The Supply Chain Dive Outlook on 2021

How does a shipper ensure a carrier is available when needed? Over the last couple of years, a term has arisen to paint a picture of a company that checks the boxes of an organization that a carrier wants to work with: shipper of choice.

In 2019, we asked a panel of experts what went into becoming a shipper of choice. They noted that carriers covet considerations like speed, profitability and digital connectivity.

A lot has changed since 2019 — with shippers and carriers alike dealing with dramatic demand swings during the pandemic and 2020 — but maybe not when it comes to shipper of choice.

"Shippers can't necessarily do anything about the demand patterns that have come from the pandemic," said Angela Acocella, a research assistant and PhD candidate at the Massachusetts Institute of Technology Center for Transportation and Logistics, whose recent research has looked at reciprocity between carriers and shippers.

What the pandemic did was underscore how difficult the process of freight procurement can be, Acocella said.

"It's not that different from other market cycles," she said, noting that while some markets experienced a very hot trucking market, others saw a downturn in their demand for freight.

In fact, the pandemic has made the idea of shipper of choice more important than ever, according to Michael Zimmerman, partner and lead for analytics in the Americas at Kearney.

"During the price spikes of 2018, when capacity was down and then demand was up, and during COVID — same thing — shippers known to have poor conditions didn't get the capacity," Zimmerman said. "And then the only way to get the capacity was to pay more."

For the shippers looking for freight and dealing with a tight market, the ideas underscoring shipper of choice still apply, Acocella said. And others agree, even if the phrase itself might be falling out of favor.

"I would say that term is a bit fatigued," U.S. Xpress Chief Revenue Officer Justin Harness said in an interview late last year. "But there are certainly things that shippers can do to become more attractive to the carrier community."

Does a history of higher payments matter?

In a research paper published last year, Acocella completed an analysis to determine if carriers are more likely to pick up a contracted shipper's freight in a tight market if the shipper had paid a higher price in a soft market.

"Are [carriers] remembering their shippers' previous performance or pricing when they're making their acceptance decisions?" she said in describing the research goal.

The research considered a shipper's performance across a few different variables including contract pricing, the consistency of volume tendering, tender lead times and dwell time.

Acocella and her co-authors found that when the demand for freight exceeds the supply from carriers, the carriers are "not really considering what their shippers' previous market behaviors were," she said, noting that the previous market means the preceding period of low demand for freight. "But really, they're responding to the current performance."

This means shippers could pay more in a soft market, but that won't, on average, help them procure freight when the market tightens. Higher rates help shippers procure freight, Acocella said, but only if they're competitive in the tight market.

Money can buy capacity, but a history of shared business helps

The variables that matter to shippers haven't changed that much as a result of the pandemic.

"You can always get a truck," Zimmerman said. "It's just a matter of price."

But the ability for a shipper to find capacity when the market is hot can come down to more than just price, Acocella said.

If a carrier has a long-standing relationship with a shipper, the carrier will have more information to determine if it should prioritize those loads.

"We can offer that capacity to that shipper because we know them over there and we can, you know, hop on the phone and we know they'll pick up," Acocella said.

So the history of a business relationship matters, but so do the variables hidden within that relationship that show the shipper's operational performance over time. The operational performance comes back to considerations like low dwell time and consistent tendering behavior.

Dwell time is one of the most expensive variables for a carrier that it doesn't have control over, so a shipper that manages it well will be placed in high regard, Harness said.

One reason dwell is so expensive for carriers is that drivers know they make more money when they're moving since they get paid by the mile. So a lane with high dwell time can lead to driver turnover, which is costly for carriers — especially during a driver shortage.

In 2020, shippers who had bad reputations with carriers struggled when capacity became tight, Zimmerman said.

"It was particularly bad in the second half," he said. "And even worse in the months of October, November, December, when the market was at its worst. And that's when poor shippers or non-shippers of choice had the worst time getting capacity."

Harness said U.S. Xpress does everything it can to accept loads from shippers that fall under contract. If it can't, it is "almost exclusively going to be based upon available capacity," and the carrier works with the shipper to find alternatives.

So while the pandemic might not have changed what carriers consider important, it did "shed a light on how difficult this process is," Acocella said.

