E-commerce demands to lead innovation in supply chain in 2023

In a highly competitive transport and logistics environment businesses must have a future-proof strategy that helps their operations to meet growing e-commerce and consumer demands, while also being able to weather the rigours of transportation and supply chain movement. Many operators are investing in automation and advanced technologies, with more electric vehicles and freight capacity, increased delivery days, and seasonal workforce.

Our research shows that shoppers spend more at sales events that offer the deepest discounts. Despite cost-of-living pressures, consumer spending is on the rise

Richard Thame

It was predicted that 2022 would see record-breaking online shopping trends and boy, did those predictions come true. Australia Post reported that November 2022 turned out to be the biggest month in Australian online shopping history, with over six million households making an online purchase during the month, which was half a million more than the October 2022 average and up 3.0 per cent from November 2021. The two-week period between Black Friday and Cyber Monday sales saw online shopping figures move up 4.0 per cent from the same period in 2021. New South Wales saw the highest spending figures, followed by Victoria and Queensland.

While the early stages of Covid created continuing production constraints that affected the consumption of goods and services, the slew of repeated lockdowns and other health-related restrictions resulted in various transportation and supply chain issues that, albeit difficult operations-wise, did not have a debilitating effect on most transport businesses in Australia. But with great power comes great responsibility.

Although that isn’t exactly news to the industry as experts had already warned of supply chain pressures in the lead up to the pre-holiday and Christmas shopping season.

Holiday peak

While some in the industry had expected online shopping to weaken in November / December compared to the lockdown highs of 2020 and 2021, the result would have surprised even the best of them. Gary Edstein, DHL Express Australia CEO, expected the return to bricks-and-mortar shopping was likely to soften 2022’s peak parcel delivery period.

“I don’t envisage peak to be as big as what we’ve had before,” he said. “Back in 2020-2021 people were locked up, isolated, shopping online. Now that we’re out and about we’re spending discretionary income on things like hospitality and travel. We’ve also seen inflation and interest rates go up and there is less discretionary income for online retail, so it’s sort of softening in B2C (business-to-consumer).”

However, despite increased foot traffic back into retail stores, online shopping showed no signs of slowing. An e-commerce update published by the Australia Post Group in November titled ‘Inside Australian Online Shopping’, looked at deliveries data across 2019, 2020, 2021 and 2022 to predict that despite a surge in online buying in November, the Boxing Day sales would again see a hike in parcel volumes travelling across Australia.

“This year’s Cyber Weekend sales (Black Friday and Cyber Monday) was almost 7.0 per cent higher than last year’s record Cyber Weekend period,” the report noted. “We saw a significant spike in volumes a few days prior to the official commencement of Black Friday on 25 November. This indicates that retailers are beginning their sales early to capture a larger share of the wallet.”

Seasonal stress

Co-founder and director of Software as a service (SaaS) platform provider Cario, Fiona Marshall, said carriers often have to use sub-contractors or seasonal workers to tide over the holiday peak combined with staff shortages, which can affect overall operations, particularly in a consistently increasing online shopping landscape.

“Traditionally, the holiday pressure was on the Christmas period, as the main event,” she said.

“We are now seeing several new peaks, including Black Friday and Cyber Monday, combined with extreme weather events such as the flooding across parts of the country.

“Carrier performance naturally drops during peak periods due to the large increase in demand, coupled with a fairly fixed supply of trucks, warehouses and staff. Typically it is expected for this performance to rebound in January. However, this isn’t always the case, as many companies also use this time to give their team a much-needed break. This results in subcontracts taking over runs, some of whom may not understand the operation so intimately.”

Marshall said e-commerce is bringing about unique pressures on freight operations, particularly in regional and thinly populated areas. With carriers under the pump with increased demand, some end up choosing jobs that offer higher earnings. She added the industry needs to come up with better B2C strategies in handling freight as customer demands increase in a burgeoning e-commerce sector.

“Since Covid, Australia has seen a large uptake in online shopping,” said Marshall. “This can be anything from running shoes, and grocery shopping, right through to larger items like fridges and beds. The freight network as it stands is poorly equipped to deal with servicing Australia’s sparsely populated area for the range of goods consumers may buy online. At the same time, carriers have experienced excess demand therefore have become more focussed on highmargin activities. They are therefore exiting freight that doesn’t fit their network.

