2020 placed unprecedented strain on retail logistics. Lockdowns have shifted the entire model of the retail sector, and both bricks-and-mortar and online retailers have been forced to overhaul and adapt their logistical operations accordingly. With continuing uncertainty around retail footfall, increasing demand for ecommerce and the challenges posed by Brexit, these logistical strains will continue throughout 2021.
Adaptability and flexibility in retail logistics and supply chains will therefore be vital to mitigating the disruption and building towards growth. We expect several key themes to dictate the success of retail logistical operations throughout this year.
Impact of Covid-19
The impact of the pandemic will continue to be felt throughout the retail sector in 2021. Consumer buying behaviours have changed, retail footfall will remain low, and demand for ecommerce, which has grown by the quantity expected in five years over the past year, will continue to dominate. Retailers have been forced to adapt their logistical operations more rapidly than ever to account for this, and this adaptability will continue to be crucial as restrictions continue to fluctuate over the coming months.
In 2021, the trend of winners and losers will continue with very few left in the middle ground. Traditionally online retailers and those who have pivoted their logistical operations successfully will emerge as the winners. Ocado for example recently saw a 35% increase in retail growth reflecting the importance of a logistical operation that is flexible and built for digital consumers.
Adjusting to Brexit
The consequences of Brexit and the UK-EU Trade & Cooperation Agreement (TCA) will present serious logistical and administrative challenges this year. The retail sector has been one of the hardest hit so far by the TCA, as retailers now need to identify and disclose materials sourced and manufactured from countries outside of the EU before importing into the bloc. This has already caused a major crisis in UK-EU border disruption and difficulties for retailers.
Additionally, these new rules are placing enormous strain on reverse logistics. Retailers are experiencing unsustainable costs for return transport of goods between the UK and EU, coupled with higher returns due to increased online shopping. It might take between three and six months for these initial Brexit barriers to stabilise, so retailers will need to optimise supply chains to adapt and stabilise their business.
Is automation the answer?
The combined impact of the pandemic and Brexit are going to pose major challenges throughout the year. Large proportions of the European workforce in the UK are returning to the continent and British workers continue to endure social distancing and other restrictions. This combination has led to labour shortages and huge operational challenges across the supply chain.
Many retailers have weathered the storm so far, but it is notable that many retailers who have excelled have done so by adapting and managing their supply chains with technology. Among those who re-evaluated operations and supply chains in 2020, smart automation has provided real competitive advantage. With Autonomous Mobile Robots (AMRs) and co-bots among the rapidly evolving automation technology, retailers can increase efficiency and ensure their supply chains are more adaptable for similar circumstances.
However, the cost of technology investment can be significant and full implementation can take up to 18 months. The surge in demand for automation is also likely to drive purchasing prices and implementation time upwards as providers struggle for supply capacity. Despite the predicament, with a comprehensive procurement approach these options are available to retailers, and we expect to see a surge in usage of these technologies.
Logistics will underpin success and survival
In 2021, the need for flexible and adaptable supply chain and logistics strategies across the retail sector will be integral to success. Many retailers are beginning to understand that their logistical and supply chain operations can be a key differentiator in costs and customer propositions.
With volatility expected to continue throughout the year, adaptability and flexibility in logistics and supply will dictate who will succeed and survive.
Clare Harris is senior vice president at Proxima