The process for accepting a load will vary greatly depending on the carrier, with technology increasingly making the decision to accept or reject a load at larger carriers.

"It is a fairly automated process," Harness said, adding that "algorithms are helping us make the decisions on what we should and should not take based upon where the capacity is or where it's forecasted to be at any given point." He declined to comment on the variables used as predictors in these algorithms.

Shifting sands for contracts?

The 2020 calender year ended with many shippers realizing they've blown their budgets as a result of paying premiums to get freight, Zimmerman said.

"They're going to look for ways ... to mitigate that," he said.

Part of this will result in more focus on the shipper of choice fundamentals like reduced dwell and consistent tendering, Zimmerman said. But some carriers and shippers are starting to completely rethink the way they do their contracts.

"I don't know that it's necessarily because of the pandemic or not, but using dynamic pricing as a way to factor in market conditions to help manage this capacity allocation decision" is one potential change coming to freight procurement, Acocella said.

Dynamic pricing moves away from a single, annual contracted rate and toward a rate tied to an index of the freight market. The market dynamics that took place during the pandemic highlighted the need for a more flexible approach to freight procurement, she said.

But details like what index to use (DAT, Cass and Stephens are some options) and how much the price should fluctuate on a contract are still up for debate within the industry, she said.

"Both sides are talking about it," she said. "It's a conversation that's being had a lot."

Changes to contracts will provide more clarity to shippers and carriers about how rates will change as the markets shift. But when markets get hot, carriers will still have to make decisions about which freight to prioritize — and a history of short dwell times and consistent tendering behavior will still be important.

Don't look here for the standard issue procurement and supply chain trends for 2021. You can read about the digitization of procurement, artificial intelligence, machine learning, cloud-based software solutions, autonomous vehicles, robotic process automation, evolving enterprise systems and dashboards driving supplier analytics in other areas of this publication.

We are fundamentally professionally and personally transformed because of our COVID-19 pandemic experiences. In an era of increasing technology in our profession, we have actually become more thoughtful and understanding in our supplier relationships. Perhaps we have regained a portion of our humanity.

And it is humanity that colors my procurement trends for 2021.

Empathy

A human resources manager once told me that in his view, everyone came to work carrying a bag of rocks. Those rocks were metaphors for financial pressures, sickness and health problems, parent or childcare issues, car repairs or just everyday mundane aches and pains. He felt it was his responsibility to lighten the load as much as possible. His empathy for employees was almost as important as his problem-solving skills.

While we might have empathy for our colleagues holding their share of rocks, empathy for suppliers was often in short supply. Accepting supplier excuses was a sign of weakness and a buyer's alleged naiveté was often questioned and even mocked. If a supplier's performance wasn't up to snuff, fix the problems or move on to a new supplier was the standard and unemotional mantra.

But now we have a fresh level of empathy for suppliers who experience the same virus-related issues that we do. Many employees and their families are sick, in quarantine, or worse. Local regulations and lockdowns impact operations. Carriers are overwhelmed, slowing deliveries. One inadvertent virus exposure can shut down a product line or a company, immediately disrupting supply. And the same can happen to our companies … in an instant.

Presence

"You're on mute" is now met with a smile and not an embarrassed grimace. Video calls are here to stay. At this point we've overcome the connection issues, optimized our cameras to look younger, thinner and smarter, found our unique backgrounds and figured out how to properly dress for our virtual meetings. In fact, calls without video are increasingly unfulfilling and infrequent.

Video calls with suppliers and colleagues improve communication, enhance relationships and create a human presence that was in danger of being fully digitized. Using this ubiquitous technology for our important daily interactions makes us that much more personable and approachable. And notice how we no longer apologize for a child or pet suddenly appearing on a video call? "Tell me about your dog" is an interesting opening gambit in a tense negotiation.

Support

During this pandemic, small business, including HUB suppliers, have taken it on the chin. Decreased demand, operational and supply chain problems and lack of access to pandemic related financial assistance have forced many small businesses to barely hang on or close their doors for good.

Many of us are supporting local restaurants with regular take-out orders. Use that same compassion to support the small business in your community. A decent sized order for maintenance, repair and operation supplies might not mean much to a mega supplier, but it may just be the lifeline a local company needs to stay in business. Strongly suggest that your major tier 1 suppliers do the same, as upstream small business supply chain disruptions will roll down to your company at some point.

