As online sales surge to record levels, can our supply chains handle a holiday shopping season unlike any other? In this episode, we examine the challenges facing retailers, shippers, and the millions of human hands working to get packages delivered on time. This week we’re joined by Andy Whiting, CEO of Better Trucks, to learn how his company is adjusting to uncharted territory.
Featuring:
- Andy Whiting, CEO Better Trucks
- Dan Stolarski, Senior Managing Director Kin + Carta Advise Americas.
- Bryan Frank, Director, Leader of Kin + Carta Advise NY, Leader of Consumer and Retail Practice.
Show Notes
(0:00) “Shipageddon” upon us?
If Black Friday doorbuster sales slash Roomba prices by 50%, but there’s nobody at the doors to do the busting, are they still doorbusters?
Black Friday might not have featured the stampedes and TV tug-of-wars we’ve come to expect, but could this holiday shopping season bring a new kind of chaos?
Online sales are expected to be up 30% this year. Shipping volumes will be up 15%. Some are projecting shippers like UPS, FedEx, DHL, and the Postal Service could be facing 7 million more packages than they typically handle. And the supply chain industry has been trying to overcome a massive driver shortage, even before the pandemic. Some are saying we should be prepared for “Shipageddon”.
So is it all hype? What are retailers, shippers and supply chain companies doing to adjust? Can technology help us prevent Shipageddon? Will we have to send Bruce Willis into space to blow up an asteroid in order to do so? Or, in this case, into an Amazon distribution center to drive a nuclear-powered semi to do so?
We’ll unpack it all, including a 1-on-1 with Andrew Whiting, CEO of Better Trucks, a company helping businesses of all kinds make next day deliveries to their customers.
The central question this week–are we ready for the holidays?
I’m Scott Hermes. This is Working Better.
(01:50) Supply chain in the COVID era
The pandemic, at least at the beginning, marked exactly the third time in human history that the general public cared about supply chains. The first was when the invention of the Steam Locomotive transformed how goods could be exchanged, the second, of course, was the Beanie Baby Apocolypse of 1994. Rest In Peace, Jaden, Kiki, Peachy, and Zip.
Toilet paper, soap, hand sanitizers, and jigsaw puzzles flew off store shelves, didn’t return for weeks and weeks, and left many people considering for the first time just how things are actually MADE. As in how does toilet paper go from a tree in the forest to Target shelves, decorated with Bears dancing about “Enjoying the Go.”
Needless to say, COVID-19 has exposed many gaps in our society. The impact of upended supply chains has been one of them. When restaurant service came to a screeching halt around the world, farmers were forced to waste huge amounts of crops because food is normally produced based on easily forecasted levels of demand. When it was cut off, with nowhere for the supply to go, they had to throw it out.
On the flip side, companies like Cuisinart found themselves scrambling to meet a 700% increase in demand for breadmakers. Not from me though, my quarantine hobby was psychic surgery. Who needs scalpels when you have the power of the mind?
So with the calendar now in December and the Holiday shopping season well underway–what will it mean for holiday shopping?
“I think the consumer should prepare for some disappointment, quite frankly.“
Dan Stolarski – Senior Managing Director Kin + Carta Advise Americas
(03:16) Unwavering Consumer Expectations
“I think the consumer should prepare for some disappointment, quite frankly. – Dan Stolarksi, Senior Managing Director Kin + Carta Advise America
“Prepare for some disappointment”–a leading candidate for the 2020 movie poster.
That’s Dan Stolarski, from our Kin + Carta Advise office in New York. We spoke with Dan and Bryan Frank, also from Kin + Carta Advise in New York. They emphasized that while so much of the world has changed because of the pandemic, consumer expectations largely haven’t.
Dan:
“If you think about it, 80 percent of Cyber Monday shipments are shipped for free. That’s obviously very largely driven by Amazon and shifting the behavior with the consumers and what they expect. About 25 percent of consumers will actually abandon their cart once they see an unexpected shipping charge appear in their cart. In the meantime, all major carriers, USPS, UPS, FedEx, are increasing their rates for the holiday season. United States Postal Service had made permanent price changes and what UPS and FedEx are doing is they’ve introduced holiday season surcharges. We’re not done yet. Add to that, that almost 50 percent of consumers expect their packages to arrive quicker this year versus last year. And then finally, let’s not forget reverse logistics. Of the nearly $250 billion in expected online sales this holiday season, about $50 billion worth of goods are expected to be returned, which represents roughly 25 to 30 percent of the holiday’s shipping volume. “
50% of consumers expect packages to arrive quicker this year than last.
