In the age of globalization and international trade, transportation and logistics have become hot topics, impacting business-to-business and consumer behaviour worldwide. The COVID-19 pandemic brought a redefined realization to our integrated world in early 2020, and has likely changed the industry for good. In this article, we explore a few trends stemming from the flurry of innovation that has taken over the industry, and discuss what the future holds.
Mergers & Acquisitions
Logistics will be a main focus of transportation and logistics (T&L) deals during the ongoing COVID-19 pandemic and in the post-COVID-19 world, as businesses will look to increase their online commerce and last-mile services in 2021. The pandemic has created a sizeable shift in the logistics sector. Consumers have leaned into online shopping, and pandemic-related lockdowns have created a need for businesses to improve their last-mile services. Because of this shift, many companies have been forced to augment their last-mile offerings and contemplate fresh approaches to client services and corporate partnerships.
Pandemic-driven growth in online commerce has accelerated corporate investment in digital services, driving certain companies to rely on M&A to enhance their online infrastructure. In a time where consumers expect swift, often same-day deliveries with real-time tracking, 78% of companies in Canada in T&L say last-mile delivery is the most inefficient process of their supply chain. Many companies have considered using M&A to bolster their existing final mile services. Some recent examples include:
- Target’s acquisition of Deliv, Inc. (May 2020) to acquire the same-day delivery start-up’s technology that assists in the batching and routing of orders.
- Costco’s acquisition of Innovel Solutions, Inc., a middle-mile and last-mile delivery and installation business (March 2020), to refine the company’s warehousing, shipping, and home delivery processes.
- A U.S. based multinational retail corporation’s acquisition of JoyRun, Inc. (November 2020) to incorporate JoyRun’s peer-to-peer food and drink delivery service into its own last-mile logistics.
Will online commerce continue its meteoric growth sparked by the pandemic? Will consumers continue to embrace delivery culture? The stakes are high for companies invested in the T&L industry, and the upheaval sparked by the pandemic may open up avenues for a rethink of distribution strategies.
Technology continues to modernize the industry, as shippers and carriers realize that there are a number of promising technologies that can deliver significant returns on investments. The drive towards digital transactions, e-commerce, data analytics and other technologies can provide businesses with the tools to address fast-changing needs. Key technology trends that will play a big role in accelerating this shift include:
- Artificial Intelligence (AI). AI allows T&L companies to process historical trends to forecast and manage inventory, and address variable demands across supply chain operations. Historical data from past operations can help AI algorithms conduct primary operations automatically, reducing human error in the supply chain.
- Automation. As expectations for fast and accurate delivery are expanding among consumers, automation in the T&L sector is on the rise. With automated warehouses and the introduction of autonomous vehicles, companies can be better situated to plan, purchase and predict the behaviour of cargo in transit.
- Blockchain. The use of blockchain solutions in the T&L realm has been pitched for a number of years, and this is likely to continue in 2021. Proponents argue that blockchain can be used as a solution for traceability, execution of smart contracts and to provide payment to linked T&L partners. The primary purpose of blockchain in the industry has been to improve transparency, allowing data to be shared seamlessly throughout the supply chain to all concerned parties, while also ensuring information is unmodifiable. Blockchain technology could also be used to help smooth last-mile deliveries by reducing inefficiencies at this stage.
- 5G. The 5G mobile broadband standard promises to innovate the T&L sector by accommodating faster transfer speeds for more data and, in turn, increasing visibility throughout the supply chain. With the development of 5G technology, thought to be more secure and 100 times faster than current technology, logistics processes can be faster, safer and more reliable.
- Crowd-sourced fleets. Crowdsourced deliveries, functioning similar to the likes of Uber and DoorDash, allow corporations to employ contractors to assist with the delivery process. The flexibility of crowd-sourced fleets will likely appeal to companies pushing to better their last-mile deliveries, while remaining adaptable to seasonal demand and evolving consumer demands.
Sustainability and environmental regulation
One of the challenges for the T&L sector in 2021 will be grappling with national and international regulations concerning shipping emissions and other potential environmental risks associated with distribution. Consumers are becoming increasingly climate conscious, and are more likely to purchase from companies with sustainable, eco-friendly reputations. Companies that have integrated robust sustainability practices throughout their supply chains are well-placed to confront these trends.
To achieve the targets of the Paris Agreement, companies such as Amazon, JetBlue and some consumer ride-sharing platforms are currently implementing initiatives such as Climate Pledge, seeking to support the development of sustainable technologies and minimize carbon emissions with respect to ships and vehicles.
As the sector experiences mounting pressure from its stakeholders, companies will be looking to new technologies in order to reduce resource consumption and enhance the efficiency of operations.
What’s next? 2021 and beyond
2020 brought many new challenges to the T&L sector, as companies were required to redefine their business models to remain competitive. A recent survey revealed that 68% of Canadian T&L companies claim their technology is outdated. In today’s fast-moving T&L sector, companies will look to adopt new technologies to simplify workflows and drive efficiency in their operations.
It is critical for suppliers and distributors to keep up to date on innovative technologies, industry regulations, COVID-19 developments and investor expectations in order to retain market share. Dentons will continue to monitor all trends in the T&L sector and stands ready to provide business-oriented strategic and legal advice.
The authors would like to thank Stewart Maier in connection with his assistance with this article.
- “Last mile” refers to the last leg of a journey comprising the movement of products from a transportation hub to a final destination.
- Retail Insider, “Last-Mile Delivery Most Inefficient Part of Retail Supply Chain in Canada: Experts” (July 2020).
- “5G” refers to the fifth generation wireless cellular technology.
- CEO Today, “Uber, JetBlue and Others Join Amazon’s Climate Pledge” (December 2020).
- SOTI, “The Last Mile Sprint: State of Mobility in Transportation and Logistics” (June 2020)