But what of the "low cost at all costs" mentality that resides in the C-suite at far too many companies? The protection of the local and regional economy, and the reduction of supply chain risk, more than makes up for any potential increase in price. "How can I support your business?" is music to the ears of a local small business owner.

Leadership

Many consumers received an education about constraints and shortages in the supply chain when they tried to buy toilet paper, flour and disinfectant wipes last spring. Supply chain management became the cause célèbre and brought our profession into the daylight during the early days of the pandemic.

A basic understanding of the supply chain transfers easily from the supermarket aisle to the workplace, creating a deeper understanding of the strengths and challenges of our profession.

This newfound exposure is a great opportunity to take a permanent leadership role within our companies. Managing and providing workarounds for product shortages, supply chain constraints and supplier challenges, validate and reinforce contributions to the success of our companies. Become the voice and the conscious of the supply chain as our companies work through the next stage of the pandemic.

There is no doubt technology will continue its inexorable transformation of procurement and supply chain management during 2021. But it will be tempered with a large dose of kindness, compassion, patience and understanding, important traits that will hopefully stick around for a while.

The role of the chief procurement officer is changing. According to LinkedIn Economic Graph Research, CPO ranks 11 on the list of fastest growing C-suite titles of 2020, with 15% growth (as a proportion of total C-suite hires last year).

The need for more — and more critically thinking — CPOs is accelerating, said Pettis Kent, assistant professor of supply chain management at Loyola University Chicago Quinlan School of Business.

That’s especially true for "multinational companies where they need someone to stand at the intersection between what we need internally and what’s available externally," he said. "The CPO is the man or woman who manages that entire organization."

More strategy, collaboration, and perhaps diversity and inclusion lies ahead for this expanding, and increasingly important, role.

Technology lets CPOs be more strategic

Traditionally, CPOs have had one job and one job only: drive down costs. They’ve largely been successful at that, said Alex Zhong, supply chain lead at IBM Sterling, and it can be seen especially in the lower cost of consumer goods.

But forward-thinking CPOs have already moved past the bottom line and "saw that only focusing on cost is definitely not sufficient. They need to step up even more in a strategic position to really support the business growth from a revenue perspective," he said.

Technology advancements have helped make that happen. Instead of the CPO being a mostly technical role, artificial intelligence and machine learning have automated many rote procurement processes, such as vetting vendors and negotiating prices.

That has allowed the CPO job to become a more a "qualitative or communication or a leadership function," said Abe Eshkenazi, CEO of the Association for Supply Chain Management.

It frees the CPO up to do risk-scenario planning, reduce total lifecycle and ownership costs, and encourage innovation in procurement and beyond.

Working with supply chain

CPOs haven’t always been at the C-suite level, said Kent. "The CPO was probably the person outside the room, and now they have a seat at the table."

For enterprises looking to build more resiliency in their supply chain, the CPO role can’t be so siloed. "When you take a look over the last five to 10 years, supply chain has taken on a much bigger role and encompassed procurement as a key function within the organization, as opposed to residing outside of the supply chain functions," said Zhong.

The COVID-19 pandemic pressed this need even further, as supply chains around the world were disrupted. Those companies that weathered the storm were more likely to have C-suite procurement and supply chain professionals working together, said Zhong.

Visibility in the supply chain also helped procurement source what it needed to, and more quickly than if supply chain and procurement weren’t used to working together.

"They need to talk to each other. In some of the better companies, they are actually sitting under one roof," Zhong said.

Training the next generation of procurement professionals

As in-demand as leadership-geared CPOs are now and will be in the future, there aren’t enough people to fill those roles.

This is changing, said Eshkenazi. "Historically we didn’t have a large or significant academic foundation in supply chain," he said.

In the mid-1990s, the U.S. had just a handful of programs, and procurement training was typically an on-the-job endeavor. Now there are "over 500 programs that have supply chain degrees. It shows and reflects the tremendous need for supply chain professionals," which includes procurement, he said.

Kent specifically teaches about subjects such as strategic sourcing and "major concepts that really are decided at the C-suite level. We’re trying to help our students understand the value of the strategy side of sourcing."