“For a lot of carriers this means stopping or reducing B2C deliveries and charging new or increased B2C delivery costs. With B2C shopping predicted to continue increasing, carriers and consumers need to find better B2C solutions. This will likely include more secure parcel letter boxes with delivery codes that can be provided to freight carriers, carriers focused on B2C deliveries like Allied, Aramex and Couriers Please. There will also likely be new, out of hours services continuing to develop around delivering to customers when they want to be delivered to (e.g. 9pm at night). Additionally, there will be services needed to deliver heavy or awkward goods to residential addresses. The current solutions are often cost prohibitive.”

Infrastructure issues

Natural disasters could continue to remain a threat to the industry, causing significant supply chain disruptions across freight networks. The 2022 flooding events across New South Wales and Victoria had serious impact on transport and delivery networks, including a train derailment in regional NSW that was caused by the tracks buckling due to unprecedented rainwater continuously seeping underneath them. The event affected freight deliveries between NSW, Victoria, Queensland and Western Australia. The disruptions led various sides of the industry to rally round and call for urgent federal and state funding to create a plan to tackle the repairing and restoring of road and rail freight networks. Regional areas rely on an accessible road network and reinstating road access as quickly as possible is critical to ensure the supplies, support and equipment needed to recover from a natural disaster can get where it’s needed, NSW deputy premier and minister for regional NSW Paul Toole said at the time.

The Victorian Transport Association (VTA) had called for governments to invest up to $1 billion to fix the flood devastated transport networks, including gazetted routes that operators rely on to carry freight. The state body said that while the repair bill may seem extraordinary for state road infrastructure damage, the impact of the transport disruptions are felt nationally, particularly in the lead up to a busy holiday season.

In NSW, the state government recently announced a $500 million funding under the Regional and Local Roads Repair Program to restore roads damaged by months of wet weather in both Greater Sydney and Regional NSW. The funding is in addition to the NSW Government’s $1.5 billion commitment to maintaining state roads each year, and on top of the $50 million already provided to help regional councils carry out emergency pothole repairs.

Earlier in May, union bodies and associations joined forces to form an alliance that sought to better protect the transport industry and supply chain sector in the face of external pressures. The Transport Workers’ Union (TWU), the Australian Workers’ Union (AWU) and the Shop Distributive and Allied Employees Association (SDA) came together to make a Retail Supply Chain Alliance (RSCA) that represents workers throughout supply chains from farms to stores. The unions say transport issues as a result of extreme weather events and supply chain disruptions in the face of the pandemic were some of the factors that pushed them to collaborate on an alliance created with a set of supply chain safety principles.

Private sector investment

At the same time as federal and state governments led infrastructure investment across various part of Australia, many big and small private players in the market invested in advanced tech and warehousing upgrades in 2022.

In November, DHL Supply Chain announced its plans to deploy 1,000 robots to its warehouses by 2025 – its largest Australian investment to date and its largest investment in robotics and automation in the Asia-Pacific region. The $150 million investment in warehouse robotics solutions and automation aims to support faster delivery to customers, improve operational efficiency, and reduce employee workloads. In addition to the investment in robotics, DHL Supply Chain aims to grow its Australian workforce over two years and will provide retraining and development opportunities to existing employees.

Also in November, DHL Express opened its first Australian shopping centre Service Point in Sydney. Located at Stockland Merrylands, the 63-square-metre store offers improved express parcel shipment services to customers. It is also DHL’s first standalone Service Point in Australia, where customers have the option to lodge a shipment in-person.

“Until recently, our Service Points have been located near airports or in business parks, some distance from the main shopping areas frequented by consumers,” said Edstein. “During the pandemic, with the closure of Australia’s international borders, more people chose DHL’s express delivery service to send important shipments overseas to their family and friends. With this new retail Service Point at Merrylands, we’re stepping into the retail sector to make express delivery services more accessible and convenient for all our customers.”

