The Last Mile: Finding the Right Workforce System for Urban Logistics
The “Last Mile” of supply chain is a topic that keeps coming up. But it’s because we expect that it will significantly change the face of the supply chain, material handling, and logistics industry.
The last mile revolution has come about in large part because of three factors:
- • Increasing urbanization
- • Shifting customer shopping patterns
- • Technological innovation
We first dug into this topic in our 2017 Annual Industry Report, which you can find at mhi.org/publications/report, but we’ll give you a quick recap to set the scene.
The relative density of urban areas is increasing. In 2015, “approximately 65% of the current U.S. population resides in cities that account for just 3.5% of the total land mass” (2017 Annual Industry Report). This means that a higher concentration of deliveries are occurring in dense urban areas, where real estate is at a premium and logistics can be a nightmare. A recent report from Prologis points out the potential traps of city logistics, saying, “Land shortages in urban locations will intensify, widening the disconnect between supply and demand… hence the ability to handle transportation innovations and automated equipment should be built into current design.
In addition to the higher number of people being delivered to in a complex logistical area, the number of deliveries to each person is increasing. As customer expectations increasingly demand lower costs, faster speeds, and more options, often colloquially referred to as the Amazon effect, supply chain providers have to shift to match – or lose business. Prologis predicts that the growth of cities will only drive the trend of “[rising] consumer expectations and the value of time.”
One way they are doing this is by adopting innovative technologies, such as automation and predictive analytics, and changing their distribution networks to include more, but smaller, distribution centers in urban areas. In fact, Prologis goes so far as to state that “the future of supply chains requires a focus on greater efficiency driven by technology, including alternative fuels, autonomous vehicles, robotics/automation, and predictive analytics,” which is something that supply chain operators have seen coming for a while now.
However, in our 2018 Annual Industry Report, we found that while survey respondents are predicting an exponential increase in the adoption rate of innovative technologies, the actual adoption rate is relatively slow. We identified three major barriers to NextGen supply chain innovation:
- • Making the business case for investment in innovative technologies
- • Trust and security in digital, always-on supply chains
- • Tackling the supply chain skills gap and workforce shortage
And we aren’t the only ones.
The CBRE Group recently released a report on this topic, pointing out that “Three over-arching trends point to labor availability as one of the most critical elements for continued growth of the industrial & logistics (I&L) sector: e-commerce growth, a shrinking skilled workforce and rising wages.”
Many supply chain and material handling companies struggling to find not only qualified workers, but workers at all – leading to pinch points as companies try to expand to meet growing demands from technological innovation, but don’t have workers to do the job.
Even if you have the workers, the last mile can get expensive fast. The CBRE Supply Chain Advisory Group argues that labor will typically account for 15-25% of cost – until you move into last mile logistics, where it skyrockets to 75%.
But it’s not all bad news. CBRE found that industrial employment growth outpaces the national average, so there are jobs to be had. We just have to find people to work them.
Even adopting innovative technologies has a light at the end of the tunnel.
Prologics predicts that the adoption of new technologies is expected to cause “aggregate supply chain costs to flatten or fall in the medium-term.” They point out that while some may find adoption unfeasible today, as more companies integrate these technologies into their supply chain “technological maturation and the growing need to overcome logistics challenges” will lower the adoption barrier.
They conclude with two things “future-proofed portfolios” need to account for:
- • Build in the “future” factor – account for the unknowns that may include “regulation or the pace of technological progress/adoption—as well as “unknown-unknowns.”
- • Consider the “The rise in consumer expectations and the value of time.” Customers are demanding more, faster, cheaper, and it shows no sign of stopping.
Supply chain will never go away. People will always need things to be moved (and for material handling, need the things to move the things). But the way supply chains look and work will change. That’s just the way history works. So it’s just a matter of adapt and survive – and there are ways to do so that work for your company.
(Side note: CBRE measured emerging transportation and warehousing employment markets, and Charlotte, HQ of MHI, won with a 56.8% increase in the last five years. So come hang out with us!)