This training doesn’t need to only be within academia. ASCM will launch a Supply Chain Procurement Certificate program in March.

Salaries are competitive, too, which will continue to attract talent into the field, bringing in professionals that will grow into these more strategic CPOs.

In its 2020 Supply Chain Salary and Career Survey Report, ASCM found that the median salary for supply chain professionals with a bachelor’s degree was $78,507. That’s 24% higher than the national median salary of those with a bachelor’s degree. ASCM also found that supply chain professionals with associate degrees had a median annual salary of $62,000, higher than the national median of $46,124.

Plus, the survey found that these professionals received an average annual salary increase of 4.7%, compared to the national average of 3.5% (while ASCM’s survey was about supply chain, it includes "procurement specialist" as a common title).

While the industry still needs to address pay gaps between men and women, the survey found women under 30 are paid the same as their male colleagues, and women 30 to 39 reported salaries at 93% of what men in the same age bracket earn. Nationally, the gender wage gap is 81%, according to Payscale.

"We need to focus on diversity and inclusion. We need more women and more people of color for supply chain to be much more reflective of our consumer [base] and the entire population," said Eshkenazi.

Better pay parity and more opportunities for currently underrepresented demographics are not only better for procurement and supply chain now, but they also mean that the CPOs of the future will be more reflective of diverse consumer bases and the entire population.

The supply chain landscape began the year absent of a familiar name. Damco is no more, after Maersk announced in September it would dissolve the freight forwarder brand by the end of 2020. Maersk absorbed Damco's air and ocean less-than-container-load shipping to combine it with Maersk’s logistics and services products.

The Copenhagen-based conglomerate's portfolio now boasts air forwarding and LCL in addition to existing services in ocean transport, trucking, customs brokerage, warehousing and port terminals.

Alexander Nowroth, managing partner at Lebenswerk Consulting Group, compared it to the Amazon effect.

"Amazon wants to control everything up to the last mile. And the same thing is now happening with container lines," he said.

Maersk CEO Søren Skou has pursued an end-to-end logistics strategy for years, acquiring customs brokers, investing in digital tools like Loadsmart and developing platforms such as Maersk Flow and Twill. Maersk marketed the internalization of Damco services using words such as "simplified," "agile," "seamless" and with fewer "handoffs."

Andrew Sisto, director of corporate development at project44 and former manager at Maersk, described the internalization of Damco as "a natural fit."

The Damco move further blurs the lines between forwarder and carrier.

"It's very hard for shippers, and also forwarders, to differentiate," said Nowroth, who formerly held roles at DB Schenker and Maersk. "Am I dealing now with a freight forwarder? Or am I dealing with a shipping company?"

Shippers face a choice as they plan their freight strategies: the simplicity of a single end-to-end provider versus the reduced risk of a diversified carrier network. 

"Shippers can take a call on what sort of service they want and whether they might be willing to pay extra for an end-to-end service from a single provider," said Chris Rogers, lead supply chain analyst at S&P Global-owned Panjiva in an email. 

Many large businesses already work directly with container lines, so there may be little change to their relationship with Maersk, if any. Firms that ship several thousand containers each year likely already have what Nowroth called a "healthy mix" of freight suppliers. 

Mid-sized shippers may find themselves more in a decision-making spot. No doubt Maersk, as the largest container line in the world, has expertise that could aid shippers, particularly smaller ones. 

"We can bundle products into customized solutions and also offer visibility and reliability that help our customers make their daily jobs easier, solve their supply chain challenges, and help them win in their markets," Michael Meierkort, head of logistics and services for Maersk North America, said in an email.

Working directly with a carrier such as Maersk typically means preferred (though not always guaranteed) vessel space — a critical factor in the current environment of limited capacity and lofty freight rates. 

For a supply chain manager in need of reliability and stability rather than the lowest cost, Nowroth recommended direct bookings with a carrier. "Maersk can definitely get you space if you pay money for it," he said, adding that the carrier is known for a high quality of service. 

"The disadvantage is [shippers] only have one ocean freight service," Nowroth said, as opposed to a freight forwarder that will book with more than one shipping line.