You might be wondering right now what planet those people live on. Was actual chaos the missing ingredient to really make our supply chains more efficient?
As consumers, we’ve come to expect free and fast shipping. We want simple returns. We want to procrastinate. As JG Wentworth commercials taught us to scream from our window–“It’s our convenience and we want it now!”
(05:11) Surging Shippers
So expectations haven’t really changed. But package volume for carriers like FedEx, UPS and DHL is expected to exceed capacity by at least 5% globally. Shippers are providing every sign possible that they’re prepared.
The good news, if you can call it that, is they’ve had 8 months of the shipping world turned upside down to practice? UPS hired 39,000 new employees earlier this year, including plans for over 100k additional seasonal hires. FedEx also announced plans to add as many as 70,000 additional workers for the holidays.
In our conversation with Dan and Bryan, Bryan emphasized that the math simply doesn’t tell a promising story:
Bryan:
The demand clearly outstrips the supply. How quickly can you add new trucks? They already do this every year. They add thousands of seasonal employees to get out there, who don’t always know the routes very well, don’t know the customers, it causes all these other delays.
I think it’s difficult to believe that there’s enough capacity in what is already a relatively constricted and hard-to-adjust-in-the-scale business.–Bryan Frank, Director, Kin + Carta Advise.
(06:24) Driver Shortages
Sometimes, the human side of this topic can get lost. Until the promises of driverless trucks come to fruition – this is very much a human business. Every package, every truck, depends on PEOPLE to keep it moving. Dan says it’s worth keeping in mind that drivers were already in record short supply, even pre-COVID.
Dan:
“Not only do we have a capacity issue, we also have a driver issue. The demand for truck drivers is at an all time high, and there are massive, massive numbers of job openings that these companies cannot fill.”
In 2019, tens of thousands of drivers left the industry. Hundreds of trucking companies went bankrupt. All before approximately 88,000 drivers lost their jobs when the pandemic hit in April.
Some fear that surges in COVID-19 cases between Thanksgiving and Christmas could also pull thousands of drivers off the road.
In an October piece, the New York Times’ Shira Ovide summarized the nature of the problem well, she writes: “The potential for hiccups shows the complications when our zeal for shopping from home meets the physical limits of humans, warehouses stuffed to the rafters, roadways and ocean freight shipping.
There’s always been a war to get stuff to our door. It’s just been one we usually ignore.”
(07:56) How Retailers are Adapting
Beyond adjusting for the holidays, Dan and Bryan say it’s time to think bigger.
“I think that the bigger question that we need to ask is, ‘ Is the current shipping system that we have a sustainable one? Is it the right one? – Bryan Frank, Director, Leader of Kin + Carta Advise NY, Leader of Consumer and Retail Practice.
Bryan:
“I think that the bigger question that we need to ask is, ‘ Is the current shipping system that we have a sustainable one? Is it the right one?’ Shouldn’t we be thinking more intelligently about using local stores and local opportunities near customers as ways to distribute goods? It may be buying online, picking up at the store in a different fashion. It may also be using those stores as local distribution centers. I think everybody needs to be thinking about alternative ways of getting goods to customers and incentivizing customers to choose the option that works well for them.”
This year, Walmart converted 42 warehouses that were originally used to ship products to stores–to now fulfilling online orders.
Best Buy recently announced it would be offering same-day delivery, thanks to a new partnership with on-demand grocery platform Instacart. Bed Bath and Beyond announced a similar change, working with Shipt and Instacart to get products delivered faster.
“I think it’s difficult to believe that there’s enough capacity in what is already a relatively constricted and hard-to-adjust-in-the-scale business.”
Bryan Frank – Director, Leader of Kin + Carta Advise NY, Leader of Consumer and Retail Practice.
(09:10) Rethinking Supply Chains
Bryan and Dan also shared examples of companies that have re-thought their supply chains creating new opportunities to engage with customers in the process,
“Wayfair, which for the longest time was shipping cheap sofas and rugs and all that stuff by common carrier, when they built their castle gate network and that includes both warehouses where it’s essentially fulfillment by Amazon, and it’s final mile delivery on Amazon trucks, or sorry, on Wayfair trucks with Wayfair employees that show up with a Wayfair shirt, they have a great experience, they can build that brand experience with the customer. Perhaps even more important, what is the value of getting one of your own employees into a customer’s home?” said Bryan
(10:00) Cooler Terms w/ Pooler & Hermes
So how can we better understand what led to supply chain breakdowns early in the pandemic? The toilet paper, breadmaker fiascos we mentioned earlier? To help us get our heads around this, it’s time for Cooler Terms w/ Pooler & Hermes.
