The recent Covid crisis has been a very difficult transition for the economy as a whole, the effects of which will certainly be felt in the months and years to come. For logistics in particular, if the crisis has often been a test, it has above all been a challenge: that of keeping the distribution afloat and allowing life to go on for all. Indeed, at a time when everyone had to limit their trips to the maximum, only the logistics chain was able to provide for all. Among all the players, parcel delivery has seen its role become central and its customers change profile. This period will have served for parcel delivery companies as a full-scale test of the resilience of their model in the face of B2C demand doomed to increase in the future. So, what lessons can we learn from the past period, and especially what developments are taking shape for long-term carriers?
Retrospective of the crisis for those involved in parcel delivery
On March 16, 2020, the announcement of the confinement of the population marked the start of an unprecedented period for all French people and for a large number of professionals, in particular those involved in logistics. Overnight, consumer habits are shattered and all the forecast models used until now are rendered obsolete.
Parcel delivery companies specializing in B2B delivery see demand suddenly collapse in response to the closure of physical outlets. Over the weeks, the activity resumes in part but without however returning to its initial state because:
- Volumes have globally decreased: according to the information available on 7 May 2020, INSEE announces that “French economic activity would be down 33% compared to a normal situation”, with a significant consequence on the volumes processed by parcel delivery companies in April,
- The constraints of B2B customers have changed: after a period of reorganization to be able to ensure the safety of their employees, some stores are reopening. But their supply constraints are often no longer the same (recurrence of deliveries, modified delivery day, etc.)
- The B2B / B2C balance among parcel delivery customers has been profoundly changed: in response to consumer demand, some of the usual B2B flows have been diverted to e-commerce. According to Kantar, e-commerce has recruited 2.5 million new customers during the confinement period.
The parcel delivery companies who were able to pick up this new demand had to adapt to the constraints of their new customers, whose orders have characteristics very different from those of their usual B2B customers: a lack of recurrence in orders, parcels of lower weights and volumes, fewer packages delivered by stop, different delivery times and slots (office hours for B2B versus evenings and weekends for B2C), greater average time spent per package delivered and longer tours.
Even though each week was different from the previous one in terms of activity, the adaptation of parcel delivery players took place gradually and “in reaction” to changes in activity, where (like in all the Supply chain), forecasting is usually the key word.One thing is certain, the logistics of the last mile were present during the confinement period. But what are the changes that could remain in the long term? Some elements and avenues for reflection.
What could change in the long run for parcel delivery companies
No one knows what will happen in the aftermath of the crisis for last mile logistics players, but some assumptions are already emerging.
With the reopening of retail outlets, the parcel delivery business related to their B2B customers is expected to resume, at least to some extent. But what about the evolution of the latter’s demands on the shipping companies? What will happen to the 2.5 million new consumers who placed their first order during the confinement period?
Long-term boosted e-commerce
It is safe to bet that, if the experience has been positive, some of these new users will keep online shopping as part of their spending habits. According to Nielsen, the crisis will therefore certainly benefit e-commerce, which should reach a market share of 8% over the rest of 2020 (it reached 10% during confinement and amounted to 6% over 2019). This boost in e-commerce suggests that the B2B / B2C split should not return to its pre-confinement level, implying strong pressures on the parcel delivery companies who will have to adapt their means to respond to them in the long term .
New contracts to keep!
Many players whose distribution channels slowed down during confinement have switched part of their B2B flow to direct deliveries via e-commerce. From a practical point of view, this requires calling on new service providers and labeling the packages in the formats required by them. For couriers who have successfully captured this flow by signing new contracts, it will therefore be a question of adapting to the constraints specific to their new customers in the long run.
Conditions were favorable during confinement to meet the requirements of these b2c flows thanks to the absence of road traffic and the availability of customers, at their homes all day. But these favorable conditions will not continue and the parcel delivery companies will have to continue their race for quality of service if they want to keep this part of the business for the long run.
What responses to these new challenges
The logistics of the last mile played an essential role during the confinement period that our society has just experienced and it was there! The intelligence of Humans and their deep expertise of their trade allowed an effective adaptation among a certain number of actors of the sector who knew how to reinvent themselves and rebound. This agility has often been facilitated by the digitalization of the sector, a priority subject for many parcel delivery companies. Technological solutions publishers also have an important role to play in the ability of parcel delivery players to adapt seamlessly to periods of activity different from the usual volume of business.
Data project, fleet resizing, strategic sectorization: discover some lines of thought to respond to changes in the activity of parcel delivery players.