Multiple carrier options hedge shippers against risks, whether that's a force majeure declaration, a blank sailing and rolled shipment, or a cyberattack that disrupts communications or operations.

"The spate of cyber-attacks ... [shows] the importance to shippers of maintaining a diverse set of shipping options even if that comes at the expense of efficiency and costs," Rogers said.

Freight forwarders: Friend or foe?

The scrapping of Damco also leaves freight forwarders at a crossroads. Maersk, once and still a supplier, now offers many of the same services as freight forwarders.

"Forwarders definitely see this as competition," Rogers said.

After Maersk announced the Damco move Sept. 1, DB Schenker wasted no time swooping in to grab Damco customers who would have been transferred over to Maersk. On Sept. 4, DB Schenker announced a "stability package" for Damco customers, in which DB Schenker would provide short-term services agreements with the same conditions shippers had working with Damco.

"As you can imagine, Maersk was very furious about that," Nowroth said. The carrier terminated rates and agreements with the forwarder, according to Nowroth and media reports. ShippingWatch later reported the forwarder had moved its business from Maersk to MSC. DB Schenker did not respond to a request for comment.

On Maersk's Q3 earnings call in November 2019, an analyst asked about volumes and market share with freight forwarders, mentioning the media reports about DB Schenker.

"I think all we can say is that, as any other business, you win a customer every now and then, and you lose a customer every now and then," Skou said in response, without naming DB Schenker. "And so we are very comfortable with our position with our freight forwarder customers."

The critical dynamic as Maersk integrates Damco services is maintaining a level playing field, said Dr. Stéphane Graber, director general of FIATA, the International Federation of Freight Forwarders Associations.

"The maritime supply chain has undergone a number of structural changes over the years, and all actors have had to adapt and make commercial decisions in line with the new business realities," Graber said in an email.

Even if freight forwarders choose to treat Maersk as competition, they have to consider availability of assets to provide their shipper customers.

"Most of the forwarders are alive to the fact that they cannot avoid using Maersk as a carrier especially when they have huge market shares in many trade lanes," said Hariesh Manaadiar, author of Shipping and Freight Resource.

Maersk has a capacity of 4.1 million TEUs and holds 17% of the container shipping market, according to Alphaliner. Its alliance partner MSC ranks second in Alphaliner's Top 100, holding nearly 16% market share with 3.9 million TEUs. A freight forwarder avoiding bookings with either or both carriers significantly shrinks the pool of available capacity.

"Kuehne + Nagel doesn't have their own ships. And that means they can't really do anything in the freight forwarding service without Maersk," Nowroth gave as an example. Kuehne + Nagel declined to comment on whether it views Maersk as competition, a partner or both. FIATA said it was not in a position to comment on hows its members perceive Maersk. 

"Freight forwarders will continue to be a key customer segment for our ocean business," Meierkort said. 

Forwarders working with Maersk but concerned about competition may choose to issue house bills of lading rather than use master bills of lading issued by the carriers, to protect shipper details from Maersk, Manaadiar said.

Forwarding's shifting sands

Analysts said the Maersk-Damco move will start to drive a number of changes among freight forwarders and how they market themselves to shippers.

"They have to justify their existence," said Nowroth. "They have to be far more innovative, they have to be far more clever, about what they can really offer as a value to their own customers."

One way to do so is to emphasize to shippers "the importance of having a diverse set of logistics options open," Rogers said.

Forwarders will have to invest further in digital transformation to compete with carriers' offerings. Forwarders typically have the upper hand over shipping lines on tracking services and customs clearance, Nowroth said, which they can bill as a value-add. 

The Maersk move may also spark a spate of M&A activity as forwarders aim to demonstrate value to shippers through size and purchasing power.

"If you don't have hundreds of thousands or millions of TEUs ... you're not really a serious negotiation partner with shipping lines," Nowroth said.

Size was among the reasons DSV bought Panalpina for $4.6 billion in 2019. The acquisition made DSV Panalpina the fourth-largest freight forwarding firm globally, according to Armstrong & Associates.

Analysts have speculated that freight forwarding firms would buy each other due to the highly fragmented market.

"I see Agility buying something within the next couple of years," Cathy Morrow Roberson, founder of Logistics Trends & Insights, told Supply Chain Dive in 2019. Agility was in merger talks with Panalpina before the DSV acquisition.

