The coronavirus has been a wake-up call for small businesses and supply chains all across the globe. Fewer people are shopping in stores, more people ordering online, and a boom in demand for contactless deliveries. How are supply chains and strained delivery systems keeping up?
The Current Challenges to Supply Chains
Because of COVID-19, Digital Commerce 360 found that 36% of retailers have had to adjust their marketplace strategies. And with the eCommerce market expected to reach an annual growth rate of 14% through 2023, now is the time to make delivery and fleet management services a part of those strategies.
But there are a few challenges that need to be addressed first:
1. Truck Driver Shortages: Even before COVID-19, it was estimated that there was to be a shortage of 1.1 million truck drivers over the next 10 years.
2. Driver Health & Safety: Delivery drivers are considered essential workers, which means they are at higher risk of exposure to COVID-19. There are nearly 2 million truck drivers in America and more than 20% are owner-operators. For this group, contracting COVID-19 could be financially crippling due to a lack of health insurance or paid sick time.
3. Shifts in Buying: During the early weeks of the outbreak, the supply chain that supported millions of office workers slowed down, while the residential supply chain faced a sudden, unexpected increase in demand. The result was it became impossible to find certain essential items like toilet paper and hand sanitiser. This shift is expected to last long-term; in fact, Global Workforce Analytics predicts that 25-30% of the workforce will be working from home multiple days a week by the end of 2021.
This shift has a great effect on many supply chains, most notably for home deliveries, which already grapple with a shortage of drivers and delays. When supply chain interruptions occur, ripple effects can last months or longer.
4. The Amazon Effect: In an Onfleet survey conducted only a few months before the coronavirus outbreak in the U.S., 78% of respondents said their experience shopping on Amazon has raised their expectations for all deliveries. One in four respondents said that same-day delivery is important to them, and nearly 40% said they expect their local stores to deliver household items the same day. Delivery providers should be prepared to face increased expectations and volume as more traditional brick and mortar stores adapt by transitioning to e-commerce.
If these underprepared areas of the supply chain weren’t evident before the virus outbreak, they certainly are now. And although the lessons learnt can help businesses be better prepared in the future, what can be done right now?
3 Ways Supply Chains Can Act Now
1. Get Drivers on the Road
On top of truck driver shortages, DMV and commercial truck training locations were closed across much of the country, preventing between 25,000 and 40,000 new truck drivers from getting their commercial driver’s licence (CDL).
Acquiring alternative vehicles can help ease the already taxed delivery system Last mile deliveries — the process of delivering products directly to the customer from the store or fulfilment centre — can easily be completed in pickup trucks and cargo vans, which don’t require CDLs to operate.
Sourcing these vehicles can be challenging for financially cautious businesses right now, but leasing can provide a few crucial benefits for online retailers and logistics companies:
• Tax Deductions: Section 179 of the IRS tax code allows businesses to deduct the cost of equipment and software, which includes both leased and purchased vehicles.
• No Up-Front Costs: Unlike vehicle purchases, leasing does not require up-front cash. This can be a gamechanger for small businesses that are strapped for cash right now but need access to vehicles quickly. It also preserves capital since leases have lower monthly payments than purchases.
• Flexibility: If you have seasonal needs, a short-term lease can include skipped payment options so you will not be billed during your off season. Leasing also lets you start with one or two vehicles, and add or reduce the number of vehicles as your business needs change. Cheque your leasing partner’s fleet management services to see what options are available.
• Higher Employee Satisfaction: Drivers across every industry prefer to operate newer vehicles. Leasing vehicles means you will have access to the latest models, without having to worry about complicated, expensive trade-ins. This is a cost effective business decision, and can help boost your employee recruitment and retention. It is worth noting that today’s new vehicle inventory is tight, but leasing can still allow you to trade in for newer models as they become more available.
• Safety and Liability: Having newer vehicles means your drivers can benefit from having the latest safety technology, which can help reduce your accident risk. Currently, new vehicle inventory is tight, but even near-new and pre-owned models can offer safety technology benefits over older vehicles.
2. Stabilise the Supply Chain
The high demand for products means drivers may struggle to get everything delivered in a timely fashion. Online orders have been skyrocketing, and even many of the world’s largest retailers and logistics companies are struggling to meet the demand.
But every supply chain is different. No matter the specific challenges, there are a few steps to take to better stabilise your operations:
• Set Priorities: First, supply chains need to identify the critical gaps in production, labour, storage, and delivery.
• Strategise Immediate Actions: Next, strategise short- and long-term actions you can take now to limit disruptions and better utilise suppliers and networks. For example, try sourcing materials from local vendors.
• Improve Your Visibility: Take a good hard look at your supply chain ecosystem and identify your strengths and weaknesses. Then, you can create new strategies to streamline the production and forecasting processes both for today and into the future.
• Expand Your Vehicle Search: Due to manufacturer shutdowns during the pandemic, there is now a shortage of new delivery vehicles, and constraints on inventory are likely to extend into the coming year. This means you may need to expand your vehicle search to include renting near-new and small capacity models to keep routes running.
3. Focus on Driver Safety
Throughout much of the country, essential employees were earning less than some laid-off workers receiving unemployment benefits. This made it difficult to attract and retain delivery drivers who were risking their exposure to the coronavirus to perform their job duties.
Placing a strong focus on driver safety is critical to easing drivers’ concerns. This includes providing protective equipment such as masks and gloves, having crystal-clear policies around testing and what to do in the event of an exposure, and having specific cleaning protocols for vehicles at ends of shifts.
Author Information;
Rick Bell, Vice President, Strategic Accounts
Rick serves as Vice President, Strategic Accounts at Merchants Fleet. In his role, he engages on a strategic level with clients to build relationships, support their long-term planning initiatives, develop innovative fleet management tactics, and identify opportunities for efficient, value-added solutions. He rejoined Merchants in April 2015, originally as a sales executive for the Southeast region. Rick has 20 years of sales experience and an extensive track record of developing business relationships, leading teams, and qualifying and maintaining sales pipelines.
Rick is a decorated veteran of the United States Army Infantry, was deployed multiple times in support of Operation Iraqi Freedom, and served as Instructor at the Officer Candidate School. He is a recipient of numerous awards and honours. Rick received his bachelor’s degree in history from Bridgewater State College. He currently lives in Savannah, Georgia.