E-commerce, which had already been growing at a fast pace, went into overdrive in reaction to the pandemic. To accommodate this pace, the logistic sector stepped up. One state, Georgia, which has been ranked a top location for many years for logistics and infrastructure, found itself well situated to respond to the new economic reality.
“The pandemic has really brought the future right into our present,” said Pat Wilson, commissioner of the Georgia Department of Economic Development during a presentation at the 2021 Georgia Logistics Summit which was held virtually on March 23, 2021, and sponsored by the Georgia Center of Innovation for Logistics.
“While there have doubtless been struggles, Georgia has welcomed tremendous opportunity since the beginning of the COVID-19 pandemic,” Wilson said. “The way Georgia confronted and responded to the coronavirus response has been noticed, and we’re continuing to leverage this attention to create jobs and opportunities for Georgians. From July 1 through December 31, of 2020 – the first half of our state’s fiscal year – we saw unprecedented activity in terms of economic development projects and expansions in our state.”
Wilson noted that the 163 project locations and expansions in the state created 16,000 new jobs. These projects represent $6 billion in investment. For Georgia, this is a very large increase compared to last year; 40% increase in new jobs and 47% in new investments. “We are seeing tremendous new growth in transportation and logistics, accelerated by the rise in e-commerce,” Wilson said. And there are projects in development for distribution facilities for companies including Amazon and Home Depot.
Assisting this expansion is the growth and development of that state’s inland ports. In fact, the Port of Savannah is the fastest-growing port in the U.S. and despite COVID-19 disruptions, total tons crossing all Georgia’s docks reached a record 37.77 million, up 0.6%, or 223,000 tons, compared to 2019.
What is happening in Georgia reflects the national trends, says Alan Amling, Ph.D., an executive advisory board member at Georgia Tech Manufacturing Institute (GTMI) and a Distinguished Fellow at the Global Supply Chain Institute at the University of Tennessee. He moderated panels at the Summit and spoke with MH&L spoke about these trends.
The Impact of E-Commerce
The largest trend that the entire logistic network must address is all of the implications of a very robust e-commerce system, says Amling. “One of the fascinating things we have witnessed is this transition of retail, as we knew it, to e-commerce,” he says. “The customer experience now reaches to the delivery experience which includes more pressure on logistics as customers require very liberal policies. In fact, one of the primary reasons people don’t purchase an item is that it doesn’t fit their delivery expectations.”
Georgia’s expansion of its distribution centers is reflective of how the industry is coping with these demands, says Amling. “While I do see people returning to brick-and-mortar stores as vaccination rates increase, the e-commerce trend will continue and so companies are going to use stores as distribution centers more frequently. Retailers are in fact leaning into this trend.”
To illustrate his point, Amling cites Target’s announcement in March of this year that it will open new distribution and urban “sorting centers. This model will collect online orders from local stores a few times daily and sort orders into efficient delivery routes.
Amling sees the biggest changes occurring in this small package delivery segment. Shipping from stores skyrocketed during the pandemic. Walmart doubled its shipment from 1500 stores to 3000. Other large retailers are doing the same; Lowe’s fulfilled 60% of its online orders from stores and Dicks’ Sporting Goods shipped about 70% of its products from stores.
Along with the expectation of quick delivery, is the demand for the right selection of products to the right local store at the right time, says Amling. How and where to store these goods given that urban locations are more expensive than traditional distribution centers will be an issue. Inventory will be a larger cost driver. “That is a challenge that logistics will have to face and there are some solutions on the horizons that are of interest."
A lot of companies are getting much better at how to use predictive analytics as part of the solution." Using AI and machine learning will be a game-changer in the logistics market,” Amling says. More companies are forming to tackle the middle mile issues. Some of the solutions to smaller more frequent delivery is going to come from above, he points out. Electric aircraft is in the early days will grow.
All of these changes, occurring at the same time, present challenges. “I talk with a lot of logistic leaders who are doing great things but struggling. Trying to run a business and make money and increase service levels and decrease cost consistently. But at the end of the day in the age of e-commerce where consumers have access to the great source of power since the dawn of time, you won’t reverse that trend, so companies will find solutions.”
Workforce Issues
These changes can also affect the workforce in the field and those leading it. The next generation of supply chain leaders will have to be well versed across a broad range of disciplines. “The schools are now pumping out supply chain majors and at The University of Tennessee, it’s the largest business major," Amling says. "That’s been a big change over the past ten years as there weren’t a lot of programs specifically dedicated to supply chain education.”
One of the first issues these leaders are going to have to deal with is how technology will interact with workers, especially in warehouses and distribution facilities. There will be layoffs as in the example of Best Buy who recently announced a reduction in their in-store workforce to convert more retail space to fulfilling online orders. However, at the same time warehouses and distribution centers are having a hard time finding staff. “Given the enormous growth in the field, finding people who want to work in a warehouse is difficult. Automation can assist with this as I see automation as being designed to expand the capacity of the individuals and not replace them.”
While the industry is faced with many challenges in dealing with the new normal in the distribution of goods, it can also bring opportunities as evidenced by the gains that Georgia saw over this past year. Innovation will occur across technology, workforce strategies and processes pushing the logistics sector to even greater prominence.