In the wake of Maersk's Damco move, Nowroth floated what he said was a "cool, radical idea:" that a freight forwarder might buy a shipping line. But he acknowledged that's a big undertaking from a capital investment standpoint due to the high costs of operating and maintaining vessels.

Carriers are unlikely to buy other carriers, as the industry has undergone a wave of consolidation and the top 10 control nearly 84% of the market. But they'll likely make moves to go deeper into forwarding, logistics and end-to-end services, analysts predicted.

The most comparable example so far is CMA CGM's acquisition of Ceva Logistics, though there are key differences. CMA CGM hasn't restructured its business in the same aggressive manner as Maersk. Ceva is also more of a standalone operation, at least for now.

"Maersk traditionally has a pull effect," Nowroth said. "Whatever they do first, others naturally try and imitate that."

A step-change in consumer behavior will inevitably spiral through the supply chain, and e-commerce is no exception.

"The package market is likely to remain tight in 2021 providing support for pricing gains at UPS and FedEx," wrote UBS analysts in mid-December in a perfunctory summary of what may be a driving force in retail supply chains for the year.

If parcel carriers maintain their advantage, which experts and analysts predict they will for some time, the dynamic between shippers and carriers will continue to shift. In a world where parcel carriers choose which volume they carry in and out of peak season, some shippers will win capacity and some will lose. And "shipper of choice," a concept more often referring to in the trucking market, could be used in the small parcel supply chain too.

Post pack, pre carrier

Operational capacity after orders are packed but before they are handed over to carriers will be a differentiator for shippers looking to secure volume flexibility in their next contract, according to Tray Anderson, logistics and industrial lead for Cushman & Wakefield in the Americas.

Pre-sorting packages or driving them directly to carrier sort centers, though not always helpful this past peak, could become more of the norm — potentially creating yet another line of separation between mature e-commerce players and the rest.

Target has already started down this road. The retailer opened its first post-store sortation center during the third quarter to consolidate orders picked and packed in dozens of stores in the Minneapolis area.

Retailers with the size and skill of Target, Walmart and Amazon may be able to build post-pack infrastructure and capacity, but others will not. "No one else can afford to do that kind of thing. And those players are buying shipping startups," said Rick Watson, CEO of RMW Commerce Consulting.

Anderson posited that third-party depots may become more common, consolidating pickups for shippers without enough volume to stand up their own.

Proactive supply chain management wins again

Size may not be the only differentiator. Consistent, predictable volume may become more valuable than simple scale — adding value and importance to demand forecasting capabilities and technologies for shippers.

Carriers are no longer concerned about filling trucks and vans, and the contracts that traditionally focused on the minimum acceptable parcels will fall out of favor.

Carriers may instead create stipulations that account for unplanned demand, Glenn Gooding, president of iDrive Logistics, explained.

"Carrier contracts — they're really not contracts. They’re pricing agreements built around trying to hold a shipper accountable for the full portfolio of spend," Gooding said.

Bed Bath & Beyond reported earlier this month that FedEx’s surcharges increased the retailer's shipping costs by roughly 20% YoY in the final quarter of 2020, cutting 80 basis points from its margins.

E-commerce has traditionally been a downward force on retail profitability. COVID-19 brought the kind of volume uptick that can sometimes increase efficiency, but it also brought mitigation and safety requirements, not to mention staffing issues and widespread sickness, that increased costs.

Retailers like Bed Bath & Beyond and Macy’s, which largely admit to having a long way to go to get to a modern supply chain in general, may lack the agility to adjust their networks to better serve carriers.

And not only could service from the major carriers be harder to obtain for these retailers, but the cost may also be harder to bear — potentially leading the e-commerce leaders to build their leads and the laggards to fall farther behind.

In 2021, last-mile innovation isn't really a technology play, according to the experts. The technologies to move retail delivery forward already exist and are in use. But the near-term evolution of the last mile is going to be about how retailers, carriers and orchestration platforms collaborate to fully weave last-mile services into the retail landscape so they contribute to, rather than distract from, the overall business of retail.

