In the online and digital shopping age, delivery has become more important than ever. According to a report from McKinsey, a staggering 100 billion parcels were delivered in 2020 – and this is expected to double by 2030.
In the light of this, it was timely to discuss the future of delivery with two of my colleagues in a recent In Conversation event.
Pandemic shifts driving deliveries up
Sean McGill, Director in KPMG’s Strategy Group, underlined the extent to which ecommerce has grown through the pandemic. The proportion of retail sales through digital channels grew from 18 percent in 2019 to 24 percent last year. This is forecast to continue to grow, reaching perhaps 30 percent of sales by 2025. In Food meanwhile, online sales rocketed from 11 percent to 21 percent. This can be expected to drop back somewhat now lockdowns are over – but we’re still predicting the proportion to stand at around 16 percent in 2025.
It’s not just the Covid shift to digital purchasing that’s driving this growth. As Sean said: “Consumer goods businesses are increasingly focusing on going direct to consumer, disintermediating the retailer, which fuels more deliveries. In Food, there’s also been the huge rise in the popularity of meal kits as well as ‘dark kitchens’ – takeaway operations where all orders are delivered to the customer rather than being collected.”
The supercharging of deliveries raises a number of issues for retail and consumer goods businesses to think about, such as the need to reduce packaging in an ESG conscious age and to minimise carbon emissions from all the delivery vehicles on the road. As well as electric fleets, there are some innovative last mile solutions out there – from localised delivery ‘hit squads’ to self-driving bots.
Supply chain challenges becoming mission critical
But there’s another issue that has been thrown into especially sharp focus. Delivery to the customer depends on the whole complex supply chain process that leads up to it. And supply chain operations have become increasingly challenging for businesses across the board in recent months.
A combination of the pandemic, Brexit and other incidents such as the Suez Canal blockage have led to a perfect storm of materials shortages and rising prices, manufacturing delays, increased freight costs, highly constrained freight capacity, and an acute shortage of staff - particularly drivers.
It’s a headache for everyone that has even begun to hit petrol forecourts in the last few days. There have been warnings about the availability of various goods at Christmas. How bad it turns out to be remains to be seen, but there’s no doubt that managing the supply chain has become mission critical.
Iain Prince, Associate Partner at KPMG, had some great advice that he shared with participants. “You’ve got to think about the whole balance of the supply chain, and in very practical terms: not just strategically but at a tactical execution level. What’s going to happen today, tomorrow, next week? For many clients, it’s moved from a ‘just in time’ philosophy to one of ‘just in case’ – what can we do to cover all eventualities and get the really vital stock in that we need?”
Four key areas to tackle
Iain set out four areas that businesses should focus on:
- Visibility – It’s essential to map out and really understand your whole supply chain from end to end. This means focusing on your product flows around the world and between geographies; and understanding not only your own flows but those of your customers and your suppliers – and the suppliers to your suppliers too. Don’t forget about packaging either – the last thing you want to do, with deliveries so important, is run out.
- Board decision-making – Supply chain needs to be right near the top of the Board agenda. The Board needs to be making the key decisions or have a clear governance process in place to ratify decisions taken elsewhere in the organisation. Within the business, different functions such as Sales, Supply Chain and Operations can often ‘fall out’ with each other due to competing or conflicting priorities. The Board needs to resolve that – and perhaps call in outside parties like ourselves. We often feel like ‘marriage guidance’ helping to restore harmony!
- Do the maths – To understand what to prioritise, you’ve got to have access to good data so that you know which products and services are most profitable. If you’re only going to be able to fulfil 90% of orders next week, that calculation will be crucial in helping you decide which ones to prioritise. Think about it from the customer lens too – what’s the occasion they’ll need a product for and therefore how time-critical is it?
- Operating model – Labour is absolutely key. The war for talent is the worst that most of us have ever seen, especially for drivers. Think about your value proposition to those key staff so you can attract and retain them better. Try to cut down on the process and form-filling you ask operational staff to perform so they can maximise the time they spend actually doing the job they’re needed for.
Resilience and innovation
There are no easy answers at the moment to any of this. But I have no doubt that we’ll continue to see the sector finding creative solutions and workarounds as it always does.
Retail and consumer goods businesses are nothing if not resilient. It will be essential to keep on drawing on those reserves so that consumers keep engaging, browsing and buying – and those all-important deliveries can be fulfilled to complete the customer experience.