goods efficiently.
But it’s not just last-mile fulfillment that is causing concern for retailers ahead of the upcoming holiday season; both retailers and carriers alike want to streamline the returns process.
to be continued… …