"COVID has cleared the decks so that everybody is more focused on: 'We need to empower our physical location to be much more efficient, to utilize existing assets, people, product and infrastructure,'" said Bill Thayer, co-CEO of last-mile technology provider Fillogic, at the National Retail Federation's Chapter One virtual conference.

Thayer, along with executives from Uber, Danone and Tanger Outlet Centers, discussed four elements driving the future last-mile innovations for retailers.

1. Connecting the dots between stores and delivery

The relationship between inventory visibility and consumer delivery was undervalued before the pandemic, according to Thayer. Suddenly retailers were incentivized to fulfill orders from shuttered stores with trapped inventory and many did so. The future of that practice is being sorted out now and inventory visibility is a determinative factor.

"Stores were never designed to operate like fulfillment locations. That was never their goal," said Thayer, adding that before COVID, a lack of sophisticated inventory management between in-store and omnichannel sales was more acceptable. The volume of non-traditional sales during the pandemic changed that.

Retailers have prime space in their stores from which to fulfill orders, often delivered directly to customers, Thayer said. But tacking delivery onto an inventory management system not intended to handle it can lead to problems — and make scaling precarious.

Inventory visibility can "connect the dots" between physical infrastructure and last-mile services, he said. Inventory visibility developed with delivery in mind can make way for the channel flexibility retailers have sorely needed through the pandemic.

2. Efficiency and density

One order, one delivery simply won't do in the post-COVID world. Retailers and delivery partners are working out ways to bundle deliveries or encourage consumers to time or accept their orders in a bundle without their knowledge.

"There are ways that you can actually artificially create more pickup density," said Erik Logerquist, Uber Direct's business lead. He suggested directing customers to one of only a few delivery windows throughout the day. "That's a way that we can see a higher batch rate that creates cost savings for us so we can pass those cost savings on to retailers," Logerquist said.

Tanger Outlets is working on a plan to do just that with Fillogic. Outdoor shopping malls like outlets haven't traditionally aggregated logistics services of any kind, explained Thayer. Fillogic and Tanger are working together to do that batching work — at least on the post-purchase logistics side of the outlet mall.

"We're rounding up all those retailers together to aggregate the volume to make that process more efficient, and, of course, getting products and orders into Uber direct vehicles," Thayer said.

3. Data transparency for retailers, brands and consumers

When the cost-benefit equation of running to the store for an item changed with pandemic risk, so did the stakes for delivery tracking — highlighting the inconsistencies in tracking capabilities between last-mile providers.

"Not only do consumers want things on demand. They want to be informed every step of that journey," Logerquist said. "Traditional carriers have made some improvements in real-time tracking. But, consumers nowadays are used to seeing their french fries delivered in real-time on their smartphone. And I think they're really starting to want that same experience with all the merchandise that they purchase."

Consumers want transparency, but so do brands and retailers, according to Danone Director of Global E-commerce and Business Development Omer Waysman. Danone recently realized that in order to optimize its last-mile services, it needed to be able to see the data for every delivery — something not all partners provide.

"We were a bit blind in terms of last-mile delivery data ... Obviously, we are able to do surveys, etc. But the data was with the external partner. And so we were not able to really follow it and really track it in the best way," Waysman said.

Getting ahold of more data allows Danone to measure consumer satisfaction, which Waysman said is paramount for a cost-heavy service like last-mile delivery. For a CPG company like Danone, the financial analysis for Danone's direct-to-consumer business is relatively complicated, he said.

Danone turned to Bringg to orchestrate its direct-to-consumer last-mile business with the hope of using a more complete data picture to better understand consumer behavior pre- and post-purchase – with sustainability and life cycle analysis in mind.

4. Scalability for spikes

If 2020 taught retailers anything, it was they need to be ready for times of feast and famine when it comes to sales volume. For the last mile, that means scalable capacity.

It's no surprise that Uber is a proponent of last-mile services not dependent on fixed assets — but gig-economy-backed services like Uber have indeed seen an explosion in the last year for this reason.

"Traditional providers typically have fixed assets, fixed employee bases, which is really hard to scale and manage spikes in demand," said Logerquist.

For Danone, that scalability is all in the partners retailers and brands choose.

"What was important for us ... is to make sure that the partners we are working with are agile, flexible and can adapt themselves to every situation in every market," Waysman said.