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The shift to working from home and social distancing measures that have accompanied the Covid-19 pandemic has driven people online in a way that few could have anticipated. Increased familiarity with online ordering, and necessity, has ensured more people are making purchases for goods and groceries for home delivery.
Some 39% of global consumers now shop online for things they previously purchased in shops, EY analysts found. But this increased number of transactions and deliveries also presents a heavy logistical burden for businesses.
It has come at a time of greater urbanisation. Recent years have seen more people moving to cities from rural areas around the world. Around two-thirds of the global population will relocate to urban areas by 2050, according to UN data, up from just 30% in 1950.
In fact, around 1.5 million people are moving into urban areas every week, according to PwC, mainly in Africa and Asia, demonstrating how the need for more urban solutions to fulfilment is continuing to grow.
Companies are increasingly turning to micro-fulfilment – the placing of small-scale ‘warehouse’ facilities in urban locations closer to the end-consumer – to allow them to respond to fast-changing trends in consumer behaviour.
Traditionally, retailers have used manual in-store picking. But operators such as Ocado have fulfilled orders from centralised facilities. The highly changeable Covid-19 lockdown conditions increased the need for scalable and cheaper micro-fulfilment centres. Retailers are increasingly innovating to meet the challenges of the new trading environment.
Competing with Amazon
Although it’s difficult for many companies to compete with online retail behemoth Amazon, which is able to offer a range of delivery options to customers, micro-fulfilment centres may help democratise the landscape.
Retailers such as PepsiCo and Walmart in the US have begun experimenting with micro-fulfilment to meet growing online demand during the coronavirus crisis.
Other retailers have adapted to the new conditions by using their own stores or other underused urban spaces as more people have been encouraged to work from home. And property investors are increasingly buying up under-utilised industrial buildings in recognition of the opportunity they represent.
Such ‘last-leg’ or ‘last-mile’ warehousing may come at a cost, but more local locations in densely populated areas could be more efficient and convenient for retailers who don’t want to be tied to long-term leases for large units.
Micro-fulfilment centres can help address the last-mile issue, making delivery faster and reduce costs with more customers demanding same- or next-day delivery.
The advance of technology is also making micro-fulfilment even easier, as automation is harnessed to reduce delivery times even further and make processes more efficient. There are a growing number of players in the micro-fulfilment technology space that are helping to fulfil orders, whether by through robots or end-to-end services.
Finally, micro-fulfilment centres can offer more localised insights into consumer trends and help retailers plan ahead, helping to make sure that they are well-stocked and prevent shortages.
It’s been a challenging time for most retailers and it’s underscored the need for fully integrated and highly efficient solutions for their supply chains.
At DP World, we understand how the world is changing and have been investing to help our clients meet the challenges of the modern world.
As one of the leading logistics businesses in the world, we can help facilitate your micro-fulfilment strategy. But that’s not all we can do.
By partnering with DP World, we can offer you insights and help you to identify pockets of growth in international markets and get your products to your customers with our air-to-sea and sea-to-air logistics solutions to help move and track cargo using our world-class digital technology.
It’s never been more important for retailers to think carefully about their supply chain and keep their customers’ loyalty: choosing the right partner could be one of the most crucial decisions you take.