From operational models to warehouse projects, from delivery management to automation 4.0: these are some of the transformations underway in the world of logistics, a sector currently under the spotlight due to its role in the acceleration of digitally purchased consumer goods during the worldwide lockdowns. In Italy, e-commerce experienced a +45% boom in 2020 (for a total of EUR 25.9 billion), and the trend looks set to increase by 18% again this year (EUR 30.6 billion) according to the Netcomm eCommerce B2C Observatory of the Politecnico di Milano. Food expenditure remains the driving element (+38%), followed by clothing (+26%), cosmetics and body care (+20%).
So how did the logistics sector react? This switch in channel and volumes did not offset the collapse occurring in areas such as the automotive and retail industries or the block on export, making turnover in “contract logistics” (EUR 77.8 billion) fall by 9.3% in 2020. “The reopening has kicked off a recovery that in 2021 will allow us to approach 2019 levels, without however reaching them," explained Damiano Frosi, director of the Gino Marchet Observatory of the Politecnico di Milano.
"The acceleration in e-commerce has shown that traditional last-mile travel is no longer appropriate. The keywords, therefore, are ‘decongest’ and ‘optimise’," Frosi continued. "The market’s schizophrenia is keeping the sector on tenterhooks. On the one hand, B2C logistics seems to have changed the way B2B works, reducing the size of orders and stocks. On the other hand, economic uncertainties have led to a reduction in fixed costs, with companies becoming accustomed to placing orders based on their production needs and receiving just-in-time deliveries. This has led to an increase in the frequency of logistical transport, visible in the sector’s growth in turnover from EUR 71 billion in 2009 to EUR 86 billion in 2019."
Now, however, in the post-pandemic recovery phase, certain aspects can no longer be taken for granted. Firstly, there is a lack of drivers, which - according to the Confindustria association Anita - are 17,000 short of those necessary for the next two years. Then, Assoimballaggi claims that the increase in the costs of raw materials such as wood, which has more than doubled in less than a year, has caused the price of pallets to soar by 50-100%. Also, the Drewry World Index recorded an average 351% increase in the price of container rentals in transoceanic transport (+594% on the Shanghai-Genoa route), with average delays of almost seven days (source: Sea Intelligence). Finally, the growing need for space by e-commerce companies has meant that logistics has attracted real estate investments for EUR 660m in the first half of 2021 (+135% year over year).
Evolving factors in logistics
"This phenomenon is consistent with the increase in property rental costs: today the aim is to build up stocks and bring them closer to urban centres so as to speed up the last-mile," explained Frosi. "This is clearly Amazon’s philosophy, as it builds numerous small regional hubs across Italy and continues to work on data." According to the Gino Marchet observatory, to meet the multi-channel challenge, operators are diversifying their warehouses: storage (90%), last-mile (65%), shops (56%), fulfilment centres (35%) and micro-fulfilment centres, and multi-floor warehouses with mezzanines to multiply surfaces and mobile automated picking systems. Programmed to follow a map, these systems optimise routes based on real-time orders, communicating with one other via ultra-wideband systems and wearable devices to alert operators.
Automation is the second most important trend when designing warehouses, and concerns storage (71% of responses), set-up (59%) and the sorting of incoming (47%) and outgoing (71%) orders. "This goes hand in hand with two other mega-trends in the use of management software," explained Frosi. "The first is data-driven logistics based on consumption-related big data, which makes it possible to carry out predictive analyses on stock requirements, thus booking trucks in advance and constantly ensuring the capacity to respond to orders." Through ERP systems and by sharing information with supply chain partners, also through tools such as Google Data Studio, FM Logistic Italia, a historical company in this sector, manages on the one hand to track orders sometimes as far as production, and on the other to provide certain customers with the set-up and management of their e-commerce sites.
The second trend involves supply chain visibility: "Logistics companies often don’t know the precise quantity and location of their pallets, and therefore have to make an inventory with each loading and unloading operation," Frosi said. "Companies are investing in sensors and software to keep everything under control in real time. This need skyrocketed with Covid and the raw materials crisis, but it is still very much limited to consumer goods. Full digitalization is still too long a way off to see the massive spread of IoT and blockchain. Consequently, the reading of RFID tags associated with pallets through gates offers a reliable method of traceability for brands such as Conad and Bayer".
Startups at forefront
The USD 9.56 billion investments raised in 2020 by 501 logistics start-ups worldwide indicate the direction being taken by innovation, with businesses offering software solutions (USD 1.86 billion) being by far the most numerous (168). A third of the value, 3.28 billion (+913% over 2018) concerns hardware vendors focusing on smart vehicles and warehouse robotics. Gather AI uses drones to perform in 8 minutes the inventory that two operators would make in two hours. Drones have also been used by the Alphabet company Wing to perform over 50,000 food deliveries in Logan, Australia. In September, on the Brenner motorway, Iveco experimented the Platooning system: convoys driven by a single driver on the first truck, followed by others connected by a wireless network.
Platforms that match the supply and demand of logistic transport and storage services (85 start-ups, USD 1.42 billion raised) fell by 10%. For example, the German xChange finds unused third-party containers and reduces the handling of empty containers due to the imbalance of global flows.
Asset sharing can also involve private individuals. The new logistics players have raised USD 2.9 billion for some 160 initiatives worldwide. Sharing logistics is the model taken by certain start-ups, like the Italian companies Alfred and Gel Proximity, which allow customers to receive packages at thousands of physical pick-up points, such as offices, cafés and newsagents, thus optimising e-commerce flows and reducing time, costs and consumption.
"90% of deliveries are still made at home, but increasing the number of trucks on the road to respond to the growth of online sales is uneconomical and congests cities," commented Frosi. "Last-mile deliveries (7%), instead, make it possible to carry out more deliveries per stop, exploit load capacities, and give life to green logistics services on the ‘very last’ mile, reinstating disused areas or using mobile containers as decoupling points." This is the model used by Berlin’s Urban Cargo, which makes deliveries using minivans and electric bicycles, starting from mobile, refrigerated micro-hubs.
Of course, quality and speed are key logistical factors for brands wishing to win customers over. Among these, one in three in Italy say that the choice of e-commerce website depends on the pick-up and delivery options provided. Sometimes it really takes very little. The last quarter of the year is the most difficult, between Black Fridays and holidays, but globally the brands that last year offered the chance to pick products up at collection points saw their digital revenue grow by 54%.