MHI Solutions Improving Supply Chain Performance
Two megatrends are about to collide. And if careful planning isn’t in place, the resulting traffic jam could be felt throughout the logistics world.
Trend No. 1: Globally, three in five people will live in urban areas by 2025, according to the United Nations. In the United States, already about 80 percent of the population lives in urban areas, according to the Census Bureau, but large cities will become even larger by 2025. New York will top 20 million.
Trend No. 2: Online retailing will account for 19 percent of global retail by 2025, according to Frost & Sullivan research; in the U.S., it’s anticipated that e-commerce will be about 30 percent of retail. That means home delivery, of course, but it also means some will ship products from stores as omnichannel becomes a reality.
Frost & Sullivan expects the number of urban deliveries to swell to 500 million per day by 2025. “That’s a huge demand that logistics providers will have to meet in the future,” said Archana Vidyasekar, Frost & Sullivan senior research analyst. “There are some huge challenges for organizations.”
This global shift in population has been occurring for some time. Consequently, some companies have already begun to refine strategies for delivering in urban areas. Yet no clear one winning solution has emerged.
“They are choosing to handle it in many different ways,” said Jeff Mueller, vice president, Sedlak Management Consultants. “Some have gone with a strategy of an offsite warehouse 20 miles from the urban core to act as a staging area for products that will deliver just-in-time to stores. Others are doing it with more frequent deliveries due to backroom space at a premium. You have to go with one trailer a day every day rather than two days a week.”
Because of the costs of real estate, every inch of smaller stores in urban areas can be used for selling. That trickles down to an issue at the warehouse, too. “Things have to come in a little smarter,” Mueller said. “They have to come in with the destination in mind, so that as you open this box, it’s all men’s wear. That one is all women’s wear. You come in with these pure boxes so that it flies through the backroom and ultimately makes its way to the selling floor pretty quickly.”
By Sandy Smith