In December, Australia Post opened Perth’s new state-of-the-art parcel processing facility with advanced automation and the ability to process close to 200,000 parcels a day during peak periods. “Online shopping continues to grow in WA. This $82 million facility is a significant investment in our overall network and demonstrates our ongoing commitment to meet growing e-commerce needs,” said Australia Post Group CEO and Managing Director, Paul Graham.

“The automation inside the new facility means significantly reduced manual handling keeps our people safer, parcels are processed faster with more scanning events, which is fantastic for our customers.

“This state-of-the-art facility is allowing us to deliver in Perth like never before and continue to connect Australians to each other and the world.”

The extra processing capacity delivered by the Boorna Wangkiny Mia facility helped Australia Post to process over 650,000 parcels over the Black Friday and Cyber Monday weekend.

Global shipping giant FedEx also made major investments across its international locations, with $6.8 billion invested in facility improvements, network optimisation and infrastructure improvements in 2022, which was a 15 per cent increase over FY2021.

A CouriersPlease report had earlier forecast that despite a climate of high inflation and increasing interest rates, Australians may be prepared to strongly spend this year during the Black Friday and Cyber Monday sales, and the November-December gift shopping period. “Our research shows that shoppers spend more at sales events that offer the deepest discounts,” said CouriersPlease CEO, Richard Thame. “Despite cost-of-living pressures, consumer spending is on the rise. Last year, we delivered more than eight million parcels during our peak period. This year, we’re further streamlining our processes and technologies to reduce our parcel handling times, and onboarding more drivers and franchise partners to continue delivering parcels safely and swiftly to millions of households.”

2023 Outlook

The long-term effects of Covid on the Australian supply chain are still far from over. How the latest Covid wave in China is going to affect the logistics and supply chain here remains to be seen.

However, some issues may be more predictable than the others, Marshall noted.

“While the Reserve Bank has been trying to curb spending, we are still seeing consumer spending remaining strong,” she said.

“Combined with the uptick in B2C deliveries, this means that demand for freight services are still running at near capacity.

“On the supply side, we are still experiencing a shortage of drivers and warehouse workers (traditionally helped by migration). While the worst of Covid’s last wave appears to be behind us, any absenteeism still has long lasting consequences. With China abandoning its zero-Covid policy, this should mean a smoother supply of goods from China.

“In saying that, it will likely put extra pressure on the fuel price in 2023 as their demand bounces back.”

Roads Australia (RA) has called for a range of procurement reforms to lift transport infrastructure productivity and resilience. RA’s December 2022 report not only highlighted the need to encourage further momentum in procurement processes to meet the challenges of delivering the transport infrastructure Australia needs, but also includes 28 recommendations for reform across core areas of procurement designed to foster collaboration, promote innovation, manage risks more effectively and help build a stronger, more diverse workforce for the sector.

Michael Kilgariff, Roads Australia CEO, said challenges in the market have brought greater urgency to the need for reform. “Without further progress in the near term, we are likely to see government clients unable to deliver planned transport projects, industry exposed to increased risk of business failure, and the community not receiving the full benefits of projects, harming our industry’s social licence.”

RA’s recommendations aim to reverse stagnation in productivity growth in the sector by encouraging more collaborative approaches to contracting, reducing regulatory barriers to innovation, embracing circular economy opportunities, forging improved risk management strategies and developing industry skills-driven training programs.

Industry experts believe that advanced planning through new customer strategies, modern technologies, partnerships, and a focus on new markets can help many businesses navigate their way out of the challenges predicted for 2023. The Australian logistics sector will face continued pressures from rising costs of fuel and warehousing spaces, labour shortage, cybersecurity risks, demand for sustainable deliveries, new customer expectations and the risk of natural disasters, Thame predicted earlier. While the pandemic accelerated a paradigm shift towards the digital economy, both SMEs and consumers believe that e-commerce is here to stay. In fact, the overall industry and consumer outlook for the 2023 indicates a huge latitude for further growth in an already booming e-commerce sector.

Leveraging e-commerce growth is a golden opportunity for SMEs in Australia and Asia Pacific where cross-border e-commerce is estimated to grow at a 13 per cent annual growth rate between 2020-2025, a recent e-commerce trend report by FedEx Express states. Additionally, Australasia and Asia Pacific will account for more than 45 per cent of the global absolute value growth in e-commerce during 2020-2025.