2017 is just about in the books, and it has been a busy year for the supply chain industry. Let’s look back at ten of the top logistics stories of the year.
2017 has been the year of the drone. There’s been a lot of interest in using drones for last mile deliveries. In the US, an easing of FAA regulations could finally make it a reality, which is good news for the likes of Amazon, Walmart, UPS, and Google, who have all invested heavily in drone research and patents. Overseas, JD.com has been at the forefront of drone technology. The retailer is developing a network of up to 150 drone operation sites as well as heavy duty drones that are capable of making deliveries of items weighting up to a ton. However, one of the most viable uses of drones has been in humanitarian and relief efforts. This includes the delivery of medicine, supplies, and blood samples to difficult to reach terrains. Drone technology will certainly continue to be a top story as we head into 2018.
Amazon vs. Walmart
The rivalry between Amazon and Walmart reached a fever pitch in 2017. As Walmart shifted its focus to blend the brick and mortar business with e-commerce, it took aim at eroding Amazon’s market share. This was evident with its acquisition strategy over the course of the past 15 months, which included Jet.com, Bonobos, Moosejaw, and Modcloth. Walmart also acquired Parcel to make same-day deliveries in New York. In turn, Amazon turned the grocery world on its head with its acquisition of Whole Foods. This move finally put Amazon into a favorable position within the grocery industry, although it is still a far cry from Walmart’s grocery business. The two retail giants are pushing ahead for drone deliveries as well as integrating e-commerce with brick and mortar. This is a rivalry that is just heating up.
In his first year as President of the United States, Donald Trump has made an impact on the supply chain and logistics industry. His biggest impact has been around global trade. While it was not a surprise, and it was also a move that Hillary Clinton had vowed to make as well, Trump pulled the US out of the Tran-Pacific Partnership (TPP) as one of his first acts as president. The remaining members of the proposed TPP have since gone back to the drawing board to establish a new trade agreement. President Trump has also threatened to pull the US out of NAFTA if the deal was not restructured. While the rhetoric has been toned down, negotiations are still underway to revise the trade deal. President Trump also had a strong stance on implementing a border adjustment tax to discourage US companies importing goods from Mexico as part of their manufacturing process.
Digital Freight Matching
Digital freight matching, or the “Uberization” of freight, has been a popular topic. While hundreds of millions of dollars have poured into this market, the implementation of a program has generally only been seen on the last mile delivery side, due to companies like Instacart and Deliv showing that a crowd-sourced model for home delivery can work. On the trucking side of things, Uber officially launched Uber Freight, its digital freight matching service in May. The app will match truckers with available capacity to companies that need to ship freight throughout the United States. Amazon has plans to launch a digital freight matching service as well. Its launch of a trucking app designed to streamline deliveries to its warehouses might just be the first step in building out a network of drivers.
Innovations in the warehouse continued to reflect the changing role automation plays in today’s digital environment. One of the biggest stories in 2017 from a warehouse perspective is the continued use of robots within the warehouse. With a labor shortage looming, autonomous robots are coming to the rescue. Most of these robots are used in conjunction with a human labor component, bringing bins or racks of items to be picked to a central location, allowing the warehouse worker to be more efficient. However, as more companies invest in robotics, the warehouse is getting closer to having robotic piece-picking. The intricacies of this task are still a ways off, but it is becoming closer to reality. Another trend within the warehouse has been the use of exoskeletons for worker safety. GEODIS and Lowe’s are two examples of companies that are using this technology to reduce injury risk.
While the driver shortage continues to grow, an eventual hope is that autonomous trucks could help solve the problem. We are still a ways away from that scenario, but autonomous trucks are continuing to pick up steam. In 2017 alone, there were a number of investments and announcements regarding autonomous trucks. The USPS and Deutsche-Post both announced plans to develop autonomous trucks by the year 2025. Domino’s Pizza and Ford also announced a pilot program to make pizza deliveries with an autonomous vehicle. However, these plans still need to clear regulatory hurdles. In the meantime, the use of platooning technology seems to be the best use case for autonomous trucks for the foreseeable future.
The convergence of channels is becoming increasingly important in today’s omni-channel world. It is the prime reason that Walmart has decided to change its legal name from Walmart Stores Inc. to Walmart Inc. With the convergence of channels comes new challenges, but also new solutions. More customers are shifting to a “buy online, pick-up in-store” model, and retailers are taking notice. The end goal is to make this process as easy and seamless as possible. While the in-store pick-up used to be a great way to get customers to walk into the store, this is no longer the case. From supermarkets to big box retailers, the trend is shifting to curb-side delivery, where a store associate will actually run an order out to the parking lot in a designated section. This is truly changing the way people shop and how orders are fulfilled.
Last Mile Deliveries
Last mile deliveries continue to be an expensive and difficult piece of the logistics puzzle. This is especially true for restaurants and grocers. As a result, there has been an influx of interest in using third party companies to oversee the last mile. Instacart, DoorDash, Deliveroo, and UberEats, just to name a few, have seen business increase. For Instacart, there was concern following Amazon’s acquisition of Whole Foods, considering the partnership it had with Whole Foods. The acquisition has not hurt Instacart so far, but the company has expanded is relationships with other big retailers, including Walmart. Major retailers such as Target and Best Buy have also reduced spending thresholds to qualify for free delivery as customer expectations have changed. I expect to see a lot more interest in how to handle the last mile in 2018.
Natural disasters put an incredible amount of strain on the supply chain. And 2017 was no different, especially given the destruction left in the wake of Hurricanes Harvey, Irma, Jose, and Maria. Collectively, these four storms caused more than $200 billion of damages. This sent a ripple effect through the supply chain, as retailers raced to replenish supplies, ports were closed, trucks could not get deliveries through, and power outages caused further delays. A critical piece of setting up relief issues comes down to fleet management for disaster relief.
As Steve Banker wrote about earlier this year, blockchain is still at the bottom of the supply chain maturity curve. However, the technology has gained steam in 2017, with a few programs using the technology for food safety and traceability programs. For instance, Walmart has already successfully piloted blockchain programs to trace pork products from one farm owned by Chinese meat producer Jinluo to a Walmart distribution center in Beijing, as well as to trace mangos in the US from the plants to store shelves. The company is also looking to accelerate the acceptance and adoption of using blockchain technology to increase food safety, with a promised investment of $25 million by the year 2020.
2017 was a busy year for the supply chain and logistics space. Technology innovations abound and will continue to change the nature of the industry for years to come. Some of these technologies are showing growth already, such as warehouse innovations and e-commerce integration. Others are picking up steam in a limited capacity, such as drones and blockchain. And others are still unknown entities that still need time to mature, such as digital freight matching and autonomous trucks. I’m sure In the end, it was an exciting year, and I look forward to exploring these topics more in the future. Let me know if there are any topics I missed.