That’s right we’re back! Cooler Terms is our recurring segment where our very own Katie Pooler helps us make sense of the world by explaining concepts that sometimes get buried in technobabble.
Katie:
“Just-in-time” supply chains. It basically means materials and products are moved just before they’re needed in the manufacturing process. So if you manufacture breadmakers, you want enough raw materials–steel, aluminum, copper wire for electronics–to essentially match the amount of breadmakers you need to make, and not much more. Meaning you don’t have to store extra materials in inventory for very long, which can get expensive. So manufacturers can usually predict how many people will buy breadmakers, and they’re able to maintain a steady flow of materials to meet demand. It’s the same reason I only buy six bottles of Chardonnay every week, because I know that’s exactly as many as I will drink.
Scott:
So efficiency is sort of the name of the game.
Katie:
Right, but it also means these supply chains aren’t able to adjust easily because they were designed to run as lean as possible. Many are advocating for resilience to be a new priority in supply chain management.
(Katie performs flawless rendition of “The Chain” by Fleetwood Mac, we learn more about Stevie Nicks’ passions, etc.)
The dangers of “just in time” supply chains certainly seem easy to spot now, and many experts are predicting a shift towards resilience, as Katie mentioned. More variety of suppliers – businesses not putting all their eggs in one basket. Many experts are advocating for what’s called “nearshoring” – which is sort of a fancy way to say stop depending on China for everything.
However you slice it, no business will be immune to the effects of a severely strained shipping network this holiday season. One business uniquely positioned to help make all of our holiday dreams come true is Better Trucks. They’re a “Last Mile Delivery” Company – meaning they focus on the critical LAST leg of the supply chain process. Usually from a distribution center to YOUR door. A.k.a the part we all care most about. We spoke with Better Trucks CEO Andy Whiting to get his take on the holidays and the state of the shipping world as a whole. We also may have accidentally founded a business during the course of our conversation. You’re all under NDA.
(14:18) Interview with Andy Whiting
Talking with Andy was such a great reminder of, again, just how human this business is. It takes so many sets of human hands to propel something through space and time, as Andy said. It’s a worthwhile reminder to simply be patient and appreciate the people that make our convenient world of online shopping possible.
(23:38) What should consumers do?
So from a consumer standpoint, what else can you do? Well, if you haven’t already –get your online shopping done. Today. December 14th is looking like the last day you can ship and have confidence that your gifts will arrive before Christmas.
Shop local! Experts are also recommending choosing options like curbside pickup instead of delivery to help mitigate the strain on shippers.
Another option: sit the children down and tell them they have been very, very naughty and Santa will not be coming this year. Long pause. Wait for the tears to subside. However. Santa did say that, maybe, if they were really really good between now and Christmas, he could make a special trip after Christmas to deliver their gifts. IF and that’s big IF. They were really, really, good.
Perhaps lean on things that aren’t shipped physically – like tickets to an event in 2022, online classes, or a cleaning service if you’re looking for a festive way to tell someone “your home is a mess.”
Which reminds me – we’re knocking 50% off all Working Better merchandise for your last minute holiday needs. Have a 10 year old niece with impossible to perceive taste? How about a tote bag from a podcast she’s never heard of! Have a sibling who just bought a home? Get them the Working Better Home Security System. Guaranteed to make you feel more secure.
Overcome with existential dread? Get yourself a little holiday treat: The Working Better Anxiety Control System. Just breath in and out slowly into our officially licensed Brown Paper Bag and your anxiety will be temporarily under control.
No, none of these things exist. Maybe one day if you send $19.99 and stamped self-addressed envelope to:
Working Better in the Future
PO BOX 123
Anytown USA 55555
…okay I’m being told we’re out of time.
That’s our show folks. Good luck out there, stay safe, be sure to subscribe and follow us on all of the social mediums: TwitGram, InstaBook, LinkedEr, and FaceIn. Or just knock three times on the ceiling if you want me; twice on the pipes means it’s time to move to a house with modern heating and air conditioning. We’ll see ya next time!